• by Wayne Friedman , Staff Writer, November 3, 2008

Previous recessions didn't give the entertainment industry much of a black eye. But this one might be different -- and whatever downward trend occurs will probably start with younger entertainment consumers.

For example, younger viewers might not want to keep both their Internet and traditional cable programming services. Guess which one will get dropped? Cable, of course. Viewers might not want to pay $50 a month -- or $600 a year -- in monthly cable fees, instead preferring to pay for the Internet to get programs for "free" on Hulu.

Of course, the Internet isn't exactly free. Computer users still spend $30 to $50 or so a month for DSL or cable modem access to get to Hulu, YouTube, or other digital video areas, as well as access to email, and a host of daily consumer and business necessities that the big TV box can't, at the moment, offer.

Historically, home video entertainment suffered little to no erosion of business during previous recessions; perhaps people just saw fewer theatrical movies. But the end result was that movie studios still made a bundle. Home entertainment sales and rentals revenue -- then, as well as now -- contributes many more times the revenue of theatrical box office receipts.

What's the new equation in this recession? Among all viewers -- young and old -- cable operators have seen consumers still sticking with monthly cable programming packages. But they aren't adding on premium channels or services.

The end result: Now everyone wants even lower-cost entertainment, and the Internet influence only encourages that. But advertisers have yet to figure how to follow these viewers.

"If you look at how many people are viewing videos online, the industry is monetizing only a small fraction of that," Adam Kasper, senior vice president-U.S. director of digital at Havas' Media Contacts unit, said during a panel at the OMMA Video conference in Los Angeles last week. "Right now, we're kind of behind the adoption curve, and we're not taking advantage of everything that's out there."

Meanwhile, media executives keep asking whether there will be advertising dollars to support traditional TV programming for a long period. Rino Scanzoni, chief investment officer for Group M, predicts a pullback in advertising could create a three-year downturn.

At some point, traditional TV and video advertisers will need to rethink seemingly dicey Internet user-generated content and increasingly fragmented traditional TV shows to hit their new financial goals.

It's a double whammy for a TV/video advertisers in this market. The main questions are: Where are viewers going -- and can I afford experimentation to engage them with fewer marketing dollars?