I’m forever in the quest for ways to organize big subjects into quirky containers, and so I was stunned watching a video presentation by investment banker Terence Kawaja that gave me a simple new sorting system.
It goes like this. Traditional electronic media--the networks, cable operators and big movie studios make up most of that group—are motivated by fear of losing everything they’ve got.
And digital upstarts—the whole dot.com world of cleverly-named enterprises that are major players in some oddly-defined space-- are precisely opposite. They are motivated by greed, because they have their eyeballs on $70 billion of spend the traditional media still hoard.
That’s all you have to remember. Fear or greed. It’s so simple.
The founder and CEO of LUMA Partners LLC neatly separated all the major players into two sets, and for about a half an hour Kawaja explained how they’re different, how they’re the same and how ultimately they will work with each other. Also, as an investment banker, he assured us, most will eventually merge.
Kawaja is always good for a startling look at the way business works and this video is no different. He gave his “Future of (Digital) TV” address during Internet Week in New York last month.
But until Google comes up with a way to instantly store and recall a boatload of data and commentary, watching the video is the way to go. I live for pause buttons and conferences don’t have them.
He points out, for example that traditional media players fall into 19 or so different businesses; digital into 36. Traditional media is divvied up by 100 major companies with total ad revenues of about $150 billion. Digital is populated by 400 companies with ad revenues of about $6 billion. But just a handful of digital companies have more money on hand than the Big Four networks put together.
What’s ridiculous is that traditional media that produce content do it so clumsily. Television content producers last year spent $300-$400 million to tentatively create content—146 pilots, that resulted in just 56 shows that were produced, of which few became hits. Kawaja says 10% of the content supports 100% of the business, another kind of shorthand that’s worth pondering.
By comparison, using the kind of data driven programming that gave us “House of Cards” and that encourages Amazon to let its customers decide what pilots they’d like to see. Given the economics, that’s their best option, and pretty safely creates predictable results.
Indeed, for businesses so closely aligned, how TV works and how digital works seems radically, even laughably, different. When you work in it close up, it's hard to see how oddly divergent even the sales process works.
As Kevin Spacey said last year, digital and its viewers now evolve faster than traditional media can process it. As this presentation makes it clear, the lines are still clearly there and will always be there. But there’s a lot of blurring on the edges.