In the first decade of the commercial Internet--the 1990s and early 2000s--there were frequent murmurings that newspapers were screwed.
The digital audience didn't read newspapers, people pointed out. They visited web sites. They read articles here and there. But they didn't put the stack of articles, photos, and ads known as a "newspaper" on their breakfast table and flip through the whole thing.
What's more, the digital audience stopped using newspapers as a reference and source for commerce. They browsed on eBay and Craigslist instead of reading classifieds. They got their movie news from movie sites. They got real-estate listings from real-estate sites. They learned about "sales" and other events from email and coupon sites. And so on.
In other words, the user behavior that had supported newspaper companies for a century began to change.
But for almost a whole decade, the newspaper industry barely noticed.
Subscriptions kept going up.
Ads kept going up.
Stocks kept going up.
Those who said that newspapers were screwed were dismissed as clueless doom-mongers, at least by newspaper executives.
Then this happened:
And lots of newspaper companies went broke or almost went broke. And the stock of The New York Times Company, the country's premiere newspaper, fell from $50 to $6. (See: "The Incredible Shrinking New York Times")
In other words, newspapers were screwed. It just took a while for changing user behavior to really hammer the business.
The same is almost certainly true for television.
In our household, as in many households, television consumption has changed massively over the past decade, especially over the past 5 years.
- We almost never watch television shows when they are broadcast anymore (with the very notable exception of live sports)
- We rarely watch shows with ads, even on a DVR
- We watch a lot of TV and movie content, but always on demand and almost never with ads (We're now so used to watching shows via Netflix or iTunes or HBO that ads now seem like bizarre intrusions)
- We get our news from the Internet, article by article, clip by clip. The only time we watch TV news live is when there's a crisis or huge event happening somewhere. (You still can't beat TV for that, but soon, news networks will also be streamed).
- We watch TV and movie content on 4 different screens, depending on which is convenient (TV, laptops, phones, iPad)
If not for live sports, which are consumed by exactly one member of our household (me), there is no way we would be paying for cable TV or any other kind of traditional pay TV anymore. And even as a sports fan, I'm starting to find the fragmented multi-channel coverage of the few sports I watch--like tennis (Grand Slams), baseball (Yankees), and football (Jets/Giants)--so annoying that I may soon investigate just getting those via direct subscriptions.
In other words, in our household, and in many other households like ours, the same thing has happened to the TV business that has happened to the newspaper business:
The user behavior that supported the traditional all-in-one TV "packages"--networks and cable/satellite distributors--has changed.
We still consume some TV content, but we consume it when and where we want it, and we consume it deliberately: In other words, we don't settle down in front of the TV and watch "what's on." And, again with the exception of live sports, we've gotten so used to watching shows and series without ads that ads now seem extraordinarily intrusive and annoying. Our kids see TV ads so rarely that they're actually curious about and confused by them: "What is that? A commercial?"
For now, our type of household may still be in the minority, but we won't be for long. And our type of household is the type of household that many advertisers and TV networks want to reach. We're still in "the demo" (24-55), and we're still buying a lot of stuff.
So, what are the key points of this shift in user behavior for the traditional TV business?
- "Networks" are completely meaningless. We don't know or care which network owns the rights to a show or where it was broadcast. The only question that's relevant is whether it's available on Netflix, Hulu, Amazon, or iTunes. This means that one of the key traditional "businesses" of TV--the network--is obsolete.
- The majority of what we pay our cable company is wasted. We get broadband Internet from our cable company, and we use that constantly. But we also get 500 channels that we almost never watch, along with a couple (HBO, Tennis Channel) that we pay extra for and do watch occasionally.
- We rarely watch TV ads, and when we do, we're usually doing something else at the same time--like typing. Also, the ads seem startlingly intrusive, because we're not used to them.
More directly, what this means is this:
- The vast majority of money TV advertisers spend to reach our household (~$750 a year, ~$60/month) is wasted, because we rarely watch TV content with ads, and, when we do, we rarely watch the ads.
- The vast majority of money we pay our cable company for live TV (~$1,200 a year / ~$100/month) is wasted, because we almost never watch live TV and we can get most of what we want to watch from iTunes, Netflix, Hulu, and Amazon.
This user behavior has been changing for a while, and, so far, it has had almost no impact on the TV business. On the contrary, the networks and cable companies are still fat and happy, and they're coining more and more money every year.
But remember what happened in the newspaper business.
When the Internet arrived, user behavior started to change. It took a decade for this change in behavior to hit the business. But when it hit the business, it hit it hard--and it destroyed it shockingly quickly.
And the same thing seems likely to happen to the TV business. The only questions are:
- When will it happen?
- What will it do?
Let's take the second first.
What is the shift in user behavior likely to do to the TV business?
- The traditional "network" model is likely to break down and be replaced with far larger "libraries" of content and far more efficient content production, acquisition, and distribution. Some of the content produced by networks will still be consumed (and, therefore, produced), but the idea of getting "affiliate fees" and selling advertising for each of dozens of branded networks seems absurd. This change is already occurring, of course: Traditional networks are being replaced by Netflix, iTunes, and uber-networks like "NBC Universal" and "Time Warner." There is so much money in the network business right now that, initially, this shift won't mean much. Over time, however, it will. Unprofitable networks will be merged with profitable ones. Unprofitable shows and overpaid talent will be cut. Overpaid managers will get fired. Production costs, on aggregate, will drop. Sets, crews, newsgathering, etc. will be consolidated. The fat will get squeezed out of the system.
- The cost of traditional pay TV will have to drop--users will have to get more for less, or they'll stop paying for much at all. I might value the TV content we get through our cable company at $20 a month--about 1/5th of what we pay for it. Eventually, as soon as I can figure out ways to get the few sports I watch another way, we'll stop paying the $100.
- Ultimately, the distinction between "TV" and other forms of video content will disappear. We'll pay some distributors for bundles of that content, we'll buy some of it directly, and we'll get some of it for free. But a lot of the money that is currently being wasted by us and to reach us will be spent much more efficiently.
Bottom line, as it has in newspapers, the TV business is going to have to get radically more efficient. It won't disappear--newspapers haven't disappeared--but the fat and happy days will have to end.
As for the other question, "when," the answer may be "now."
Cable TV ratings over the past year have dropped sharply, as this chart from Citi shows.
A recent survey from Nielsen, meanwhile, included some startling statistics, including the following:
- The percent of people worldwide who watch TV at least once a month dropped from 90% to 83% over the past year.
- The percentage of people who watch video on a computer once a month--84%--is now higher than the percentage who watch TV.
Needless to say, a decade ago, newspaper industry forecasters were not expecting newspaper advertising to do this:
Similarly, TV forecasters are not expecting TV advertising or subscriptions to do that over the next 10 years. On the contrary, they're expecting TV advertising to just keep going up.
But user behavior is changing fast.
And at some point, that's going to hammer the business.
SEE ALSO: UH OH: This New Nielsen Data Suggests People Aren't Watching TV Anymore
Buy a roku.
Netflix, Google, Amazon, etc need to become the studios or pony up and purchase content from the studios.
TV is playing a scorched earth game of retaining IP on shows people refuse to watch on TV's terms and TV refuses to acknowledge the world has changed.
You can only ignore your customer for so long.
Shows like "Chuck", "Arrested Development", Star Trek", etc. that fans would literally pay to see but want to watch on their own terms will eventually find new life on Netflix, etc. with Netflix producing or funding their production.
The problem is that TV retains the IP, so to get past that dinosaur barrier, Netflix, Google, Amazon need to pay the cost of initial production of new shows and have their own pilots. Very, very risky - but once Netflix et al figure out how to do this, TV execs are screwed permanently.
Example: I very much enjoy the Yahoo video show featuring Henry and Aaron Task but I rarely think to go to Yahoo and watch them.
If the show had a roku or Google TV app, was on Amazon Prime or Netflix, I might be prompted to watch them while perusing the content offerings on those systems.
These types of collaborations or indie app dev don't presently exist, but how hard would it be?
If BI had a roku channel or a Google TV app and produced good content - I'd watch it.
http://paidcontent.org/2011/03/08/419-google-poaches-from-paramount-again-but-why/
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Not many people caught on to (another brilliant Blodget story in the making) that GM tried a power play on Facebook leading up to its IPO. The demanded more gaudy and obnoxious ad real estate on Facebook. When they didn't get what they wanted they pulled their ad revenue on the EVE of the IPO. Try reading something on the Huffpo or many of the news blogs it is like trying to play a video game. The page is upscrolling and hiccuping into a down scroll for the first fifteen seconds. Many times some movie ad extolling mayhem and slaughter.
The question is, who is going to buckle and grovel on bended knee to the advertising monsters. Spam is easier to handle than horrible gaudy advertising. The web is next...
Soon the HDTV will be simply the Computer Monitor. No TUNER, just HDMI inputs
As far as TV viewing itself, it's not declining...at least not noticably (no more than overall non-Facebook website traffic is, for example). How you can regurgiate that Citi slide the same week that the Hatfields & McCoy's generated the highest ratings in cable history, is well head scratching....think about all the great programs on cable now both scripted (Mad Men, Jusitified, etc.) and un-scripted (Planet Earth, etc.) and TV has never been stronger.
Lastly, there is really no disruptive threat to TV advertising that Craigslist and Monster posted to Newspapers classified & employment revenue. If wou want to lauch a new car or big new movie that weekend, getting a dwindling audience on Yahoo or AOL won't do it, you need to go to TV programs....context matters and advertisers still now TV is the main environment to be for branding\product launches. Your house is not completely representative of the US, plenty still watch live TV (and those who do DVR, only about half of ads are skipped across overall DVR footprint).
When the subscriber exodus picked up steam back in 2010, did they decide to squeeze the C*O crowds' salaries for needed operating cash? Hell no. They decided to squeeze me instead. They raised my rate 4 times between January and June.
Fed up with never ending rate hikes, reality shows and paying for hundreds of channels we never watched, I told them to stuff it.
I got a box and hooked the laptop to the TV. Now we watch Netflix. We have to wait longer for HBO shows. So what. We can watch what we want, when we want, without all the stupid ads. If we like a series, we can watch one show after another...or not....as we want.
Will the cable company let me pick and choose which channel I want in the house? Hell no. I have to pick from different packages...all stuffed with crap....crap they want me to have. Not what I want to have.
The cable company calls me once a moth to tell me what a "deal" they have for me. They bloviate on how they can give me "quality entertainment for the mere pittance of $75 a month," and how this translates into "massive savings over your current bills."
Sorry Charlie. $75 is more than $16. Your Wall Street Math doesn't fly in this house.
What's more - if looking for information/news - the reporting is much more diverse and compelling online than anywhere on broadcast where they are beholding to their conglomerate masters, governmental censorship, the Israeli agenda (http://www.mwio.org/) & advertisers. They will not report anything too controversial or against propaganda directives.
The freedom of information achieved by the internet is a global revolution and catching fire as more consumers have a broader range of appliances (laptop, notebook, Ipad, smartphones, etc) to digest this information.
Looking forward to the next 10 years of advancements.
There are three big things that burst your bubble:
1. You are not represnting the typical american family. I'm sure your family income is vastly higher than 90% of the country. A lot of people cannot afford cable, DVR, streaming, broadband, iPads etc. There are parts of the country with no decent broadband. Your in the 1% and think your norm is the norm. Meanwhile most of america is struggling to get by and dreaming of the day they can buy and use all the things you wrote about.
2. The networks make all the content. They don't get people buying cable / watching ads, they have no income to make great TV shows, considering every year there is more and more reality crap theres a greater liklihood tv shows as we know them will only be on networks that get subscription fees. Which could be a model NBC, ABC, CBS etc turn to if you want new content. All the services you like are fantastic for reruns and old content. If you want to watch the latest Walking Dead, Boardwalk Empire, etc you need cable and a DVR (extra cost for most) So your going to pay that advertising one way or the other. Perhaps Apple will launch their own sattelite and network.
3. Everyone has this comical concept "Look at all the content I can watch for free on the internet, if I could just find a way to see X,Y,Z I'll drop paying for cable. The second that happens at any meaningful rate your broadband will either be capped (already happening with wireless carriers and most have set data caps exp. 350gb a month) or will jake up their broadband data cost. Average is for 5mb+ is around $50 so I'd expect $75 as the new norm to offset the cable channel fee where most of the advertising is.
4. I'll throw this one in as you mentioned it and one of the main reasons I pay handsomely to Comcast. Live sports is very hard to duplicate over streaming. I've tried it for years and the image always lags, or rips apart right at a key shot, moment and I run to find a real TV. Each major sport has BILLIONS of dollars in broadcasting, advertising that all the networks pay a ton. Do I want to watch the NBA finals on a 10" iPad when I have a 65" 1080p LED with full digital sound system atteched to it?
5. Another bonus - the elder audience don't even have broadband let alone cable. They are likely the largest consumers of traditional TV and the main way they get news and entertainment.
I agree there will be a change in how product marketing and how people get content. I however like to wake up and watch CNBC before work, wife likes the Today show. I pick up the same WSJ, USA Today papers daily (and have the digital versions as well). I'm betting there are a ton of people like this.
And Netflix @ 7.99 per sub per month does not support an Entertainment Industry. The article focuses more on shifts in demand and distribution, but without a sound shift in the underlying economics (monetizing content), there is not seismic disruption. It will be a slow shift. But remember, the Culture of TV is ingrained in the US mind-set. Content currency and exclusivity is a huge advantage that offsets an all-on-demand model and there are many complex contracts in place that make it super expensive to try to bankroll a major shift.
there are three legs to the TV stool: content, distribution, hardware. each leg will gain dominance only to find the others eventually catching up. They all rest on the same fundamental economic floor: monetization through advertising to mass audiences. A long-tail, always-on-demand, a la carte pricing or all you can eat sub doesn't produce the same amount of cash. If there is no money, there's no new content. If the prospects for good money aren't there, the content will become second-tier.
the elder audience is dying off...
We all had antennas on the house and had 4 channels for the price of having to climb the ladder in a snowstorm to adjust the stinking thing. Money to a cable company? They didn't really exist. Funny how that managed to not only pay for the entertainment industry, it grew by leaps and bounds. Ads paid for it. Viewers didn't.
When cable finally came around....we got a whopping 12 channels. Granted, there was no more climbing on the ladder to fix the antenna during inclement weather, so those who had the cash saw it as a fair trade.
Fast forward to now. My cable company charges about $70 for 200 channels. That translates into 37-1/2 cents per channel.
Then, as now, advertizers are paying for the entertainment industry. Sorry, but your cable fees are going to pay Brian Roberts' (CEO Comcast) 31.1 mil a year.
High speed internet capable of sustained high def quality is still limited to the blessed few. And the undisputed kings of money making, in The US at least, NFL, MLB, NBA, NASCAR have no intention of cutting off their audience in favor of a many times barley existent internet crowd.
There is also less hatred of advertising as some would have us believe. As the ad makers are learning, good ads don't get skipped nearly as often as the poorly made, repetitive, cheaply made campaigns of the past.
Besides all this stuff, it is silly to compare the demise of the newspaper business with the changing of the guard of the tv business. Being that tv is one of the reasons newspapers are not as relevant as in the past
Do you have any inkling how ridiculous that sentence sounds?
TV is finished as we knew it growing up.
First nail in the coffin of commercials was the remote control, gave us more
options, we switched channels to avoid annoying "product placements".
Yet television business models remained the same, assuming people would just stay tuned. In fact, television advertising rates continued to rise for twenty years after remotes were everywhere. Now, people of every age group occupies their time doing something else during commercial spans, which
routinely occur now twice or (on broadcast networks) three times as frequently as they did 25 years ago.
Plus, as he said, many people never watch daily or nightly programming in real time except for sports. They take in programming on their own schedules and preferences, in the same way Internet News/24-hour cable news has replaced network nightly crap. And why pay $100/mo for bundled cable service that advertises six times an hour for its own product (that you already subscribe to!). It's ridiculous and like other worn-out ideas, soon transforms, likely into a new more flexible media the article above described.
Yeah, the money may dry up to some extent, but overall there will be a SOURCE for content. And people will know the source, be it networks or newspapers.
Newspapers have simply changed their presentation model. They now are basically websites. But we know where are content comes from on the internet, don't we? Whether it be CNBC.com or MSNBC.com or Huffingtonpost or ZeroHedge.
The "sit down and watch what's on" form of entertainment was doomed anyway. Just like being forced to read what was only in a single newspaper. Content on demand is the new paradigm as it should be. It doesn't change the fact that people will know where their content comes from. And that those sources can find ways to charge for it.
TV is an anachronism. Because even cable TV is going more and more to content on demand with DVRs and streaming on-demand video. Saying it's dying is meaningless.
Networks will survive and more will flourish as have online news sites. Yeah, we may have lost paper newspapers but we now have BI, right? How would BI feel if we lumped them in with failing paper newspapers? Is it the end of BI?? Maybe Youtube should pack it up, because people don't remember where they pulled their content from....
Of COURSE -- old media is SCREWED, the walking dead. Have to go to the networks with 2 x 4s and break them over the heads to see if the people are just asleep or really dead.
Print media? Haven't touched any such in decades. The NYT used to call me SO enthusiastic and confident about their product, and my answer was that I didn't have any fish heads to wrap and throw away and bought kitty litter in pellets by the bag. Besides, using their product for wrapping fish heads or shredding for kitty litter got their greasy, black ink on my hands. Bummer. That is, their paper would be more valuable if they didn't put ink on it.
I cut off cable TV a month or so ago: Now the house is quieter; it's easier to concentrate; I don't get frustrated clicking through many channels looking for something pitched above the second grade. So, besides the savings in money, there is the savings in time, energy, and frustration.
Sure, I like to eat, so I'm interested in cooking. But TV is where shows on cooking are just vicarious, escapist, fantasy, emotional experience entertainment and not informative or instructional and did next to nothing to teach me how to cook. So, the cooking show producers are CONVINCED, like the cookbook editors, that none of their viewers or customers want to LEARN about cooking. And they expect such media to last?
I still remember the NYT recipe for beef stew starting with chunks of bottom round roast -- with results not fit to eat or print. Obviously that recipe was never tried or, if tried, the NYT staff is still laughing at how they fooled their readers. Henry, making decent beef stew from bottom round roast is from quite difficult down to impossible. Chuck roast? Sure, that's easy. Experienced cooks know this. The beef industry trade association knows this. But the highly self-esteemed NYT didn't know this.
But, Henry, you need to be careful: McLuhan is still correct: "The medium is the message". In particular, the old message won't work on the new medium. And why should it since that old message never made any since anyway -- an Andy Hardy movie from the 1930s was laughing at the low quality of content of newspapers, and 'Citizen Kane' illustrated the nonsense well?
Finally, Henry, once again you made a mistake with a graph: Your first graph has title "Print Newspaper Advertising Revenue Adjusted for Inflation, 1950 to 2011" with the vertical axis giving revenue in millions. Okay, but by "Revenue" you mean daily, weekly, monthly, quarterly, annually, or something else? It makes a HUGE difference!
So, likely your title should have read "Print Newspaper Advertising Annual Revenue Adjusted for Inflation, 1950 to 2011" and/or your vertical axis should have been labeled "Annual revenue in millions adjusted for inflation". Come ON, Henry, you're not writing for the English majors of the NYT! Instead, some of your readers actually understand math above the second grade!
They need to adjust to changes in how people consume their product. But they're being boneheads instead and trying to force the few remaining people to pay more, which just makes those people cancel and go for cheaper options.
I spent 18 years in the TV business before moving over to digital. I am old enough to remember that back in the late '70s-earlhy '80s everyone also predicted the fall of network television as cable and video games began to fragment the audience.
Guess what . Nothing changed.
The reasons are.
1)TV suppliers and distributers are very symbiotic and it is a tightly closed system, even more so today.
2)Advertisers, agencies, and marketers love the cost efficiency of network TV. Advertising production, planning, buying, support vast efficiencies and profitability on both the buy and sell side that is unmatched by any other medium even today.
3) Even today, making quality video entertainment is capital intensive, risky, and in limited supply. Distribution has exploded but content has not.
4) TV is show biz. Unquantifiable buzz/ego factor enjoyed by all participants. A small niche of people in magazines and newspapers feel this, but it pales by comparison to hanging with TV and film stars.
5) TV is already an electronic medium. A big part of the loss in magazines and newspaper was caused by their time delayed distribution problems.
6) TV is still fundamentally a lean back medium. Marshall McCluen had it right. Interactivity and TV have been tested now for 30 years and patient is not taking the cure. The internet provided a very storng pull that fundamentally changed some forms of media consumption becuase they were simply better than much of dead-tree media.
I don't think most digital people really get all of this. It is not a business that will be affected by interactive technology the way the others have and the inner working are so entrenched and profitable change will be fought hard.
That said, TV is dying. But it will be a very very slow painful death and I would not bet on anything what happened to newspapers happening anytime soon.
Streaming services are so compelling and have thrived because of an existing library of content built over decades and funded by a paying audience. As the future is written by the entertainment entitled class (most of the people on this comment string seem to fall into this classification), you can forget about anything creative, challenging, or any degree of what might be considered excellence when it comes to our entertainment choices. You talk about fans of Arrested Development being willing to pay for the show. Sure we would, but what about if a show like Arrested Development was never developed to begin with because it was too complex for the masses. Prepare for more IQ diminishing laugh tracks instead.
You don’t mention the radio industry which is really a better parallel to draw than newspapers. Radio stations used to be a place where new creativity was featured and new genres of music discovered and developed. Not anymore. Radio stations are being devoured the day by large media holding companies who generally maximize margin by firing all the talent to save money and then play music that was already created years ago. Revenues for the creators and artists and people who’s careers depend on them are way down but hey who cares about them right? The JACK format "We Play Everything" ...as long as its already a proven commodity that is.
Finally, there is an line in this article about “when I figure out how to stream live sports” . The problem is, from a business perspective it makes no sense for a sports league to provide this to you for free. Why should they? If you want something, you inherently assign a value quotient to it. These days however, we like to forget that paying for things we value actually makes sense if we want to continue to enjoy them. Is there fat in the world of entertainment, of course. Should it be cut, agreed. But let's not over-simply a problem that warrants a little more thinking.
I suppose I’m ultimately arguing that we have been subsidizing the development of original content for years by paying $100 a month and only watching $20 worth. Some of what you pay goes into what you might call TV R&D – the ability to invest in new types of programming vs. working on such thin margins that you can’t afford writers, or production, or talent. This stuff costs money, a lot of money, it’s not newspapers, it’s not as easy to replicate with a so called “free” site like Business Insider.
One thing that will never change is the notion that you get what you pay for, and soon it won’t be much.
Certainly the 'legacy' TV audience of people over age 30, by and large, will be later adapters of the "cut the cable cord" movement. But my own twins, age 19, seldom watch what comes into their house or dorm rooms via cable. YouTube, iTunes, NetFlix on their laptops and iPhones for sure. But not over the Comcast cable. And now with CLEAR and its ilk, there is no need for a cable to bring broadband into the house. Left unsettled, as others here have noted, are questions of how future content will be funded. Yes, network drama and comedy costs zillions per episode. But just as bloggers have disintermediated (removal of intermediaries with 'media' as the ironic root of the term) the traditional news media, so will a zillion eager creatives find new ways to bring their storytelling to the digital masses. As we bemoan the loss to commercial sponsorship, recall Schumpter's capitalist principal of creative destruction. New revenue streams evolve--iTune payments, NetFlix subscription fees, and more. Mankind has hungered for, and consumed, stories, news, and sports since the time of Dionysus. The death of NBC and Comcast will not change that.
Give it a year or two, and it will be the top advertiser again!
That is certainly true. I recently tried to recall ANYTHING I've ever bought based upon a TV ad. I couldn't think of even one thing.
The name is pounded into their heads so shopping becomes an automatic response. Want sneekers? Nike-- just do it. Want a sticky plaster? Think Band-Aid. Toilet paper? Don't squeeze the Charmin. Diamonds? DeBeers. Luncheon meet? My bologna has a first name...
Sad, but this stuff sticks with us loooonnngggg after the ad campaign is dead or the business falls into oblivion. I bet there are those out there who still conjure a very specific image when hearing the words, "where's the beef!"
That's how advertizing works.