• by Ashkan Karbasfrooshan , Op-Ed Contributor, August 9, 2010

Since I'm a new-media entrepreneur producing and distributing online video content, you'd think I would use this soapbox to suggest that traditional media companies (TMCs) were dead because of the Internet.

Not so sure about that, folks.  Roughly 85% of the programming that mainstream America watches belongs to the big TMCs.  Moreover, while some made-for-Web shows and videos have become somewhat successful franchises, let's face it: more often than not, those "brands" will draw blanks when you ask 10 random people from Anytown, USA.

Meanwhile, while it's true that many new media producers are creating content and generating decent reach, they are not generating anywhere near the kinds of revenue that the TMCs are - even when simply taking their traditional assets and putting them online, no matter in how limited of a fashion.  Over time, this translates into an inability for new media producers to invest in new programming, and thus the cycle (of TMCs keeping the upper hand) continues.  This is why Google's new Grants program for YouTube producers could be interesting, though Google doesn't exactly have a track record of seeing through each project it launches (see Wave).

It's not that the people in the traditional media landscape don't get it.  To the contrary, they do.  It's that the businesses they run can't yet be bothered by the Internet.  Television advertising in the US is a $70 billion market, and online video spending in the US only crossed $1 billion in 2009.  If you add all DVD and theatrical sales, the total market for TMCs programming represents a $250 billion market.  Meanwhile, all online advertising spending weighs in at $30 billion, of which 40% goes to search - the anti-branding advertising tool.  As I like to remind people in my side of the industry: to the average executive in Hollywood, the Internet isn't his problem, it's his successor's  problem (though the 2008 economic meltdown sure did accelerate that timeline).

When you do see activity, it usually comes from individuals, namely the talent:

-        Steven Spielberg's Pop.com was way ahead of the curve in the late 1990s, for example. 

-        More recently, celebrities like Ashton Kutcher, Lisa Kudrow, Kevin Pollak and Will Ferrell are foraying online by investing their own time, money and ideas for made-for-web projects.  Some are doing so via individual projects, others are setting up companies (Kutcher has Katalyst and Ferrell is backing FunnyorDie).

Then you have Hollywood management refugees like Rob Barnett who have launched new-media ventures such as MyDamnChannel (though Barnett hails from networks like MTV and radio, as former head of CBS Radio - but you get the idea).

If, however, you look at the actual media companies themselves (CBS, Disney's ABC, News Corp.'s FOX, Viacom's MTV, Comcast's NBC) - most of them are rehashing TV programming and putting it online.  CBS bought Wallstrip in a small deal but then proceeded to kill any trace of it.  The senior management of CBS Interactive left the company after acquiring and integrating CNET into CBS Interactive (at a cost of $1.8B, mind you).  These days, all of the CBS brass care about is identification and monetization of 60 Minutes, CSI et al.  Is that wise?  Maybe.  Maybe not.  Can you blame them?  CBS generated just over 13 billion in annual revenues in 2009, down from over $14 billion in 2006 and 2007.  To make any kind of dent or reverse the trend will take a lot more than Wallstrip (or what Wallstrip represents).  Again, all of online video was a $1 billion business in 2009.  Of course, it won't be long before the massive variance between TV's $70 billion piece of the pie and online video's $1 billion piece converge, but it won't fully converge on Les Moonves' watch --so can we blame him for not worrying too much about the Web?

The point is: sometimes it's good to be ahead of the curve, but with the massive cost structures of the TMCs, if they are too far ahead of the curve, they will fail - and expensively at that.  So by biding their time and holding out for the day and age when online video advertising is meaningful, the TMCs are not exactly being foolish, they are just being human.  Mind you, if we borrow a term from Hollywood and cut straight to the chase, it's entirely possible that their patience (or hesitation) with the Internet might come back to haunt them like a villain who comes back from the dead in the last scene.

Time will tell.  Ultimately, as a new-media producer, you will be on the right side of the equation, but to suggest that big, traditional media is dumb or old is plain foolish - they're too busy printing money to listen to us.