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Summary:

A stream of research reports continues to show people using mobile devices whilst watching TV. But what does the opportunity really add up to. Not a lot, says an influential digital media banker.

Photo: Monaco Mediax ©
photo: Photo: Monaco Mediax ©

You can’t move these days for new research indicating the rise of of “second-screeners” — those of us who watch television while using a handheld device.

But, as upstart operators scurry around trying to exploit that fact with variants of social or interactive TV add-ons, what is the real business opportunity here?

Terence Kawaja, the respected former GCA Savian media M&A advisor turned Luma Capital founder, told Monaco Media Forum on Thursday:

“That’s all well and good – but it’s on the margin. The thing they teach you in startup school is, solve an existing problem. There’s no problem in TV — at least, not for the people who are funding it.

“When social tv companies say, ‘We can enhance engagement by 700 percent, the advertisers say, ‘So? We’re happy with the engagement we have.’ As far as the TV infrastructure goes, it ain’t broke.”

Executives from Google and France Telecom’s Orange, which holds equity in Dailymotion, disagreed, however.

Photo: Monaco Mediax ©

That’s like saying, ‘A horse is not broken so why invent the car?’,” said Google’s media and platform director for northern and central Europe, Benjamin Faes.

“I love television but I don’t think the current state of television advertising leverages all the potential TV has.”

When TV ads start becoming personalized in the same way web ads are, that could be game-changing. Google has previously advised BSkyB on its long-gestated, soon-upcoming long of just such an initiative.

But Kawaja’s problem is that technologists will find cracking a still-powerful Hollywood impossible if they work against the beast.

“A lot of digital guys say ‘TV is dead, video’s going to take over’. Not so fast — the producers have a cabal that’s not going to be disrupted any time soon. This is really a lop-sided playing field.

“Television ad spend is $70 billion in the U.S. Compare that to online video monetisation that’s roughly $2.5 billion. The $70 billion is growing. This cabal is going to make it very difficult to disintermediate.

Orange Digital EVP Stephanie L’Hospital told Kawaja: “Even if, today, ad spend is growing on TV, if the TV industry does not act soon, the total amount of value will decrease.”

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  1. Sure, there’s no problem with the current business — until it falls apart. Execs in the newspaper, book, and music industry will all tell you that there was nothing wrong with their revenue models until they broke down — seemingly overnight.

    When you are part of a lucrative business such as TV production and distribution, you have a big, red target painted on your back. Sooner or later, someone is going to figure out a way to knock the legs out from under your business. If you aren’t constantly looking for what’s next, then you risk losing it all.

    Already it’s not clear that the existing business is doing particularly well. Pay TV subscriptions are down, as more people are getting their content from alternative sources such as Hulu, Netflix, and YouTube. Live sports and force of habit are about the only things that are keeping the ship propped up right now, but even those will come under assault (see http://mytvchoice.com/ for example).

    Yes, the current second screen experience leaves much to be desired, and only a relatively small group of people participate. But that’s not the point. Second screen is an opportunity to stop the slide, to make live TV more of an event again, to give people a reason not to jump ship as these other venues become more enticing.

    The TV industry does have problem. They may just not realize it yet.

  2. One more thing: mobile advertising is just a fraction of total online advertising, but does that mean there is no future in mobile? The fact is that advertisers are slow to catch on to these trends. But eventually they do. 15 years ago, online advertising was peanuts in comparison to print. Today would you rather be Google or Time Warner?

    1. While these are all valid points Matt.

      I believe the primary message was that 2nd screen apps have their work cut out for them. Non of the 2nd screen apps have devised the “AH-HA” moment that they have hoped for. Its not to say they will not get to that moment it has not happened. This is not about being Google or Time Warner (both fine companies by the way) it is a reality check and a challenge to be better than yo

  3. Right now, the insurgents going up against the TV cabal have to pull off the perfect heist a la Ocean’s Eleven. From a capitalization and industry inertia POV, any competitive misstep brings the full weight of the cabal crashing down on them. Most insurgents are trying to carve off a piece of the business in impressions. Not surprisingly, we haven’t yet had an insurgent take on the core business. Most are content to compete for crumbs, which aren’t insignificant in a $70bn market.

    So long as the competitive high ground involves creating an audience for impressions, the TV cabal will have their defense against the perfect heist. However, as the ground shifts toward owning the account (and I’m not talking MSOs but iTunes/Google Apps or Wallet or similar), the big TV guys will be at a disadvantage because the digital and second screen guys will be able to layer on the ability to transact in real time at the point of the advertisement. True, the Hollywood players will be partnering with many of these guys. Also true that many if not most of those partnerships will fail as the walls start dissolving between traditional advertising and sales.

    So don’t look for insurgents talking about creating more or better impressions than today’s TV incumbents. Look for those who can pull down the walls between ads and transactions. They will change the game.

  4. Ad sales result in commissions for ad sales people. If the TV network ad sales guy doesn’t want that commission his competitor TV network might just decide to pick up those dollars. If not that guy, maybe the newspaper ad sales guys want those dollars. Or maybe the ad sales department at the sporting, fashion, music, or whatever magazines that figure out they can sell Second Screen ad spots synced to TV.

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