Henry Blodget has an interesting post on something that seems so obvious to me that it’s hardly arguable: the impending collapse of the business model for television networks. After a lengthy exposition, outlining the collapse of the print newspaper business model (check out the astounding graph of real newspaper advertising revenue), he makes the following points:
- “Networks” are completely meaningless.
- The majority of what we pay our cable company is wasted.
- We rarely watch TV ads, and when we do, we’re usually doing something else at the same time–like typing.
- The vast majority of money TV advertisers spend to reach our household (~$750 a year, ~$60/month) is wasted,
- The vast majority of money we pay our cable company for live TV (~$1,200 a year / ~$100/month) is wasted,
Virtually the only network television program I go out of my way to watch these days is NCIS and I think that’s on twilight cruise at this point. Most of what I watch is on Netflix (I would watch more on Hulu if Hulu weren’t such a mess).
The brightest new development in my television-watching habits is that I’m now a subscriber to Acorn TV. Every month I get a nice selection of British TV I can stream via my Roku directly to my TV. That’s the direction I’d really like to see television move in: à la carte
I’ve seen at least some studies that indicate that the broad network model (or whatever you want to call it), does subsidize the choices that people would like to make an on an a la care basis. IOW, the BBC shows your watching might not be there if there was no BBC.
There are also some big differences with the paper industry. Costs of paper have been going up; the labor-intensive distribution model is costly as well. In addition, the number of newspapers and the number of newspaper readers has been declining since the 1970s.
The network model does not have the problems of high fixed cost and declining demand. Networks are often simply repackaging pre-existing content, so their costs per program should be lower. The History channel and all six or seven of its related channels frequently repurposes existing content. They keep bundling more services into the cable bill, regardless of whether you consume them. Will Blodget keep spending over a $100 per month on cable? Sounds to me like he will, and he will complain that he didn’t have the time or desire to consume everything on the buffet table.
I would love to get rid of our “cable” (satellite actually), but the wife still watches a few things. I think the networks and cable providers and only keeping their sinking ship afloat through the threat of lawsuits. Anyone who tries to make a convenient device for access to programs through the internet doesn’t have a hope currently. The alternatives to cable/satellite are still annoying enough for most people to stick with what they have, but there’s no doubt the writing is on the wall.
The biggest problem I see is that the optimum distribution method is currently illegal: peer to peer.
In the long run they will have to stop fighting it and make everything available on services such as Netflix for a lot less money.
Actually, there is a software solution that has some promise. In theory it should enable me to stream to practically anything on the Internet to any computer on my network and directly to my TV via my Roku. Of course, as Yogi Berra said, in theory there is no difference between theory and practice but in practice there is.
I’ve been tinkering with it for a while and planned to post about it. At this point it requires more tinkering than all but the most sophisticated users are likely to put up with.
TV is a different animal than internet. It’s background music vs. download. People have the TV on because they’re accustomed to having the TV on, it provides the soundtrack of their lives. People enjoy moments of passive reception and that’s what makes it different than the locate-and-download model of internet distribution. I suspect the vast majority of TV watching is in that mode, not a matter of looking for a specific program but simply having “something” on.
Then there’s the live or semi-live stuff — sports, contests, news events, etc… NBC just paid Howard Stern 15 million to be a judge on America’s Got Talent to bring his Sirius Radio audience to the network. They must see a profit in there somewhere. And there is still ‘event’ TV: History Channel just had a big hit with a very expensive Hatfields and McCoys trilogy. They didn’t invest that kind of cash because it was a money loser. They had huge ratings (for cable) and used the time to sell their network and their other programming.
Also, as I’ve learned to my surprise (and profit) old models die hard. Publishing ought to be dead, but it isn’t quite yet.
I think the results strongly suggest that the various talent progams are collapsing, at least in part from over-exposure. American Idol’s audience has shrunk by, like, 30%. America’s Got Talent is being described as a hit and it had about the same viewership as Hatfields & McCoys. On NBC!?
I think there’s a backstory on H&M that hasn’t been revealed yet. I know that its producer has been pitching it for 30 years trying to get somebody to back it. He shopped it around at the broadcast networks back in the Roots days and couldn’t get any takers. It does have a solid cast. It got a pretty old demographic so I’d be surprised if it starts a trend.
I also suspect that H&M will do more for Kevin Costner than it will for the History Channel.
@michael, I think your right about TV having an intrinsically passive role that distinguishes it from other forms of entertainment, except perhaps music. I think some of the criticism of the current model is that if you have 200 channels, its not a passive activity to browse through them all.
@andy, your kids don’t get a say about wanting to watch Nick or Disney? I think I’d suffer a major revolt if we lost these.
I think Michael is correct in identifying the “stickiness” of TV. However, I see the splintering accelerating. For me, it’s just sports and movies. For others, so called reality TV. For others they do the history channel etc etc.
I have to be careful here and not project my personal views, but I haven’t seen a “must see” TV show or series in 20+ years. I know others differ. But the point is that people have so much media choice now that unless it’s blockbuster, the slivers are just tiny.
Advertisers beware. Pay for view here it comes.
PD Shaw,
My kids are too used to the DVR – we have Dish network and they are pros at that 30 second forward button. They almost never watch live TV anymore and the only shows they are currently interested in are Mythbusters, Scooby Doo, old-school loony tunes, and Ace of Cakes. We also watch maybe 1 or two movies a week, usually free, from the movie service. If I could convince my wife to give up the satellite service, I’d just buy the DvD’s or digital equivalent for those shows.
Michael,
What about Pandora? I’m sure someone must be working on a TV Pandora, but the problem with that is getting rights to the shows.
Yeah, Drew, I forgot about sports. We need our football.
Looking at this Nielsen Report, I see some confirmation and some disconnect from Blodget’s piece:
1. Viewership of non-time shifting T.V. is still quite high. Its down 1.7% from last year, but it looks to me like the additional platforms (DVR, VOD, Internet & Mobile Phone) are up 4% to 35% and are increasing the number of people watching T.V., not cannibalizing it at this point.
2. Average person watches 5 hours of non-time shifting T.V. per day. If you watch less than this, you might be weird.
3. A lot of people are multi-tasking while watching t.v. Even people over 55, most are checking e-mail. I think Blodget is blaze about people being able to absorb commercial content while doing more than one thing.
4. Ad revenues are up. “Spending on cable TV has increased steadily over the last few years, up 42 percent from 2007.”
5. Probably need to distinguish cable tv and local tv, one of these appears to be doing good (the former), but not the other.
http://blog.nielsen.com/nielsenwire/online_mobile/report-tv-continues-to-hold-the-lion%e2%80%99s-share-of-ad-dollars-and-consumers-media-time/
blaze = blasé
Five hours a day! Holy cow, I am definitely weird.
Just go get a Roku and be done with all that nonsense….
Steve V.
I haven’t looked at Roku’s in a while, but it last I checked like they don’t have much more than what’s already available on my DVD player’s interactive suite (Amazon, hulu, netflix, etc.).
I’m on the computer, reading journals etc., far more than I am stuck in front of the tube. When I was a kid I watched TV more, especially anything that showed old movies. Now, I am too restless to sit for too long, gazing into a screen that is supposed to entertain me. When I am writing, though, that’s different, and I can be at a monitor for hours.
@andy, I calls them like I sees them, weirdo. I do sometimes wonder how such results can be achieved. If its an 8 hour work day, with something around a 6-8 hour sleep time, you have half of all non-work/sleep time with the tube.
BTW/ my earlier comment about your kids was more directed towards the a la carte idea; I find my family, like America, spinning into their own niches, and doubt that I would save any money that way. Though I probably would not subscribe to ESPN, which I can’t tell if it would save me or lose me money based upon how important it is. At some level, I would find the decisionmaking a hassle.
In our house it’s not either/or it’s all of the above. Typical night I’ll say, “Modern Family’s” on. Three of us will watch on TV but with one or two computers open simultaneously. One gets bored and tunes over to something online. One will say, “I’ll download it later.” Or maybe it’s being recorded on the DVR and w’ll time shift and we’ll time shift it. It’s endless permutations — TV, Netflix, Hulu, DVR, iTunes.
I’ll say this: Hollywood is definitely still very much in business and looking for content. It’s a dozen pathways all leading back to Hollywood. More and more platforms for scripted stuff which was declared dead just a few years ago. Even Netflix is now buying original content with a weird and oddly likable Norwegian/American hybrid called Lilyhammer.
I don’t think the recession is reaching the entertainment business. Even in publishing we suddenly have a new play — Amazon — throwing money around chasing original content, bidding to beat out the Big 6.
One other weird thing: I know of two cases at least of studios looking to reverse-engineer TV/Movie content into books before actually making the show/movie. They want to shift development out of union-run Hollywood onto book writers, and they want to build what they call (redundantly) pre-awareness. I was approached to do it but the money didn’t make any sense for me.
Not just in publishing. I thought I had posted about Amazon Studios before. It’s an interesting concept.
That’s not new. Somewhere on my bookshelves I have a copy of Star Wars in novel form, released quite some time before the movie was released. Six months maybe. It says “George Lucas” on the cover but I believe it was actually written by Alan Dean Foster. As wretched a piece of drivel as I’ve ever read. I went to see the movie anyway.
Amazon studios is a skinflint effort as far as I can tell. The publishing arm appears to be paying big premiums, at least to a buddy of mine. Sure got my attention.