Monday, August 10, 2009

Is The TV Ad Model Broken?

A universal truth is that choices constantly are shaped and changed. Build a better mousetrap and many will eventually see its benefits and flock to it. Some, resistant to change, will stay rooted with what works just fine. The sophistication and swiftness of change finds its early adopters and eventually, even the old models must change or die. Take radio as an example. Despite technological change that made the TV affordable, it may have stopped being the lead media choice, but found its value in other ways. As the web threatens both TV and radio, radio saw opportunities to be both terrestrial and web based to be everywhere for its listeners. TV may be slower to adapt, but may also find advantages in a multi-platform approach.

Within TV you have many "levels": broadcast, cable, premium, etc. Broadcast has primarily stayed an ad supported model while cable found a profitable middle ground by being both ad and license fee. And broadcast is jealous. But for some broadcast stations, a solution was found. Some used FCC rules to choose fee rather than must carry status. Univision recently moved away from that model and closed license deals with the major cable operators. Other broadcast networks, CBS, ABC, NBC also own cable networks. They used their size to push carriage for their smaller cable nets. And while that might not be felt in the broadcast channel's P&L, it certainly resonates as revenue for the company as a whole. So don't feel so sorry for the broadcasters.

"Murdoch grabbed headlines across the globe last week with his swing-for-the-fences suggestion that all News Corp. Websites will move to a subscription model. A shift of some sort may not be so far away for broadcast television either." Content is king and has value; Positioned across multiple platforms there are opportunities to uncover new revenue streams. But don't forget the consumer. Change can also lead to new innovation. The DVR was invented, not just for time-shifting purposes, but because of the desire to "skip" commercials. Viewers reached their threshold as the ratio of ads to content in a given hour increased. The same will happen on other platforms too as viewers feel inundated by ad messages. Don't let greed get in the way of success.

TV Everywhere may be one approach to assure that a customer on cable has access to content on other platforms. A walled garden approach that encompasses a multi-platform reach may just be acceptable for the consumer. And it will assure they don't leave a TV pay model for the same content offered on the web. Yes, smaller companies will bypass the license fee approach to hit the niches. But the vast majority will want professionally created content from the big media brands; they just want it everywhere and anywhere.

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