Great Advice for TV Industry

 

 

 

 

 

Stephen White, president of Gracenote, succinctly summarizes excellent advice for the TV industry:

• You Can’t Take Content Away: The outdated model based on controlling distribution is dying. If you force it underground — that is, “illegal streams and downloads” — you’ve lost the battle.

• Adapt or Die: The millennial generation is addicted to YouTube, on-demand and streaming services. They no longer tune in at a specific time and date, and are increasingly shying away from paying for premium cable bundles. With filmmakers and producers spending the time and resources to make great TV programing, like “Homeland,” “Girls” and “Mad Men,” delivery methods should be figured out to get these shows to viewers who won’t pay $150 per month in subscription fees.

• Open the Windows: The “distribution window” is used by Hollywood to define how long a VOD and streaming service can distribute movies and TV programming. The problem? If the window for season one of “Downton Abbey” is about to close from Netflix or your cable provider, and you haven’t watched any of the episodes, you better call in sick to work to get your fill of the Granthams and the Crawleys, or miss the entire season altogether.

• Stop Explaining Business Models: Movie and TV viewers don’t give a sh*t about business models. They just want to watch their favorite shows — whenever and wherever they choose. The music industry followed the same pattern in the early 2000s, explaining why the economics of music streaming and downloads would not support artists and the industry. Guess who won?

• Open Up to Developers: Don’t assume innovation will only come from within your organization. By tapping the developer community, you will be able to move faster and find new ways to use or distribute content, which could result in new monetization strategies. Some of the more forward-thinking media properties, including ESPN, are already doing this, allowing developers to hack ad strategies and sports data.

• Rethink Discovery: As video distribution evolves, there needs to be a corresponding evolution in how people discover new movies and TV programming. If viewers are paying hefty monthly subscriptions (which today support a lot of what they don’t watch), it is critical to provide paths to find what they really want to watch. The current TV guides embedded in our set-top boxes have to be completely rethought.

• Reinvent Measurement: We still depend on a small sample of viewers to rate the popularity of programs and we base all advertising decisions on this data. However, the technology to measure real time usage inside the TV exists today and has the potential to enable more precise measurement and better targeting of advertising.

Although the TV industry knows better, sort of, than the music industry not to try to kill digital distribution (cf Napster), too many legacy TV folks are kicking and screaming against new business models. Too many are either in denial or simply unable to imagine a new way of doing things. Of course it’s true that legacy systems and structures don’t just go away; many of them may deeply shape new models.

However, those in the TV industry have a choice. They can continue to insist that legacy models be imposed on a changing market, extracting more and more subscriber fees from an increasingly restless audience and further criminalizing audiences who watch unauthorized content. This option will result in an increase of piracy, dissatisfied customers, and extreme vulnerability to disruptive competitors. Sometimes systems change seemingly overnight; what seems concrete one season suddenly evanesces.

The other option is to begin to adapt to new business models immediately. Offer options, choices, convenience, accessibility, positive user experiences, and lower the prices. Instead of confusing price with value and insist that viewers must continue to pay >$80/month for TV, unlock the value of all that pent up consumer demand for easy-to-access reasonably priced nonlinear programming. Sure, content producers may have to lower budgets. Sure, profit margins may shrink. But the outcome will be a growing and profitable entertainment market with a larger piece of the pie for creators.

Audiences need entertainment. But they don’t need specific entertainment companies to provide it. The entertainment companies that survive will be the ones that respond to the market demand for reasonably priced nonlinear programming.

Is TV Taking over the Internet?

The internet is not going to take over TV, says Jeff  Bewkes, Time Warner CEO. “TV [is] disintermediating the internet, taking over the internet, not the other way round.” TV Everywhere, not Internet Everywhere?

Bewkes makes several important points in his presentation at the FT Digital Conference in London on April 25, 2013. Bewkes claims, “We all have to realize there is no distinction between TV and digital media. All TV is basically digital.” He acknowledges that nonlinear TV is the future: timeshifting is here to stay. VOD and OTT providers like Netflix are providing profitable markets.

He also argues that programming supported solely by advertising may not survive. Subscription revenue, Bewkes claims, is necessary for high quality programming. If true, does that mean that the legacy pay TV subscription bundle model is the best option? Or will that subscription model have to adapt and provide more options to viewers?

Can the television industry, having enjoyed several decades of fat profits based on oligopoly distribution control, actually transform the internet, or the streaming video part of it, into a closed proprietary system requiring subscription fees for access?  Could this be wishful thinking on the part of someone insisting that his business model is not broken?

Or is Bewkes merely pointing out to the TV industry that profits are to be made in streaming TV, that the sky is not falling. And that instead of insisting on an essential difference between “TV” and “the Internet,” the TV industry should move quickly to keep viewers satisfied by providing legitimate streaming services.

OK, but when will subscription prices reflect programming’s actual value to viewers? How much longer will viewers like me be forced to pay for ESPN before we cut the cord?

Measuring Audience Emotions, Past and Present

Affdex, a facial recognition software made by Affectiva, is being used by advertisers to measure audiences’ emotional reactions to ads. Capturing minute facial changes, Affdex tracks viewers’ fleeting emotional reactions, allowing analysts to identify, through proprietary algorithms based on “283 facial frames,” their positive and negative responses to an ad. Affectiva hopes to sell this technology to the TV industry so that “smart” TVs could, on the basis of one’s previous emotional responses to programs, auto-program one’s TV set.

With a webcam, according to Affectiva CEA David  Berman, Affdex could eventually be used as a “more scientific version of Facebook’s Like button.” 

In the next two years, Berman envisions Affdex becoming a complement to “smart” televisions that can understand people’s preferences. “If my wife and I both like to watch the same show, it will fine-tune the algorithm,” he says. “It puts the emotion back into viewing.”

Advertisers anxious about audience response have always sought quantifiable measuring techniques. Beginning in the 1930s, Daniel Starch pioneered techniques for measuring readers’ views of magazine advertisements; his Starch Reports claimed to identify effective headlines through empirical studies of the number of seconds readers spent on an ad. Today, Betsy Frank at Time Warner uses “biometrics,” such as mini video cameras and belts measuring heart rates and breathing, to track users’ responses to media. Back in the late 1930s, Paul Lazarsfeld and Frank Stanton invented a “Program Analyzer“ to measure radio audiences’ responses. Today, visitors to Television City in Las Vegas may participate in television audience research by using an updated version of the Program Analyzer, turning a dial to indicate their positive or negative response to each moment of a program.

In most of these approaches, researchers have to rely on some form of audience self-reporting, which is inherently variable. While participating a “dial trace analysis” in Television City, I noticed my neighbor laughing heartily at punch lines of a tested program but not moving his dial up past 30 (out of a top score of 100). So, to make up for his relative lack of cooperation, I moved my dial up every time he laughed. Afterward, I asked him why he didn’t move his dial much and he said that a 30 score was a reasonable score to reflect his mild amusement. Clearly, we were operating on different rating scales since I assumed that 70 was a reasonable score for anything mildly amusing and listening to him laugh heartily I assigned his behavior 80-95 scores. How useful would our data be for program analysis since we used such different standards?

Affdex removes the problem of audience self-reporting by measuring and defining facial expressions. But the application of algorithms cannot remove the problem of how to interpret that data. Why or how the algorithms determine that a facial expression indicates positive or negative responses is locked inside the black box of proprietary software and is reflective of the biases of the makers of those algorithms. Does the software categorize human emotional response beyond the simple binaries of “positive” and “negative”? How can it account for other variables, such as context, social viewing, or multitasking? What if the viewer’s responses result from hunger or sleepiness rather than the viewed program or ad? Even more problematic, does identifying a viewer’s facial expression as “positive” actually have any predictive power as to the viewer’s likelihood to buy or watch in the future?

Audience measurement continues to rely on proxy information: viewership, as measured by Nielsen people meters, and now emotional engagement, as might be measured by Affdex. (For an excellent analysis of television audience measurement, see Philip M. Napoli’s Audience Evolution). 

Yet, exposure and engagement are only proximal to what advertisers really want to know: what ads actually convince consumers to buy? Perhaps Affdex will help advertisers eliminate ads that generate negative responses, but will it be able to reliably account for the multifarious variables that affect consumer behavior? Will viewers prefer that their TV pre-select programs based on Affdex’s algorithms? Or will that actually remove some of the “emotion” from viewing?

Boxee CEO Advises Broadcasters

 “As soon as you limit access, piracy increases,” pointed out Boxee CEO Avner Ronen in a talk at the NAB in Las Vegas on April 17. Locking up content behind excessively expensive paywalls or withholding content for too long behind exhibition windows may just encourage audiences to find their own access solutions. This should be common sense, yet it sounds radical at a forum like the National Association of Broadcasters.

Ronen went on to explain,

“We’ve seen in other industries the best way to combat piracy is to make content available and to create a great experience around it.

“I think the more dangerous thing for the industry, if you limit access to your content, is now there’s so much new content coming over the top, whether it’s YouTube or directly from artists and creators and people going on Kickstarter and getting funded directly by their audience. … If you make it too hard to get access to your content, if you don’t engage with your customers, either they’ll pirate it or worse, they’ll watch something else.”

Now the irony here is that Ronen was explaining this to broadcasters!

Broadcasting, since the 1920s or so, was the original version of the give-content-away-make-money-from-advertising business model. Although ad-supported broadcasting was invented in part because there was no way to force audiences to pay for signals, and there was political resistance to taxing audiences to subsidize programming, nonetheless it proved to be an effective business model for decades.

Yet Ronen seemed to be on the defensive, expressing sympathy for the broadcasters incensed by Aereo‘s threat to the business model of retransmission fees.

Ronen offered that the pie is getting larger, not smaller:

“There are going to be more audiences watching more video on more screens, a lot of new business models, a lot more people watching more stuff and being able to pay for it. I think eventually it’s going to be the best thing that’s ever happened to the media business but I think it’s going to take a while. In the meantime I hope the transition will not be too painful for the media business.”

Let’s hope broadcasters paid attention!

Aereo and “Free” Broadcasting

Broadcast networks are suing Aereo for copyright infringement because Aereo retransmits free over-the-air signals to subscribers online. How might this case reflect broadcasters’ changing commitment to “free” over-the-air broadcasting supported by advertising? In this post at Antenna: Responses to Media & Culture, I consider the historical context of “free” and the problem of changing business models. 

 

Are TV Networks Going the Way of 1950s Radio Networks?

Is linear TV facing a crossroads today similar to what national network radio faced in the early 1950s? 

Reports that broadcast network television ratings are down across the board indicate that one network’s programming strategy is not necessarily better than another. So what might be happening? Audience behavior is changing. Nielsen, after much pressure from networks, has finally decided to include in its (miniscule) sample households that watch programming online only.

TV networks seem to be frantically trying to revive audience viewing of traditional, linear, scheduled programming, while simultaneously trying to find audiences on other platforms, such as Hulu and network web sites. Fretting about “cannibalizing” their linear audiences with timeshifting online audiences (which don’t generate as much revenue), many networks seek the magic bullet in “must see” live programming (sports, awards, contests).

This ping-ponging around reminds me of another era, the decline of network radio during the rise of network television. Many members of the radio and advertising industries believed that network radio would survive the arrival of television. Radio listening seemed so ingrained in American culture. Such large audiences gathered around the radio to hear dramas, comedies, quiz shows, and soap operas, it was hard to imagine they would ever stop.

Anne and Frank Hummert, whose soap opera “empire” dominated daytime network radio programming in the 1930s and 1940s, entered the 1950s confident that they could preserve their large audiences of housewives. Surely, women washing dishes would still listen to the radio as they worked. As audiences declined, the Hummerts tried everything they could think of. They experimented with schedules, used guest stars, changed plot lines, tried new actors, found new sponsors. Eventually, each of the programs went off the air. Their  radio soap operas—serious, didactic, ponderous, repetitious, moralistic—were replaced by more character-driven television soap operas.

Meanwhile, radio networks morphed into television networks. During the transition, the networks experimented with simulcasting programs on both radio and television; they emphasized live programming to attract audiences; and much early television programming followed well-established radio formats (game shows, variety shows, quiz shows). 

In retrospect, the shift away from national network radio programming seems obvious. Of course television would replace radio as the primary entertainment medium.

Is this shift happening today, but from linear (scheduled) television to online (time-shifted) viewing? Is the television industry today, like the radio industry of the early 1950s, aware of the momentous shift and yet still in denial that it is really happening?

Several decades from now, will this transition seem similarly obvious?

House of Cards Has No Advertising

My ruminations about the business strategy behind Netflix‘s simultaneous release of 13 episodes of House of Cards is on Antenaa: Responses to Media and Culture, click HERE to read it.