Two Elephants in the Media Room

The media business – old and new – is losing millions of dollars in ad revenues for two reasons that are completely obvious and fixable. First, they are not utilizing the growing commercial inventory of on demand and delayed viewing commercial availabilities. This will become a bigger and bigger problem as viewing inevitably shifts to user controlled playback as it already is.
When a viewer watches a commercial program from a month or a year ago, it should have commercials inserted in real time that are in-flight and in-demo for an advertiser. In other words, there is no apparent reason why delay viewed programming shouldn’t generate as much – or actually more – CPMs (cost per thousands) than live inventory. Why? Because when someone is watching on demand or from their Comcast/NBC DVR, the platform can know much, much more about them then a live viewer, starting with at least their zip code.
So when a program is recorded on a cable company owned DVR, codes for control of the commercial breaks should be inserted into the recording for use during playback, which could have more or fewer commercials than originally aired (who cares when the program ends?). If that growing delayed viewing isn’t monetized, the problem will become huge for ad supported programming.
The cable company could even use these simple codes to offer the program commercial free for a fee charged to their cable bill. Consumers are already choosing commercial free viewing of current network TV shows on Amazon (generally $2.95 an episode) the very next day. It’s not rocket surgery.
The other elephant in the advertising world is more closely related to short online programming such as YouTube. How many times do we have to sit through (often the same) commercial over and over in order to see a cat video that we ding after 5 seconds when the cat isn’t cute enough. The wearying pre-roll commercials are out of control, literally, and downgrading the consumer experience and length of viewing.
Ideally short videos should have mandatory breaks in the middle, putting the burden on the programmers who want to make money on YouTube and the others to do a good enough job of hooking the viewer in the first minute that they’ll sit through a commercial to see the rest.
But at the very least, the platforms need to track how many seconds/minutes of actual programming the viewer has seen during a session, and adjusting the number of commercials to some reasonable percentage of total viewing. If they bail out of a video after 10 seconds, it should only count a small amount toward the number of commercials they ultimately see in a session (or even across multiple sessions).
Both of these painfully obvious improvements take some programming, nothing very complicated. What is complex is the need for the industry to agree to standards and I suspect that more than anything will forestall this kind of effort. The result will be to push ad sales down and down in the on demand environment, and hat will hit us even sooner than global warming, although after this winter in Boston that may be optimistic.

Post #26 – Newspapers are dead. Wait, what’s that? It’s a bird, it’s a plane – it’s Jeff Bezos!

Yes, it’s Jeff Bezos, strange visitor from another industry who came to newspapers with power and abilities far beyond those of mortal media owners. Jeff Bezos…who can change the course of mighty industries, make money with his bare hands, and who, disguised as Publisher Jeffrey Bezos, mild-mannered leader of a great metropolitan newspaper, will fight a never-ending battle for truth, profits and the American way.

I have recently come to the conclusion that I was wrong in an earlier post. There actually wasn’t anything the newspapers could have done to meaningfully change their current situation. My reason is that, even if they had hired the sharpest new media tech guys, the mere fact that sites featuring classifieds, want ads, car sales, real estate and entertainment ads were going to start up, spelled their doom.

Because newspapers had been able to sustain monopoly pricing in those areas for so long, which supported their journalism hobby, they were vulnerable to anything that offered a lower cost alternative. As a result, the rates for those advertising vehicles, which together made up typically 80% of a newspaper’s profits were bound to take a dive.

So even though I still believe that newspapers didn’t know what business they were in – they thought they were in the news business, but were actually in the classified ad business – I no longer think they could have done much to save themselves.

I’m hoping that Jeff Bezos at the Washington Post can prove me wrong still again. Amazon’s relentless focus on the customer is so encouraging, I would tend to bet on Bezos. Even as other famous customer-or-product focused companies like Apple are being accused of losing the Steve Jobs passion for excellence, Amazon has not wavered. It continues to chug along, providing an outstanding customer experience and valuable innovation.

If Bezos manages to pull it out – and he has the resources to keep at it for a long time – then we’ll look at what he’s accomplished and say, “Ahah. That’s what newspapers should have done.”

Of course it’s possible that what they should have done is find themselves a Jeff Bezos. Or a John Henry. Or a Mike Bloomberg. (NY Times give him a shot – he’s going to need a job soon.)

Update: This study from the Social Science Research Network underscores what I said above. It estimates that Craigslist cost newspapers $5 billion between 2000-2007. There’s nothing newspapers could have done about this.

Post #25 – J.K. Rowling’s new book points to the real Chamber of Secrets

In case you missed it, J.K. Rowling, the author of the Harry Potter series of books, wrote a mystery novel under the pseudonym Robert Galbraith. She was inadvertently outed by someone in her lawyer’s office.

Much has been written about the fact that the book, although very well written and reviewed, hadn’t sold much at all prior to the revelation. Then it took off. The stories about this “irony” struggled to find a point other than that not all good novels are discovered.

Really. How profound.

What this publishing parable actually points up is that the existing, antiquated system of finding new creative content sucks and hasn’t gotten much better, despite Amazon’s best attempts. I find their recommendations tedious and predictable, but not necessarily predictive. It’s not really their fault and I love Amazon.

The problem is that the system, if you can call it that, for finding new content of any sort, be it books, music or scripted entertainment, has never been good and hasn’t been greatly improved in the information age. It’s a critical failing.

If we really want more and better content, we need a more and better way to find it. Pandora is a step in the right direction. Their music genome legitimately plays music you’ll like but didn’t know, based on the songs you tell it you do like. It’s a great way to discover new artists, a role that radio gave up years ago in an era of tight, repetitive playlists.

I’m also encouraged by the recommendations of booklamp.org, which has a DNA-Pandora style approach to books. It’s still limited (and it’s a non-profit) but the results I’ve gotten from it are promising.

While many people lament the decline and fall of bookstores, I think, like much of the existing media, that they dug their own graves. Bookstores are no longer staffed by knowledgeable people who can consult with a customer about what they may like. And they have not availed themselves of in-store technology to help you find new authors.

The challenge of helping consumers find new content is an important factor in reinventing the media.

Post #24 – To bundle or not to bundle, that is the question.

Unbundling is the elephant in the cable MSO room. The recent report by Needham & Company’s Laura Martin that predicted cable networks would lose half their revenue if they were unbundled, makes this a tricky question.
Unbundling, or a la carte choice, refers to the movement by some consumer advocates and legislators, most particularly Senator John McCain, to force cable MSOs to let consumers choose which ad-supported networks they want. Almost all cable networks get a piece of the consumer’s monthly spend, from a few cents per subscriber up to a few dollars a month for ESPN.
So customers are paying for networks even if they don’t watch them, with no ability to opt out. That money, which is generally about half of a network’s revenue, is obviously a big deal. Cable networks and Internet sites are similar – most of them can’t make it without a dual revenue stream, advertising and pay. Unfortunately for the Internet, they don’t get subsidies from anyone.
But cable, particularly in the early days, needed to boost consumer demand by offering programming like CNN that they couldn’t get on broadcast TV. So the habit of paying a per subscriber fee to the networks started.
Having worked for a company that at one point was the largest MSO in the 80’s, I can tell you that one consumer complaint about cable has stayed constant for decades: too many channels. Yes, the wonderful 500 channel (or 1,000 now) bonanza has always been seen by many subscribers as a rip off. When they see channels on their box whether it’s 5 or 50, that they don’t want or watch, they assume that they’re paying for them – and they really are.
On the other hand, this is a delicate question for Reinventing Media, whose goal is more quality programming and fewer commercials in ad supported content. Without these subsidies, cable networks would undoubtedly have to cut back and some would go out of business. That same report predicts we would have about 20 ad supprted channels left.
Just when some of the networks are weaning themselves from off-network reruns with shows like Mad Men and Sharknado (joke), their foray into original programming may be cut brutally short on networks like AMC, TNT and yes, Syfy. We may never get to see Sharknado II where the sharks eat New York! Actually, that should be Sharkicane.
But seriously, ceasing this form of subsidy could be very bad for the overall quality of TV and its commercial load. After all, everybody in Britain has to pay a tax to the BBC if they own a TV set. Why not here?
But of course a compelling case can also be made that consumers shouldn’t be forced to pay for something they don’t want by these near-monopoly MSOs. It will be more than interesting to see how this particular made-for-tv drama plays out.

Post #23 – It’s official, Hulu is off the block. Now what?

It should come as no surprise, and a great relief, to faithful readers of Reinventing Media that Hulu has been taken off the market by its owners, Disney and Fox (NBC/Universal is a passive partner). You can read the story here.

Now it’s time for the networks to move ahead to use Hulu to help move TV in the right direction. First of all, Hulu’s commercial policy (usually not more than two at a time with a countdown clock) should be a model for ad-supported TV. Of course, this will require increasing the value of commercial slots by providing better targeting information. Ultimately this has to involve the cable MSOs (like Hulu’s part owner NBC) but Hulu could lead the way. And didn’t Time-Warner Cable express an interest in being a part-owner? They should be, and so should CBS.

Commercial inventory in network shows on Hulu should be sold right alongside ad sales of the shows on broadcast by the individual network sales teams. Note, that doesn’t mean “given away as bonus inventory”. The impressions on Hulu are arguably more valuable than those on regular TV because it can prevent commercial skipping and provide somewhat better targeting. Buttressing Hulu’s ad sales as part of regular network buys will help ease media buyers into accepting all inventory, including on-line, time-shifted and dynamically served slots, as part of the normal buying landscape. This will in turn increase the economic value of TV programming, which presumably will lead to more and better shows. That’s my theory, anyway.

An important part of the equation, as a Comcast exec recently pointed out in a Videonuze panel, is to develop a buyer/seller ad system that can support this complexity. Luckily enough, this comes just as two important ad technology companies have merged and announced their intention to create just such a system. Longtime agency suppliers Donovan Data Systems and Mediabank have merged to create Mediaocean, which says it aims to create a modern system for the new digital world. Given their long standing ad agency relationships, they are well-positioned to do this – if they invest the money.

But Hulu should be right there helping them do it.