"The Internet is one of the biggest threats facing cable and satellite operators because it enables viewers to watch television without an intermediary."
Photo credit: Anthony Salimbene
"Broadcasters are scrambling to gain a foothold as their traditional business landscape starts to crumble."
New media technologies "from video-enabled cell phones to DVRs to the Internet" are increasingly placing traditional "consumers" in the driver' seat.
Already there are numerous ways for consumers to watch movies, programs and other content piped from the Web to the TV screen.
And what this sweeping transformation, fueled by multiple converging economic, technological and social factors is all about is the complete reversal of the framework for media production and consumption.
Consumers become producers of content, and niche content surpasses by orders of magnitude the value of traditionally labelled commercial television and film.
The value is not anymore in the best seller or in the blockbuster.
The value is in infinite choice of content and in the opportunity for the consumer to see content when she wants it:
prime time is anytime, and anytime is prime time.
For traditional broadcasters and movie producers this can all be interpreted as a gigantic threat or as an opportunity like no other one before.
Some, including the Wall Street Journal, venture to say that the sweeping changes to the media industries are "pushing the networks away from their decades-old model of broadcasting shows for free and selling ads to make money."
One new approach is the one of moving from free broadcasting subsidized by advertising to on-demand paid access to very specific content. The other is to maintain free access, also to on-demand content, but to sell new effective forms of sponsorship and advertising within it.
Obviously, if well implemented the second model could have a lot more traction, given equal opportunities of inventory and distribution.
"The TV business is also trying to avoid the music industry's mistakes in this realm. In the early days of music download services, labels were clueless about the changes sweeping their field, so they put too many restrictions on how songs could be used, and had unrealistic expectations about how much consumers would pay."
Also, "the arrival of on-demand services and other distribution routes offers the chance to "improve returns as consumers will pay for episodes that they might have never have been able to view."
"Typically, studios must wait several years before they have enough episodes to sell a rerun package. But on-demand services allow studios to start generating ancillary revenue more quickly, as DVDs have begun to do."
For those instead who ride this mediatic tsunami with great concerns for the local broadcasters, the direction to look toward to is the one of understanding again how important live, real-time grassroots, citizen reporting and entertainment can be. Local stations can be absolute money-making machines, as long as they well understand where are the strengths of their medium and how they can best synergize with the new emerging ones.
Another aspect that traditional broadcasters and excited telecom executives should not forget is that "video file sharing services have already have begun to blossom on the Web. One popular software, BitTorrent, has been downloaded by more than 51 million users and accounts for more traffic on the Internet than practically any other single use. For no charge, users can download prime time programming, sometimes from the previous night."
In the future of television "deciding how and what to view is a surprisingly complex task, as a series of industry-transforming deals presents consumers with a host of new viewing options.
Each approach requires a different device, and each charges viewers in a different way."
In essence, "technology is giving rise to a multitude of new ways to target consumers with entertainment and with commercial messages."
What should also transpire from the many convergent transformations affecting television as we know it is that it will be "easier than ever before to watch any show you want anytime you want, instead of watching scheduled shows."
The move toward "time shifting" accelerated this week, when two big TV networks, CBS and NBC, agreed to make such prime-time shows as "Survivor" and "Law & Order: Special Victims Unit" available for viewing anytime.
The deal comes less than a month after Apple Computer Inc. and Walt Disney Co. made a deal that allows viewers to download episodes of popular TV shows, including "Desperate Housewives" and "Lost," on a video iPod.
But this is just the tip of the iceberg, as many new programs can now be viewed on cellphones, computers or any other playback device with a color screen.
Next to well established broadcast networks who are trying to understand and play catch-up with the change-wave sweeping all media industries, cable companies have started to enter this market as their traditional telephone pipes can now be used to deliver video, film, and television content on-demand, at anytime and to any user connected to their networks.
"To start watching, all viewers have to do is press a few buttons on their remotes, tapping into thousands of hours of content stored in central offices. Viewers usually can reverse, pause or fast-forward the action so they can speed through commercials."
"On-demand services have one notable plus: They usually include programs that aren't available on regularly scheduled TV."
And this, couple with the fact that thanks to digital video recorders like TiVo or the hosted digital recorder services that many cable companies now offer, is a perfect way to sidestep and jump-over interruptive advertising of any kind.
"TiVo's introduction in the 1990s of DVRs, which can record shows without tapes and can pause and reverse live TV, was a major improvement over videocassette recorders.
Today, digital recorders are offered by most major cable and satellite companies as well. The best aspect of DVRs is that once consumers acquire the equipment, they can record any show they want for no additional fee."
So while advertising was known to be a pretty straighforward mass-market media buy it has now transformed itself in a cottage purchase of thematic audiences and niche-groups across web, cellphones, and podcasting-enabled audiences.
"As a result, advertisers are starting to treat TV more and more as just one conversation among many.
That doesn't mean advertisers are advertising less. Companies are spending more money than ever on media to reach their customers, and advertising agencies are helping them find new ways to do it.
The difference is that the slices of the pie are getting thinner -- especially television's slice."
"During the first six months of 2005, 38% of advertisers' media spending went to cable, local and network TV, down 13 percentage points from 2000, according to TNS Media Intelligence."
"The financial model for ads in on-demand programming hasn't yet emerged.
In the US alone, "this year, ad-spending commitments to the six broadcast networks during the upfront selling season dropped to approximately $9.4 billion from $9.5 billion, the first dip since the 2001 ad recession."
What I find most interesting and in tune with my own vision of a less-intrusive and interruptive ad future is that "some are finding new ways to advertise on TV that are more efficient than the traditional 30-second spot. They are sponsoring entire episodes, or embedding their products within shows as product placement.
Last month, Philips Electronics NV said it paid about $2 million to be the sole national sponsor of "60 Minutes" on CBS. Aside from spots promoting CBS's programs, and local ads sold by CBS stations, only Philips ads appeared during the program. As a result, the episode carried fewer commercials and more time for news stories."
Many of these approaches could be used in the effective monetization of on-demand videos and TV shows, having a commercial break or sponsor announcement introduce the show and one or more at the end of it. Longer shows could allow for a break time at half time providing opportunity for more of this. Key in all of this, is full awareness that audiences are fast moving toward trusted content distributors, and in the consumer eyes these are the ones that do not waste their attention with ads that are irrelevant, and insulting to their intelligence. Therefore it is also in the ability of the advertisers and new online advertisign agencies to precisely target microaudiences and thematic groups with truly relevant ads and commercial messages that tie in strongly with the content of the program being watched.
So, the real question, according to the ad market executives pondering these issues is:
"Would you pay 99 cents to watch an on-demand TV show on your preferred device?"
What do you think?
(Sources: Flurry of Deals Gives Viewers New Options
For Tuning In to Shows; Paying by the Program
By PETER GRANT and DIONNE SEARCEY
Staff Reporters of THE WALL STREET JOURNAL
November 9, 2005)
TV On-Demand May Make Ads More Targeted
By BRIAN STEINBERG
Staff Reporter of THE WALL STREET JOURNAL
November 9, 2005)
Networks Go Boldly -- And Fearfully -- Into TV's Future
Robin Good [via Rafat Ali] -
By BROOKS BARNES and PETER GRANT
Staff Reporters of THE WALL STREET JOURNAL
November 9, 2005