Photo Courtesy Duncan
It's the weekend of September 8-9, 2012 and I have had a chance to catch-up in some detail on technology news this past week. In addition, I had a chance to review my weekend entertainment choices. Despite my bias (of being in the consumer internet space), I thought the impact of the Web was an undercurrent in the expanding entertainment choices competing for our time and dollars. Consider the happenings just this past week....
TV
Jay Leno took a 50% pay cut as part of the 20% belt-tightening at NBC's "The Tonight Show". Looking deeper into the market dynamics behind these austerity measures, most late-night shows on TV saw viewership shrink by 5% from the previous year. Not surprisingly, advertising dropped as well to the tune of more than 25% across Leno and Letterman's late night shows. Why? While cable-TV shows and the DVR viewer habit increasingly have had an impact, it's clear that viewers are voting with some of their time on Web programming and online channels.
TV Comedy of a different kind....Viacom's cable channels that include Nickelodeon and Comedy Central have seen viewership drop by 29% at Nickelodeon. To maintain ad revenue, Viacom is increasing the advertising time by over 9% over a year ago. This is a established yet controversial short term adjustment technique in this industry. The difference now though is the growing availability of internet video. Should viewers get impatient with ads, they can turn off their TV and turn to the web. For example, Nickelodeon's "SpongeBob SquarePants" can be watched commercial-free on Netflix.
On a slightly different but TV related note, investors are buying small, struggling TV stations in major markets for the value of airwaves or spectrum. Two impacts of the internet playing out here. One, the strategic acquisition of airwaves are targeted towards addressing the bottomless demand for wireless broadband services. Two, competition from the Web is one of the primary reasons cited for the struggles and often demise of the small TV stations.
Movies
Turns out, the summer box office was less than spectacular with a movie "The Oogieloves in the Big Balloon Adventure" having an all time worst opening in 2000-plus theatres, attendance being the worst since 1993 in North America and overall a summer box office down 2.8% from last year. The speculation is many factors contributed to this decline including the Olympics, the economy, the Aurora, Colorado tragedy but no doubt, newer online channels and web programs had an impact.
In the movie streaming business, this past week, Amazon bolstered its movie streaming offering through a multiyear licensing deal with cable channel, Epix. This deal will bring a set of popular films like "Iron Man 2" and "The Hunger Games" from several major studios like Lions Gate Entertainment, Paramount Pictures, MGM Studios. How big is video-streaming? According to the Wall Street Journal, Amazon subscribers have access to 25,000 TV shows and movies, Netflix about 50,000, Hulu more than 58,400. Is that enough entertainment for you?
(Streaming) Music
Apple is reportedly jumping into Radio and it looks like iTunes users will be able to create their own virtual 'radio stations' along the lines of the Pandora, Spotify etc. Regardless of the consolidation and competitive battles ahead, and the problem of the high music licensing costs, one thing is clear. Online music services are here to stay and serve as an increasingly valuable revenue source for record companies. And here is the challenge to terrestrial radio (traditional radio). If as reported, Apple is successful in negotiating past restrictions to online radio such as a current ban on playing a given song too frequently, online radio will become more of a direct competitor to terrestrial radio.
Multi-Screen
I am a big believer in the potential of the 'Second Screen' products/emerging segment. A decent explanation by wikipedia can be found here. In essence, we are increasingly watching TV with an accompanying 'second screen' device mostly a tablet or smartphone thus increasing our social engagement (Tweeting, FB posts etc.) and deeper consumption of the content - "What song was that?" "What location was that?" "What shoes is she wearing?" "I have to share this play with my buddies" etc. etc. This past thursday, MTV introduced a new type of multiplatform ad service called Reverb whereby a Pepsi commercial will appear simultaneously on TV, MTV's website, or an MTV mobile app. No escaping! While the "Second Screen" is largely a social media phenomenon, the increasing impact of the online world on the traditional media of TV is compelling.
Books
A new e-book pricing landscape is on the way and if you are a consumer, it's the good kind. E-book price cuts from three leading publishers are only a month to three months away. How low are we talking about? One past indicator, Amazon had priced e-book best-sellers at $9.99 before 2010. Not an internet phenomenon per se but definitely e-commerce impact.
There you have it. All within the past week. What's ahead of us?
- Second Screen Growth. More interaction with TV content through your tablet or smartphone by apps and more context-based advertising. Not just subtle product placements like Cameron Diaz's Christian Louboutin red-soled shoes in the movie "Bad Teacher" or Daniel Craig's Omega Seamaster watch in his James Bond portrayals. But increasingly, through your second screen, this is the model he/she is wearing in this scene and here is a pointer to merchants where you can get one of your own.
- More lobbying and court-room drama. Expect players like Pandora and now a heavy-weight like Apple to aggressively seek assistance to solve the high royalty costs that are weighing on the net radio business model.
- The exclusivity of ESPN or HBO as a cable only offering will crack under market pressure. Alternate offerings will evolve for streaming services especially for the newer generation that grew up without ESPN.
- Entertainment coverage such as listings will evolve to include original web programs. For example, this friday's Wall Street Journal covered the 2012 fall season from a traditional media/entertainment standpoint i.e. theatre, movies, TV, Art, Books and Music. Some day soon - a listing of upcoming web offerings in articles such as the before-mentioned WSJ article.
Very good post. The breakdown of the competition that you articulated offers a good insight into the work that incumbents have to do to remain relevant.
ReplyDeleteHBO does offer good original content and their shows (Sopranos, Wire, Curb your enthusiasm) have positive critical reviews (even gushing!) and cult-like following due to their high quality. But they can and should diversify the medium through which they provide this content. The challenge will be to identify revenue generators (ads, subscription) that help them fund the production of this content.
ESPN faces a slightly different challenge. NFL network is a broadcasting arm of the NFL organization. It remains to be seen how long it will be a complimentary arm to the content offered by the network and ESPN. There might come a time when the three main orgs; NFL, NBA and NHL might decide to compete head on with ESPN. NFL did begin doing precisely that in 2010, if I recall correctly. If hey are successful in that, ABC/ESPN has a lot to lose since it is clearly a very predictable revenue stream.
The fragmentation evidenced by the networks through the creation of specialty cable and cable-premium channels such as History, Travel, HGTV, DIY, etc mean that not only do they have to compete with other media, but also niche' markets within their 'incumbent' space.
Mainstream tv networks seem to increasingly rely on reality or unscripted tv shows or talent contests to garner loyal audiences who spend money with their SMSes.
The challenge faced by tv and print journalism (serious ones) was covered quite well in Page One: Inside the New York Times
The second screen is here to stay, especially for highly viewed programmes (e.g. election speeches) where everyone seems to have an opinion and a keyboard handy. Social media has become a virtual living room in a nuclear-family world.
Jagdeep,
ReplyDeleteThanks for posting these thoughts.
With regard to the tumultuous eBook arena, the DoJ ruling has significant impact to the key players and Amazon is already the beneficiary with a return to aggressive pricing. I am friends anda fan of Laura Hazard Owen's insightful reporting at Paidcontent.org. Check this out:
http://paidcontent.org/2012/09/10/that-was-fast-amazon-is-already-discounting-harpercollins-ebooks/
3 of the "big 6" houses settled for a total of $69 million and are finalizing or have established new terms with all of their etailer partners while Macmillan and Penguin fight this in court. I am really curious to see how Apple iBookstore responds since they are so accustomed to MFN. Check this piece out from the often-quoted consultant, Mike Shatzkin:
http://www.idealog.com/
If you haven't done so already, check out the cover piece on ESPN in BLOOMBERG BUSINESSWEEK (kudos to them on a fantastic redesign--now my favorite business periodical by a long shot). http://www.businessweek.com/articles/2012-08-30/espn-everywhere-sports-profit-network
ESPN is in the enviable position of winning deals because of their multi-platform reach, dominant market share and potent brand. Too bad SI didn't think to buy them years ago! What a forward-thinking purchase from DISNEY.
The piece mentions how ESPN now controls sports. This quote is illuminating--“Right now,” says Norby Williamson, a vice president for production, “what you can pay for a property is based on what you can bring to a property, how you can surround a property.”
Commissioner David Stern is even quoted as saying, “There is value on each platform,” says Stern, “and the more platforms you have, the more value you can place against a rights acquisition.”
A guy I would love to meet is their power broker, Skipper (master's degree in English lit from Columbia--no MBA...) “I am in very few negotiations where I pound the table and say this is what we’re going to pay. … It’s much more important to negotiate what we’re going to get for the money.”
On another topic, I would be interested to hear what you think about NEXT ISSUE MEDIA in the digital magazine space along with HULU (+ or regular offering) as consortiums are always fascinating to me for their dysfunctions!
Cheers,
@armco