Networks Show Respect for TV Streaming by Ignoring It
AdAge has a compelling thesis from this year’s television upfronts: “[T]he rise of Hulu, DVRs and Facebook and slipping ratings across the board have forced the networks to do something we didn’t expect this year: make the case that TV still dominates.” That certainly rings true with our reporting from the last three months. From AdAge:
“In the past, everyone was trying to prove they ‘got’ digital. That they had a digital value proposition to put forward in the marketplace,” said Margaret Clerkin, co-head of Mindshare’s Interaction unit. “This year it seems much more of a PowerPoint element. They are recognizing that digital isn’t core, and they’re focusing on their core business, which is the big screen.”
It’s a testament to the early success of online television distribution that networks no longer coddle it in their presentations, and have turned back to justifying their existing businesses. That more than anything shows the networks think web video is a legitimate threat.
Or — eventually — an opportunity. Coincidentally, there are a few good stories out today about how networks are getting along with the most prominent online TV streamer, Hulu. AdAge reports Hulu is asking for $40 CPMs, just below the $45 network sites can charge, because Hulu doesn’t break out individual shows on its own sales. Mediaweek adds that as Hulu grows faster than advertisers expected, “sources familiar with the site say that leaving a lot of inventory unsold at Hulu is a calculated measure so network CPMs don’t slip.” Mediaweek puts the actual price of Hulu CPMs at $25 to $40, compared with $30 for broadcast TV. Says its unnamed source:
“[Hulu's parent companies are] still figuring digital out, and they need to find a way to increase those digital dimes to at least quarters or 50 cents. They’ll give up an additional $20 million to $50 million in ad revenue rather than get the model wrong and cannibalize themselves.”
In a separate story, AdAge reports that CBS Interactive CEO Quincy Smith has approached Hulu about distribution on a nonexclusive basis while maintaining control of ad inventory. While Hulu appears interested in such a deal, “the stumbling block is the continuing dispute between CBS’ TV.com and Hulu, which began after TV.com, which had a deal to distribute Hulu content, fashioned itself as a direct competitor, under Mr. Smith’s leadership.” C’mon guys, sounds like it’s about time to sweep that water under the bridge.
But the real question is when profits will come to online video. And that’s not just a matter of revenue but also of costs. Mediaweek quotes a source saying that Hulu’s streaming and maintenance expenses add up to $1 million per month. Elsewhere, a paidContent interview with Google VP of strategic partnerships David Eun has him saying of YouTube, whose traffic dwarfs Hulu’s and whose team is so often criticized for failing to make money, “I know that our costs are significantly lower than what anyone else is serving up and hosting.”
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Funny, I suspect if you went back and looked at what folks in the print industry said circa 1996-97, it would read just like this.
It took 1000 things (Craigslist, blogs, RSS feeds, aggregators like Digg and Google News, social networks and social sharing, etc) over the past decade to bring the print industry to crisis.
A similar process is underway with television. It’ll be death by a thousand cuts, and will take a decade or so to transpire. There is a certain inevitability to it, and all the self-congratulatory rhetoric in the world ain’t likely to stop it.
I should clarify my comment above: when I say “it would read just like this” I am alluding to the self-congratulatory rhetoric by the TV execs, not to the blog post!
That’s a tough on to call but it is hard to compare print to TV.
I do believe a quiet revolution is upon us that is changing the way we consume video media. Print is another story.
By democratizing production and distribution you give everyone a voice – everyone. Everyone from the brilliant to the banal can now publish their views all under the same guise of being a legitimate news source.
Cost to create and publish for the world to see is pretty much $0. Small guy can look like a big guy as they use the same tools.
In the video domain things become a lot more complicated. The tools are different, good ones are costly, bad ones show it. It is multi-modal, you need a director, a good videographer, a good lighting person, a good sound person, makeup, etc… the list goes on. The distribution channel is still controlled. You need an amazing infrastructure in order to deliver HD to the masses.
Don’t be fooled by YouTube – most of the stuff there is pretty bad and the good stuff is mostly stolen. Video has not yet been democratized. Video has definitely not been monetized to the point of profitability. As a startup, that’s OK. As a business, well, without profit, it’s not a business.
I agree that the claim of fully developed Digital Strategies was just a power point bullet but never acted upon. I’ve experienced it first hand. Of 75 distributors/producers I talked to at MIPCOM this year ALL had said they had a defined digital distribution plan. Once I got them to articulate their plans they boiled down to: “We’re putting clips on YouTube and trying to get on Hulu and iTunes.” What kind of plan is that?!
That plan comes from internal the structure of the business. Each company in the industry is different but they way they are run is amazingly the same. Digital is not a key business driver for them internally. It is there to appease shareholders and to get them in the press. The old value chain is strong.
This is short term thinking though. Change will happen. The leaders will be the leaders of change. Remember how the Post Office viewed email as an attack on their core business. So, instead of giving away email accounts for free, they got into secure delivery of email and charged for it. Fail! They didn’t understand the medium – by giving away email for free, one of the early pioneers who understood the medium, HotMail, made a lot of money. More money than the Post Office makes….Look at all the imitators. And the Post Office still doesn’t get it. They’re still stuck delivering the mail – a medium they do understand.