The protracted writers' strike is proving to be good--even profitable--business for the television networks, which will reap short-term benefits from scuttling their prime-time season. Dramatic reductions in program costs before the full impact of anticipated ad revenue declines could result in quarterly double-digit profit gains, especially for CBS. The next several quarterly earnings reports by CBS, News Corp., Walt Disney Co. and GE will reveal the strike's unintended consequence: a network mini-boon.
The growth of online video is intensifying in the long shadow of recorded music's hard-learned lessons about how not to transition into an age of digital interactivity. The extent to which digital video is destined to repeat or avoid recorded music's mistakes is unclear. If the latest developments are any indication, there is plenty of room for both.
Say what you will about the strike. Made-for-online video costs can be better recouped using a CPM model for Internet-oriented programs produced for between $200,000 and $500,000 per average 10-minute episode. Compare that with the conventional $2 million it can cost to produce a 30-minute episode of prime-time television. Such irresistible economics will singlehandedly alter the business over time.
Media companies are in a valuation nightmare. Their problem: being valued almost exclusively on old models and metrics, while not yet reaping the balance-sheet benefits of an unfolding digital nirvana. Their challenge: to accurately assess their stagnating traditional businesses and rising revenue streams while shaping growth prospects. There's no time to waste: Earnings multiples for media stocks are at historic lows.
The importance of studying and responding to consumer use of traditional and new digital media has reached a critical juncture. The widening gap between assuming and knowing media habits can be a make-or-break difference for businesses--especially in recessionary times. It's time to drill into consumer need--and make sure every demo--from Gen Yers to seniors--is served.
The American people put the "me" back into media by shaping the roller-coaster outcome of this week's New Hampshire presidential primary. It was a vivid reminder in the digital age that the most effective interactivity is the handshake. It is evidence that local constituents rule. Now local broadcasters need to reinvent ties to constituents utilizing all available digital tools. The CBS News alliance with Digg is a simple move in the right direction.
Just as the long-anticipated Internet-bypass is materializing, the cable and satellite distributors most threatened are shifting their content offerings into high gear to the cheers of many Wall Street analysts. It is one of the more intriguing paradoxes to watch unfold this year.
Media-related companies are being forced by economic adversity to devise more compelling content, interactive activities, user interfaces and storage options in a lucrative, connection-driven environment. That digital problem-solving 101 is the thread binding the $120 billion consumer electronics industry being showcased in Las Vegas this week. It's also known as a lesson in survival.