Commentary

Entropy Planning

Every so often I like to use concepts used to describe the physical universe as a metaphor for explaining what's going on in the media universe, and today I'd like to dwell on the concept of "media entropy."

In physics, entropy is used to explain some complex thermodynamic principles, but generally speaking, it represents the the nature of things declining into disorder.

Substitute the word "fragmentation" for "heat" in thermodynamics, or the word "chaos" in more general terms, and you'll get my drift.

And just like the physical universe, the expansion of the media universe increasingly creates uncertainty for planners and buyers who must work harder, use more data, and better data processing tools in an effort to create some order to effectively generate a return on ad spending.

I've been nurturing this thesis for some time, but was moved to write about it today because of an analysis released this morning by media analytics firm Ampere revealing a new area of media fragmentation: sports media rights holders.

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"In major Western markets, the broadcast rights to popular sports competitions are increasingly being split across a growing number of services," the Ampere analysis notes. While that should not be surprising to anyone following the media trades in recent years, it should be an early indicator of increasing fragmentation of media audience reach in the future.

That's because media rights deals aren't just theoretical, but mean coverage of the same sport are now being divided among increasingly more outlets competing for consumer attention, and more often then not, their pocketbooks too.

The fragmentation of rights holders makes economic sense and seems inevitable to continue as the relative value of sports increase for consumers and sponsors alike.

Total annual media rights spending in seven major markets analyzed by Ampere -- the U.S., U.K., France, German, Spain, Italy and Australia -- jumped 68% to $34.9 billion in 2022 from $20.8 billion in 2014.

During the same period of time, the number of broadcast outlets holding rights to top 10 sports franchises jumped 33% to an average of 12 in 2022 from nine in 2014, according to Ampere.

While the sports rights holder fragmentation should not be surprising -- I mean, this is also the first year in which linear TV's share of viewing fell below 50% -- it is yet another manifestation of ongoing media marketplace entropy.

I don't know where we'll ultimately end up in terms of market fragmentation, but I do know it's an ongoing progression that began long before Ted Bates invoked the "5% solution" to deal with the emergence of cable TV viewing, or cable industry pioneer came up with the "500 channel universe" to get our arms around the impact broadband would have on television.

We've long since blown past 500 conceivable channels, and when you factor in all the other ways consumers access content -- including video content -- I truly believe we are now living in an infinite channel universe.

I'm not sure when I first started thinking about the role fragmentation has had on media marketplace entropy, but it was probably when Interpublic's late ad forecasting pioneer Bob Coen shared a spread sheet with me early in my career.

The spread sheet contained his estimates for U.S. ad spending, by medium, going back to 1776.

You might be surprised to learn that Coen had a line item for the media marketplace the same year the U.S. was founded, and in truth, it only contained a smattering of print media.

In fact, some of our founding fathers were also media moguls: Alexander Hamilton founded The New York Post, and Benjamin Franklin founded the first magazines ever published in North America: American Magazine and The General Magazine.

I'm not sure how industry pros should plan for media entropy. I kind of alluded to a need to think about it in my first Planning & Buying Insider column referencing Erwin Eprhon's recency planning solution, and the fact that I think it was a stopgap, half measure that needs to be revisted.

But I do know this: Human attention has always been splintered, disorganized and fragmented across an array of attention-paying options, and its the hubris of the media industry to assert that it has ever properly put dimensions around that.

Sure we have some nifty new tools for measuring people's attention paid to media, but we don't even know how many media options they're actually paying attention to. And by that, I mean both structured (the kind that show up in the known media planning universe), as well as new or previously unmeasured unstructured ones.

And all this is before a new onslaught of hyper media fragmentation accelerates vis a vis the metaverse, the proliferation of AI chatbots, and the impact of synthetic media even truly gets started.

Good luck with that.

2 comments about "Entropy Planning".
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  1. John Grono from GAP Research, October 2, 2023 at 5:41 p.m.

    A great post Joe.

    As you made note, sport seems to be the big audience attractor, and the cost of the broadcast rights seem to have no limit.   Howvere, as TV broadcast continues to be in reverse there will be a point where the broadcaster can't increase their ad rates as the market won't play ball, and the broadcaster won't be able to pay for the broadcast rates.

    The sporting body can cope better as they can get revenue from the digital and other channels.   But as digital delivery successfully expands that will attract new digital delivery methods.  I suspect that the sporting bodies will end up with a plethora of entities buying broadcast rights.

    There are two other factors that will make it more difficult.   The first is that population growth is not as fast as broadcast entities.   So that means that each additional broadcast entity will eventually reduce the average audience which will lead to reduced broadcasting rates.   The second is the potential that it may start to collapse like a dying star, player contracts would probably be reduced, advertising rates would need to reduce in a market of finite games.

  2. Ed Papazian from Media Dynamics Inc, October 2, 2023 at 6:36 p.m.

    It's plain to me that we will presently see many kinds of TV fare generated by program prudction companies, movie studios, the various sports leagues, various news sources, etc. made available to consuers on multiple platforms---some ad-supported; others hybrids---part subscription, part ads, and who knows what else. For the sports leagues, this is a way to expand their reach---or, more realistically, to make up for losses in reach caused by sticking with long time linear TV "partners"---who, inevitably, will generate smaller and smaller audiences.

    As for other types of programming, the picture is less clear. For example, if you are a typical sitcom or drama series producer who wants to get someone to fund a lot of episodes so you can make a killing in the syndie rerun market you need a big audience partner---like a broadcast TV network---to get in bed with and generate enough revenue to cover  out-of-pocket costs for the first airing of your telecasts. If you are trying to get start-up "partners" from a number of different  platforms---each with their own opinions on the merits of your idea for a new series---the setting, who the key performers are, storyline development, etc. ---things can get very complicated. In the past, you sold your idea to the programming execs at CBS or NBC or ABC, and they got involved ---including some testing and, sometimes, the funding of a pilot---and if things went well, you gor a full season's order for 20 or so episodes. And you were off and running----with one network as your partner---which meant---if the show was of decent quality----that you got good time slots  and season after season renewals.

    But those days are now history as even when a network works a partenrship deal with a producer for a new series, the number of episodes ordered is usually smaller and renewal is not automtically guaranteed. So how does the new series producer get a consortium of networks, channels and  services to agree on financing the  episodes for the first season and how does one get all of them to renew the deal for a second and third season. Who pays---and how much, etc.???

    At least with pro and collegiate  sports the leagues and associations are in control, but they, too, have major issues---the main one being the exhorbitant demands of the players for more and more money. No matter how many venues are developed audience attainment will lag way behind the CPM demands being made on advertisers. There will come a  time---probably sooner than later---when many start saying "no"---even though they have major promotional deals with individual stars, teams, etc. and this had been a primary motivation for sponsoring the games on TV. You can reach exactly the same viewers via other forms of TV at a fraction of the cost.

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