Saturday, May 28, 2011

The Content Revolution Will Not Be Televised

The biggest challenge for content creators and content owners is to figure out which distribution platforms are going to matter in the future.  While it might be relatively turn-key for smaller content companies to create and market a channel on YouTube for their content, and to monetize it semi-effectively through a rev-share partnership (YouTube takes about half); that solution simply doesn’t work for companies like ABC and Fox who rely heavily on very diverse and accessible distribution to collect enough ad revenue to drive their enormous economics.

While TV is clearly still the best and fastest way for to accumulate a large audience (whether you’re an advertiser or a content-creator), fragmentation of consumption across devices, locations and channels is impossible to ignore.  Viacom is so concerned about it that they don’t even want to allow Time Warner Cable (TWC) to sling Viacom programs onto iPads within TWC subscriber homes.  You’d think that Viacom would jump at the chance to tell their advertisers that at least some of their ads aren’t skippable, but that fact simply isn’t enough to convince Viacom to relinquish control of their content on an emerging platform (it could also mean that Apple and Viacom are planning a partnership that none of us know about… but we’ll save that discussion for another time).

In the past our content has been chosen for us.  Mainstream content companies go through the process of predicting what they think will resonate with consumers, and then they try to market their way to success.  They do their best to choose what will be the biggest hits, and then they launch and cross their fingers.  That’s why we end up with six shows about nurses – it’s a much safer bet to produce something that is similar to a hit than it is to try and manufacture something new.  And, with hundreds of millions of dollars in ad revenue riding on the success or failure of each show, TV networks have learned to become extremely risk averse.  And you can’t really blame them.

What’s happening on TV is not unlike what happened to record labels in the late 90s.  As the traditional music retail channels dried up, and as the ways consumers discovered music started to evolve from a few channels (radio, TV) to many channels (social, Google, P2P, Napster, Pandora, etc.) it became impossible to guarantee success of any song, artist or album.  When you consider that record labels already had a terrible time predicting success, often releasing ten failures for every one chart-topper, the traditional ways of marketing music became obsolete and big companies went out of business.  There was a time when whatever song was in highest rotation on terrestrial radio was the top seller.  This simply isn’t the case in a world driven by organic discovery and social media.

But if you ask most modern recording artists, they will tell you that it’s easier now for them to make money than it has ever been simply because the tools for discovering, sharing and selling their songs are better than they have ever been.  There are certainly fewer millionaire musicians, but there are also more musicians making a living than ever.  What’s more, music lovers will tell you that there is more great music to be discovered now than during any other time in their life.

Now back to our discussion about TV.

There is no doubt that some of the ad revenue generated by broadcast TV shows is going away.  Consumers are finding new ways to access their favorite content while viewing fewer ads than ever (and in some cases, no ads at all).  With caution trumping creativity on broadcast TV, it’s hard to imagine consumers ever going back to appointment-based viewing where they volunteer to be interrupted every seven minutes by loud, un-targeted ads.

The smartest companies are already planning for the impact of this decline in revenue by building relationships with device manufacturers and a new breed of content distributors who are building big audiences with the promise of fewer and better ads.  No one knows which of these hardware companies and/or content distributors will win the race to the living room, so there’s a lot that the content companies need to do to protect themselves from betting big on the wrong horse.

But what appears to be a threat to the livelihood of the behemoth content companies is actually an incredible opportunity for creativity to make a comeback.  With better tools for discovery, lower costs of production, more efficient word-of-mouth marketing, more channels for consumption in more places and on more devices, not to mention better profit margins (fewer middlemen between creation and discovery), there is a content revolution happening right now.

There is just a great chance that this revolution won’t be televised.

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