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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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sherilu:
heard of tivo?
Comment by tf — June 15, 2009 @ 9:55 am
That’s newfangled!
First off – network television is free ad-supported programming. You don’t need cable to get ABC/NBC/CBS and whatever else is there. Ad supported models work fine and have for decades.
Hulu is only giving customers what they want – when they want it. Its adding value to all participating network brands. If I miss an episode of TV I can watch it on Hulu. If I miss enough episodes of a show (and they’re not on Hulu) I have two choices – stop watching because I don’t know what’s going on, or download it from the internet. Hulu is a win-win for everyone involved.
These people don’t get it. If the networks weren’t putting up their shows on a site like HULU, they would risk getting pushed out of the online market entirely. And with the illegal streaming sites (don’t have to download or fileshare anymore) becoming more and more prevalent, all the shows (and movies) are on the net within hours already. Better the nets have a piece of it than nothing. Also not like they can’t figure out how to make more off online content in the future.
end the debate-charge a subscription fee
“consumers “are not trained to directly ascribe monetary value to TV shows.” ”
How then do you explain HBO/Showtime, cable TV, satellite TV, VOD/pay-per-view, VHS tapes, laserdiscs, DVDs, Blu-ray, Netflix, iTunes & Amazon Unboxed? And let’s not even go into upgrading one’s internet connection and/or using hardware and/or software and what that costs.
I do believe consumers will pay for content in some fashion what we are now really quibbling about is the right ‘price’ to charge for it.
Even if you don’t believe consumers will pay for content with their own money they will pay by sitting through ads so long as the content providers don’t try to shift all their costs immediately to the advertisers (which is why Hulu has so many PSAs now and so few real advertisers…they balked at paying 3 or 4 times what it cost them to run the ads on broadcast or cable TV when Hulu first got going in late 2007 early 2008 and pulled their spots).
Moreover has anyone thought of the potential for new media to be a truly GLOBAL medium (Hulu is currently blocked to anyone outside the USA)? World wide audiences anyone?
And finally what kinds of numbers are the analysts getting from the conglomerates: are they more byproducts of the infamous Hollywood/entertainment business accounting, are they making educated guesses on which they base their analysis or are they simply making the numbers up? That kind of matters now to investors seeing as how they’ve been burned before especially in the FIRE (finance insurance & real estate) sector.
TV is free. charging money for it will net you a few bucks from the suckers, but it won’t last forever.
it costs next to nothing to deliver content digitally. smart people are aware of this and will figure out how to pay next to nothing to get it. your pirate enemies have managed to figure out how to push terabytes per day all over the globe for nothing more than the price of a residential internet connection. you could do it too and be loved for it, or you can fight the inevitable and get laughed at as you go broke.
you can embrace the fact that charging for content will NEVER work, and figure out how to reduce your costs (stop paying millions of dollars per episode) so you can go back to making money with ads, or you can go out of business and clear the market place for the smart people who have already figured it out.
and before you say that we need big studios and big budgets to produce tv programming, you need to get over yourselves.
no matter what you decide to do, there is a whole generation will never again pay to watch TV. you can count on that.
miller has got a point, but isn’t that already called netflix…?
Have you ever thought to add the revenue from television and from online together? Seriously, wtf?
Three plus One does not equal a negative number. (3 + 1 != < 0)
Where’s Dan Aykroyd and the SNL news to tell Laura Martin: “Laura, you ignorant slut.”
Broadcast television has been free and supported by advertising for 60 years. Nice to know that all that time they were being anti-American, anti-Consumer and anti-Media employees.
Edward R. Murrow would have a field day ripping apart these corporate shills’ agenda driven faux analyses. Unfortunately, there is no one today in the media with the stones, objectivity and reputation of Ed Murrow.
anti-american?
I hope you fall on unemployment. You are a freeper and an embarassment to society.
How hard is it to understand that giving away free content doesn’t mean everything is for free?
You do realize hulu has advertising, right? Oh right, go back to right wing talking points and leave your blog please. FCS.
Studios are contorting themselves every which way to avoid the truth that they must deliver quality content or viewers will flee. Passing off cheap content will last only so long, and certainly viewers won’t pay for it.
If you keep squeezing every last cent out of everything and everyone, you end up with nothing.
Soon, they and the crickets will be the only ones left in tv land.
Pay tv pre-dates HBO. In the 70′s there was the “Z” channel (there might’ve even been a predecessor.)
It was a subscription service that offered feature films in the days before VCR’s. That was a unique offering.
Sigh. Re previous comment: The days when people were embarrassed about porn look pretty good compared to the freak show barrage of sewage today.
Don’t bother with the howling protests from the porn hounds. Zip it, lock it, keep it in your pocket.
The TV industry is headed for a collapse just like the music biz, newspapers, and soon to be books. There was plenty of arguing like this back and forth about music, but the bottom line is it’s easy to get stuff for free so why pay? Ok , you can try more ads online, but it seems extremely unlikely that it will come anywhere close to the lost tv ad revenue. The internet is a great way to get unlimited content for free, and train young people to expect it for free. The implications of this have not been internalized by industry people yet and most are whistling past the graveyard.
Viewers went to torrent sites because of the simple law of supply and demand; viewers wanted to watch content and media companies weren’t providing it. so viewers simply found another route.
Sites like Hulu are recognizing the simple law of supply and demand and are choosing not to criminalize the viewing audience. Sites like Hulu also allow shows to gather an audience in a way that accomodates viewers, not networks; and with a site like Hulu in particular, it also gathers demographic information for advertisers in a way that doesn’t rely on Nielsen’s incredibly flawed statistical methodology.
There’s nothing “anti-consumer” or “anti-America” about meeting demand with supply and allowing shows to grow additional viewers.
I thought the employees of Hulu are aliens in an evil plot to destroy the world? They’re not anti-American, they’re anti-human.
This common misunderstanding that broadcast TV is “free” is, well, a misunderstanding.
Watching it – we pay for (even basic) cable, which pays networks (or whomever) up the food chain for programming.
Eyeballs – we consumers have to “suffer” the pains of ads no matter where they land in a given one-hour program. Not actual money out-of-pocket, but a valuable asset (to advertisers) nonetheless.
Subsequent purchases – when the show’s over we actually leave the house/apartment/condo/yacht/mansion/motorhome and BUY the stuff advertised on the “free” shows. Trust me, we do. If we didn’t, advertisers wouldn’t bother writing the checks to advertise on the “free” programs. Cosmetics. Viagra. ShamWow. KFC. Oxyclean. Automobiles. Prescription drugs. Nike shoes. Victoria’s Secret lingerie. Pork. None of that stuff is free, is it? Even those of you who use TiVo – you bought that TiVo unit with money, right?
I don’t know how the internet profit-structure is gonna play out, but they’ll find some way to make the public believe they’re (we’re) not paying for it while charging us up the a$$ in some way. This ain’t no college flunky-ass handing out free, illegal music-sharing software. This is multi-billion dollar businesses who know what the hell they’re doing. They will profit tremendously from “New Media”, no doubt about it.
And how will they get us to believe that we’re not paying for “New Media”? Advertising, my friends. Advertising.
So the networks have to follow the car industry downsizing to a leaner meaner business, no real surprises there, competition and technology can kick you in the ass if you fall asleep at the wheel. Content will still be produced and consumed by billions of people around the world, whoever comes up with the next big thing still will make big money and the people trying to sell “Reheated crap – part XI” will complain about how they don’t seem to make as much money as the people next door.
For those who are lashing out at NIkki, she is not the one making those statements.
On Topic:
The growth of broadband, HDD space, and computational power will destroy the current model. If you can D/L the streaming video to your HDD and run it as a stored file no amount of commercials or obvious ads will survive. The advertisers are not completely braindead. They will realize that they are paying lots of money for nothing.
Where to go from there? I am not certain how many permutations of the on-the-ropes model of seprate ads we will see along the way, but I see it ending up with the use product-placement via blue/green screen technology. This will require a slight step up in technology and a complete rethinking of how to design ad campaigns.
Without some way of making the advertisement an indivisable part of the programming, the days of having advertisers paying to produce shows will end.