Commentary
TV Companies: Embrace Mobile Or Lose Revenue
- by Diane Mermigas , November 12, 2010
Tacit dismissals about pay TV cord cutting by consumers favoring cheaper, mobile on-demand streaming video have a familiar ring -- like broadcasters' early denials about the threat of cable, or content producers and distributors blowing off the economic impact of time-shifting devices, such as DVRs. Playing catch-up rather than moving proactively leaves millions on the table.
The more than half a million subscribers recently reported to have abandon pay TV subscriptions -- in response to lingering economic pressures or enticement to use less expensive over the top streaming services -- is just the beginning of a trend sure to gain momentum even in an improving economy. Consumers' newly minted frugality and mobile behaviors are not going away. Their expectations and the perceived value proposition of goods and services are being radically reshaped. Embrace those new economics -- or forfeit the opportunity to participate in new revenue creation.
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Why, then, do major media executives continue to defend their status quo? The risk is in how long it takes before accelerating disconnections and other digital impact play havoc with retrans and content fees.
"There has been much ado about very little in terms of all the talk about cost-cutting," said Viacom chairman Philippe Dauman during the company's recent third-quarter earnings call. Like so many of his peers, Dauman refers to anything other than television as "incremental," as if digital interactivity isn't forcing a convergence play across all screens and platforms. He refers to tight consumer spending merely as a product of the recession.
Time Warner CEO Jeffrey Bewkes also referred to his company's domain in terms of "television" rather than as universal "video." TV Everywhere, its big digital play, denotes transporting the television viewing experience to mobile interactive devices on which video is viewed and managed differently. The popularity of the content is its ultimate protection.
"It's probably going to not lead to any cord-cutting -- not in the long run ... if you have to reach [viewers] through some other distribution than the one that we currently have, then that's how the content industry will evolve," Bewkes said.
Even Comcast, the dominant cable provider, is pursuing digital from their dug-in vantage point. Poised to become one of the largest global content producer/distributor by buying a majority managing owner of NBC Universal by early next year, Comcast should be more engaged in creating new content formats and features that begin with iPads and other mobile devices rather than simple transferring static TV and film from their set top box. Cable MSOs lack the operating connection to mobile devices enjoyed by their Telco competitors.
"There will be set top boxes for a long time, but the world is beginning to see technologies that can in some cases do away with the set top boxes," Comcast CEO Brian Roberts said during a recent earnings call. "The most exciting products we are working on allow you to have tremendous functionality right on the TV ... some customers will not want all that and will want a different model, so we are working on all."
That schism between the lowly home television and trending mobile connected devices will begin translating into balance sheet gaps sooner than media moguls think. Just imagine the response if these same media moguls demonstrated their seriousness about digital by addressing it from outside the box -- be it television or set-top box. Here is three ways to make it happen:
*Create social, commerce and content features from the mobile connected vantage point and never look back. Netflix CEO Reed Hastings took his company from the mailbox to every device streaming video in less than two years, skipping right over television to add 6 million new subscribers to its 17 million base, more than 66% of whom stream content.
*Align with major social, cloud and mobile players moving from the fringe to the center. This could include leading companies such as Facebook, Netflix and Google to small-to-medium players such as GroupOn and Zynga whose niches can be used to springboard into mobile. The holiday fight between Google and Apple into the TV space is all about using interactive out-of-home functionality to intensify the convergence cycle. Facebook's foray into casual gaming and mobile access and check-ins facilitated by apps has driven partnership with blue-chip advertisers. More than 500 million Facebook users were once devoted TV fans.
*Innovation must begin outside the norm. The only way to generate new perspective and mind-set it to tear down the silo walls, bring together professionals from every discipline of your business; empower your best thinkers to collaborate without restraints. The ultimate goal is to layer interactivity into every level of your media business to heighten engagement and revenues.
One of my favorite visual guides to turning disruptive trends into revenue generators is the roll-up-your-sleeves workbook, "Business Model Generation" by Alexander Osterwalder and Yves Pigneur. It provides visual tools and techniques that give flight to the classic "Blue Ocean Strategy" by Chan Kim and Renee Mauborgne to enable a new competitive mind-set. It's a little like digital revolution unbound.
Great article Diane. I often wonder if big media is on the same planet as the rest of us. Appointment TV-gone. Content protection-gone. Most consumers would gladly pay for watching when they want to, where they want to and on what device it's streamed to. Seems to me Darwin's theory of survival of the fittest will most certainly apply here.
Dead on target - it's the same "business as usual" that brought the newspaper industry to it's knees. As usual, I've got some rather over the top thoughts in my weekly New Media Commentary - http://www.youtube.com/watch?v=FuzGB4yzmng - and you can be sure this article will be mentioned in THIS weeks update!
It's wonderful to think originally-produced content is egalitarian information, that should be free to view by everyone at any time. Unfortunately that thinking ignores the significant costs and risks structure that goes into developing that content. It's very similar to the pharmaceutical industry spending hundreds of millions of dollars to develop a new drug, with a small window to recoup that investment before generics hit the market.
Here's an idea for Eric Schmidt and everyone who wants traditional "dumb" media companies to open up and embrace the future -- why doesn't Google risk tenshundreds of millions of dollars to develop original programming either on their own, or with the content producers and networks, or form a co-branded digital network of their own bypassing traditional distribution outlets. This way they can monetize professionally developed content anytime and anywhere without the shackles that the traditional model relegates them to work under. Of course that means Google must assume financial risk in the production of that content, which is very different from their current model of laying the risk off on others.
It's easy to criticize "dumb" traditional media and say they are not embracing the future. It's even easier to do so, when your business model allows others to take the risk, while you try to monetize their upside. As for their argument that the "smart" way to operate would have the content be available on monetize the added eyeballs. Let's ask our friends and colleagues in the world of print how that model is working for them.
As with Google's failed attempts at other forms of traditional media (see print and radio), their efforts to break into TV are following the same path. For arguably the smartest company in the world, they seem to have a mental hurdle with traditional media and seem to think the future must have all media forms follow the same monetization strategy, or else they are dumb. It's worse when you act like a petulant children who dont' get their way, and doesn't understand why everyone doesn't think like they do.
As Google is learning, sometimes you can't have your cake and eat it too. Here some advice to Google, stop thinking like a generic drug manufacturer. If you want play in the TV sandbox, do what the networks do -- take the risk and produce and sell your own content.
To Eric@ASU School of Journalism: Don't diss the Google, dude. They are one of the most innovative media companies on the planet. They continue to lose money with YouTube becasue they know that IP delivery of video is the future, period. There are two kinds of people in the world - those who DO and those who teach. Most of the latter are tenured and will keep their jobs regardless of what they say or do. For the rest of us, it's re-invent or die (often a slow and painful death). See you on the quad, prof.