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.
Bob Iger's quote comes to mind straight away. As I recall it was something like "...why should I trade analog dollars for digital pennies". Still hugely relevant.
For me, the broadband ecosystem still dominates the entire scene from concept through to completion. As long as people keep thinking "ad-based business model" then the broadband process will continue onward. Change is coming. Slowly.
Big budgets, big overhead costs, salaries for multiple employees ALL require and virtually mandate that income be large. Hence the sole interest in large scale projects coming through trusted pipelines and using expected workflows and most importantly being sent out over broadband broadcasts. Ashcan your company is in here as well. Your costs are still largish. I believe your $$ is based on ad viewing? So even new media companies still have cost issues and the need for big viewing numbers.
I think the slowly evolving solution is going to be one in which the content producers build loyal audiences willing to ppv or ppd or annually subscribe.
Narrowband, specialty content producers will never be able to support themselves off of ad-based revenue. By definition, not enough people are going to aggregate to watch narrowband content. As the web continues to fragment, people are going to increasingly search and burrow down and find (pull) the bits that interest them in lieu of watching whatever msnbc or watchmojo push out to them (which are both still based on broadcast business models of aggregating eyeballs). There is no other way for this specialty content to survive. Almost by definition, ad-viewing based revenue will never pay the freight in a narrowband world.
Ashcan I know you will deny being broadband-based, but as long as you are trying to aggregate eyeballs and generate ad-based revenue you are part of the old media problem style of thinking.....
A possible exception is if a narrowband content creator "makes it big". Then we start creeping back to the broadband ad-based possibility. But if that creator is "making it" based on the viewers paying, then why would they want to change it up and bring in ads?
It's kind of ugly and it's not happening very fast, but I think fragmenting viewer interests are eventually going to make this change a reality.
Thanks for the comment.
btw, it was NBC's then CEO Jeff Zucker, not Bob Iger.
I think I kind of sidetracked from AK's theme, so I apologize for that. AK's did hit a hot button for me as a frustrated specialty content producer. I do think that AK is exactly right in terms of how old media view new media. This topic is hugely relevant for everyone in this content space. For 99%+ of the creators/publishers/distributors out there, ad-based revenue is non-existent. It will simply never happen because not enough viewers are EVER going to come to a specialty topic. So 99%+ of the online content/publishing market either dies off OR something else comes along.
I think ppv, ppd or subscriptions have to be that "something else". I don't know what else there is, other than ads.
Two examples of online content publishers doing the ppv/ppd/subscription thing: tekpub.com is one, bluesguitarunleashed.com offers another. Other than being an interested fan of both sites, I have no connection to either, although I am on the verge of subscribing to blues guitar unleashed. I think both producers offer an interesting glimpse into how narrowband specialty interests on the web can make $$ by means other than ad views.