• by Ashkan Karbasfrooshan , Op-Ed Contributor, April 9, 2012

Last week Matt Farber published an interesting piece urging TV companies to get into online video, no matter how small it is today.  He asked: “So what will it take for the big television players -- the programmers and producers -- to be the big players in IP-based video? What do the Viacoms, Scripps and Fremantles need to be doing to sit at the head of the table?”

I wondered: Why would they want to?  Don’t get me wrong, what Farber suggests makes a lot of sense when you consider everything that happened to print and music companies, but there’s a reason why we have sayings like “History repeats itself” and “Those who don’t learn from history are doomed to repeat it.”

Indeed, despite the fact that the television and motion picture industries have been technological leaders in their own right, I see history repeating itself and the television-based Traditional Media Companies (TMCs) sitting this one out.

No Economic Incentive

Managers have a very short-term outlook because their compensation is tied to this year’s revenues and profit.  Online video is too small to matter.  The TV companies producing “super premium” content can’t fully leverage the lower costs of the Web because there is a minimum amount of quality that stakeholders expect.

According to GRP venture capitalist Mark Suster, “network television costs $50,000 – 100,000 per minute to produce. Reality shows can be cheaper, with the lowest-end costing $6,000 – 8,000 per minute.  New media producers can leverage deflationary economics to produce shows for $500 – $1,000 per minute” -- but that doesn’t mean that FOX or HBO can launch just any programming and spend that little.

For example, when I launched my company in 2006, I had just left AskMen -- which had been acquired by IGN, whom in turn was bought by News Corp.  I could have technically incubated my company within News Corp., but this would have prevented us from experimenting, keeping costs down – and frankly, staying alive.

Indeed: “TV networks seem to have a lot of trouble with web originals. And it’s not necessarily a problem of too little resources; many HBOlab-like projects have seen millions of dollars down the drain. Another HBO-spawned web comedy site — ThisJustIn, a joint venture with AOL — was simply shut down in 2007. It was actually in the same Santa Monica office space as HBOlab. Turner’s SuperDeluxe closed down and NBC shut its DotComedy as well.”

Judging by my discussions with TV-based TMCs executives in various departments, the reality is:

1)     Any new media startup’s P&L will be insignificant to the TMC, so asking an executive chasing multimillion-dollar opportunities for his employer to pause and consider a startup producing content is a tough challenge (let’s be realistic, folks).

2)     Media companies have their own content and they will always views yours as second-rate, no matter how great (you think) it is.

3)     TV companies care about distribution and how to digitize, discover/recover and monetize their archives; they don’t think they need “new content.”

Well, what about distribution companies?

In theory, the record labels should have bought Napster, and NBC, Viacom or Fox should have acquired YouTube. Obviously none of that would ever happen in the real world.  Those companies had real distribution but buying Napster or YouTube carried legal and perception (read: egos came in the way) risk. 

Then there are the second-tier distribution companies and ad networks, but those companies offer opaque distribution at best, and the executives at the TMCs would not be caught dead running their super-premium content there.

Remember: Fear is Just as Powerful as Greed

Now that being said, while tech is more of a zero-sum game than content ever is, new media content creators that don’t have a traditional business to defend are arguably a bigger threat for mindshare and ad dollars than technology companies ever will be. 

Perhaps the biggest threat to "Saturday Night Live" may not be YouTube but rather MyDamnChannel or FunnyOrDie, because as “SNL” creates hurdles for consumers to watch their TV programming online, MyDamnChannel/FunnyOrDie publish everything it produces online.  Of course, provided “SNL” also embraces online distribution, then “SNL” won’t “die,” but if the show seeks to defend its TV revenue by shunning web distribution, then it may inadvertently propel MyDamnChannel or FunnyOrDie to loftier heights.

So it’s not that TV executives “don’t get it.” They do – too well.  After all, it’s not as if TMCs haven’t experimented, either.  So while this defensive/fear mindset does create an opportunity for new-media producers, I personally think that trying to win over the TV companies is a bit of a waste of time.  

The better bet, arguably, are print and radio companies, but we’ll leave that for another time.