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There’s a conference call this morning at Bernstein Research to further discuss why Wall Street analysts aren’t buying the argument by NBC, Fox, Disney and others that they’re staying ahead of the digital curve by putting primetime shows up for free and with few ads on Web sites such as Hulu. I’ve seen 3 deep-dive reports just this month about studio-produced entertainment going online. And the consensus is that Big Media could destroy what all three reports call the entertainment “eco-system” especially if they train consumers to think that they’re entitled to see professionally produced stuff for free online.
That prospect makes Laura Martin at Media Metrics apoplectic: Sites such as Hulu, she writes, are “anti-consumer, anti-media employees, and even anti-America” — and put “at risk” more than $300 billion worth of market value (that’s the combined price for the 30 stocks in the Bloomberg US Media Index). The reason? Media companies will lose a lot more revenue by giving shows away for free online than they will from pirates. Even worse, portfolio managers may decide to dump all of their entertainment stocks when they see what low regard studios and networks have for their best products. Less investment cash means fewer and crappier productions… and then you just kiss the business goodbye.
Credit Suisse’s Spencer Wang shares her concern, without the hysteria. He notes how a broadcast show makes at least 64% less online than it does on TV and a cable show about 36% less. So why not run more ads online, charge consumers a fee, or make them buy a subscription? Too late. More ads will drive viewers away, he warns. And consumers “are not trained to directly ascribe monetary value to TV shows.”
Or maybe not. Bernstein’s Michael Nathanson says that while this subject is “perhaps the single largest investment controversy in the media sector,” it’s been overhyped: The average person only watches 2 minutes of Web video a day vs. 309 minutes of live TV. Still, he sees “potential problems on the horizon.” Fox, he estimates, generates just 18 cents in ad sales for each viewer who watches The Simpsons on Hulu vs. 54 cents for each person who watches it on the TV network. The bottom line: the networks will have no choice but to pack in more ads or charge a fee.
No doubt, conclusions like that are why News Corp’s newly installed chief digital officer Jonathan Miller recently said he envisions a future where at least some of the TV shows and movies on Hulu are available only to subscribers. “I don’t see why over time that shouldn’t happen… It seems to me that over time that could be a logical thing.” And, remember, Miller is in charge of coordinating News Corp’s efforts to find new ways to get consumers to pay for digital content.
Editor-in-Chief Nikki Finke - tip her here.
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This is not “rocket science”. Many times there are television shows that I want to see that are opposite each other, I used to watch one during the season and the other in reruns. I’m sure many others did the same. Therefore both shows were seen and everyone won-advertisers, studios, networks, artists and creators. I still do this with “Desperate Housewives” and “Cold Case”. Love both shows. The fact that networks don’t have second seasons (summer re-runs) for shows is costing them tons of money.
Can’t they see what is happening to newspapers-same paradigm? Why would networks make the same mistake?
Either charge subscription to watch premium content OR require submission of user’s consumer profile information so that high value targeted ads can be displayed in exchange for watching the content.
Just look what happened to the newspaper industry. Don’t give anything away.
I recently canceled my cable and watch all my TV on Hulu. I can’t afford $80/mo for Charter when all my favorite shows are online for free.
It’s amazing how quickly these so-called “experts” forget that before Hulu people were flocking to illegal download services like Bittorrent. All of a sudden Hulu gains a mild amount of popularity and people campaign to charging the consumer more, not realizing that consumers will go right back to those illegal services if they feel they’re being price-gouged.
Changing the public’s perception on matters like these takes time and patience. Media companies seemingly have neither.
Part of the reason I’ve fled traditional tv viewing is all the ads.. which not only means less show but too many (any is too many for me, frankly) of those terrible ‘pop up’ ads along the bottom of the screen. TERRIBLE! I now watch only what I really want to see strictly through the DVR (where I can at least fast forward) or I wait for them to come out on DVD. I don’t mind paying for a show that I like.
However, my roommate is training me to watch programs online and I”m frankly AMAZED how much is here and how much of it is free and ad-free. It’s really astonishing. Not only for the ad sale loss but also from a cable point of view. Why in the world would anyone pay for anything other than high speed internet when you can see everything that’s worth seeing online and for free?
The networks cut their own throats with too many ads, too many reality shows, fewer episodes per season and the loss of the summer re-run. Like one of the writers above, I too always enjoyed seeing the season again during the summer. But the networks thought that people would simply record a series rather than sit through it again during the summer. Re-running a series, especially a serialized show, to me, makes sense. I dunno.. I’ve seen several shows a thousand times but I still buy the dvds
Actually they are training viewers to come to them for content.
When the tides shift, and more viewers are watching online…that 18 vs 54 cents will also switch.
Whoever has the eyeballs wins.
I think you answered your own questions Nikki. They’re hoping to train consumers of their product to watch via a sliver of the Internet that they own and control. Once the amount of time online equals or exceeds the time spent watching via cable/satellite they’ll create a subscription model and people will pay. It’s that simple.
I think the big media companies have a plan which is to get people used to coming to Hulu or whatever for their content and as soon as they have a big enough number, they will charge for content.
The web 2.0 generation is very comfortable paying per whatever — such as Itunes, aps or ringtones. TV is next and what that will eventually do is destroy the provider market (not the creator market). DiretTV, cable, uverse — those are middlemen. When I can wirelessly record and cue it all up on my HP pavillion desktop that is hooked to my TV, I will and the 80 bucks a month I pay to DirectTV, will go to the majors directly. I actually think that is a good system.
That’s the dumbest thing to say. Free TV never had any problems with their business model.
Absence of journalistic standards and corporate control of information, coupled with the Internet, are what killed newspapers. Giving it away online [not entirely "free" as they do run ads] was a last ditch effort to stay afloat. Giving it for “free” is not what killed newspapers. LOL.
Many people will not remain at a site that demands registration and consumer info, even if it’s just to leave a comment.
Sites that require a whole rigamarole to participate lose more than they gain.
Viewers won’t pay for a subscription service, especially as there’s less and less of interest being put on the air. This strategy of more cheap shows, less episodes, cheaper production values has serious diminishing returns. Also, the “strategy” of haphazardly mixing a new episode, then 2 weeks of repeats, then a new episode, then a show from the previous season, etc killed tv, too, as viewers finally got fed up and couldn’t maintain continuity. “Sherilu” is right about people loyally viewing first run season, then viewing summer season of another show.
Running a good business and winning on Wall St. are competing interests. The stock market doesn’t work and has been disastrous to good business in many ways.
Hulu is overrated. There’s a limited number of shows with limited available episodes.
Using a PC through your TV in some form is the future that is already here, even if it is still too difficult to achieve critical mass. On-demand, a la carte viewing is already here but it is limited by several factors:
High internet speeds (and accompanying pricing) are still atrocious for the most developed industrialized country in the world relative to other modern states.
PC’s still don’t integrate all that comfortably with TV’s. You still have to do too much fiddling even if you know what you are doing, forget technophobes that still manage to love cable, satellite and DVDs.
A la carte and on-demand viewing options are only as good as the content available. Netflix is awesome precisely because you have unfettered access to anything ever put on video for the most part. Sites still have limited, low-demand or “we will lead you by the nose to what we want to watch” content for the most part. This is not to minimize what’s working well because some stuff is given the limitations out there but this is still a problem.
Fee structures are a tricky notion. Consider keeping or dumping even a nominal cable or satellite subscription fee. Add in your monthly internet charges, then add in a Netflix, Gamefly or other similar subscription, then toss on an XBOX Live account, maybe a monthly gaming sub like an MMO and a mobile data/phone account so you can manage it remotely, etc.. Then you want to charge people to watch stuff on sites that already have ads on them? It has to give somewhere – - – few average people make that kind of disposable income and even if they did it doesn’t all go to media companies every month.
The first companies to put their consumers before themselves will be the early winners.
Lost in the shrieking is, if everyone negotiates up front for future rights in their contract, it’s not free, merely paid for in advance.
Which is why Hulu should prevail.
“Less investment cash means fewer and crappier productions…”
They can get crappier?
———————
Why should I watched “tv” online when I have a dvr that allows me to fast-forward all that crap advertising? Online, I’m stuck in the late 80′s and early 90′s again and forced to watch whatever comes up. Why would I want to do that when I have a better option with my cable and can view on a screen 10x as big?
Music went down the free path against their will and complained and sued about it…
Newspapers went down the free path by choice and now are complaining and threatening to sue over it….
And now movies and tv shows are free and people are complaining. It seems like you are damned if you do and damned if you don’t. Maybe the future is product placements with direct buy links.
When cable television was in the schematic stage forty years ago, it was called Pay TV (or, “feevee” in Varietyese) and everybody joked, “Who would pay for the crap that they can now see for free?” Then HBO and porn debuted and demonstrated that, when there were no content restrictions, people would indeed see in their homes what they were either unable to get elsewhere (HBO) or too scared to rent (porn).
Consumer habits adapt to technology, even if it takes a while (e.g., there were e-books a decade before Kindle). Why do you think the communications industry lobbied lawmakers to allow them to merge into monoliths? Why do you think the AMPTP went to all the trouble to destroy the unions if not to shift programming online? Why do you think the telecommunications industry got the FCC to edge toward privatizing cable? Why do you think cable is fighting ala carte subscription so they can keep bundling channels, ala outlawed movie block booking?
And so we wait. No way, right now, are viewers going to sit at a table watching a desktop screen, slouch on the sofa with a laptop balanced in its namesake, or hold an iPod in one hand while doing godknowswhat with the other. But when Internet delivery fully vests as THE way to bring programming into a normal TV setup, and that’s about to happen, all the ducks will be in a row.
It’s just Feevee, only with ones and zeros.
Great presentation and analysis of a complex issue, Nikki. Keep it up!
If you don’t charge right off the bat, it will be increasingly difficult to charge in the future.
I agree with sherilu – take “Lost” as an example. In this instant gratification age, you can’t take a show off the air for seven months and then expect people to tune in when it comes back on. It doesn’t make any sense.
sherilu:
heard of tivo?
AMPTP spent a lot of time and effort over the last two years to browbeat the industry into a business model where they don’t have to pay actors, directors and writers much at all when shows stream on-line. Now it looks like they can’t monitise it well enough to make money themselves. Boo freakin’ hoo. Karma’s a bitch.
It’s already too late. People are not going to pay for entertainment on the web. If you want to make people pay for the content you’ll have to stick with dvds.
I will admit that I am not an industry analyst or executive, but I do know a little about the television industry, and I happened to think that anybody who resists streaming services like Hulu are simply burying their heads in the sand. While AppleTV, Roku and TiVo’s streaming technology are still nascent and limited, I don’t see how anybody can deny that, within the next 10 years, most Americans will be able to watch content from the internet directly on their televisions. Once people no longer have to crowd around small computer screens (usually at desks instead of in front of couches) to watch streaming video, I don’t anticipate there being any difference between watching broadcast television and online content. And, as far as I am concerned, this will be the death of network television.
At the moment, networks simply provide a means of distribution and marketing, mainly because the FCC prohibits studios from directly owning airwaves. But anybody can set up a website, and many studios already are producing content for the internet. If studios begin to sell advertise themselves, they can circumvent the network model and eliminate deficit financing. While terrible for networks, this would be wildly advantageous for studios, and, since most studios are owned by conglamorates that also own networks, networks would most likely dissolve or fold into studios.
Clearly the network model has become antiquated. Appointment viewing is a thing of the past because DVR and online services allow viewers more flexibility. This, of course, affects ratings and ad rates, but it doesn’t have to. Using the Hulu model actually gives media buyers a much more accurate idea of how many people are watching any given episode of television and prevents viewers from fastforwarding through ads, which is wildly preferable. Why pay for ad time on a network show when most viewers will probably skip through your commercial or get up and walk away from the TV? And why depending on dubious Neilsen ratings and C3 and C7 numbers when you can see exactly how many people are watching any given episode of a show?
I agree that Hulu’s ad model does not seem effective at the moment, since it mostly shows ads for nonprofit organizations, who cannot be paying very much. But, as audiences grow, and the service is able to attract higher-paying advertisers, they have the potential of creating a new paradigm for media buying. Advertisers could a smaller flat fee up front then pay per view, per 100 views or per 1000 views, similar to the model Facebook uses for its advertising. Again, Hulu can substantiate their viewership numbers much more easily than any broadcast or cable network, and, while at the moment, they show only one ad per pod, viewers cannot skip past that ad and are less likely to get up or change the channel during one 30 second ad than they are during a block of ads.
Maybe streaming services will have to start showing more ads to remain profitable, especially if studios start producing more online-only content. But anybody who says that viewers have become “trained” not to watch ads is using unsubstantiated, ad-hoc reasoning to fallaciously explain away a new model that they are afraid of and too short-sighted to embrace.
Ultimately, I see this being a huge boon for viewers, content producers and advertisers. Look at a web series like FRED. A 14-year-old from Nebraska has been able to make this model work for him, so why are media executives so far behind? My guess is that they are too thoroughly entrenched in the current system and reluctant to eliminate networks (and, in turn, a huge number of jobs). But just imagine a world with no Ben Silverman or Jeff Zucker.
Totally agree with the sources you’ve cited, Nikki. But I fear that it’s too late to put the toothpaste back in the tube…
What if sites like Hulu were only available to cable subscribers? Networks could partner with cable companies (who are worried about this problem as well) and collect some money from viewers via the cable companies. Not that cable isn’t expensive enough as it is…
simple solution. why is everyone discussing passing the problem off to the consumer. why not charge more for the adspace. if the studios say its worth it the companies will pay. tell me that they couldn’t make the numbers work then.
It appears this study is predicated on content consumption on laptop or desktop computer screens, not the 50-inch 1080p plasma in the living room in front of the couch and the Barcalounger, where people still are trained to watch more ads or pay for the content (HBO, Showtime).
As this study apparently ignores this coming shift, at best it is of little value. Or more likely, the AMPTP will trot out studies like this to justify the continued screwing of artists in new media. I certainly hope in 2011 we’re not naive enough to continue to believe what the moguls are shoveling.
Maybe you guys didn’t get the memo: “anti-American,” “anti-consumer?” Training consumers to get something for nothing is anti-American? You must have voted Republican. That’s all this current adminstration is about: giving away anything and everything for “free” — or at least what the public thinks is “free.” It’s becoming the very core belief of this new Obammy America.
Don’t be surprised if those companies are forced to provide free content once they pick up their bail-out checks.
so because networks, newspapers, music etc can’t figure out a way to compete with the current market we should start whining and slinging terms like “anti-american” around? Give people an actual REASON to pay and they will. Trying to form cartels or guilt folks into paying will NOT work no matter how much demanding you do.