Irony Alert: Companies That Depend on Ad Spending, Spending Less Themselves

The LA Times reported, through TNS Research, that media companies, despite needing advertising to drive revenue in their balance sheets, are spending less to promote themselves. How ironic. "Walt Disney Co., News Corp. and Time Warner Inc. all reined in ad spending in the first half of the year. Spending by Time Warner was down 11.1% to $574.3 million; Disney expenditures were down 11.7% to $517.6 million; and News Corp. cut its ad spending by 6.9% to $672.3 million." These same companies might need to brace for a similar downsize in their own financial statements.

It is obvious why it is done, but it also can create a downward spiral. As revenues drop, companies reduce spending, including ad spending) to make the net profit higher. But lower spending reduces awareness, key to higher purchasing. Without this marketing, revenues continue to inch lower and costs get cut again. A vicious circle. Smart companies take the risk that future spending will turnaround the trend and are willing to take a short term hit in profits for long term profitability. How long ad spending drops will depend on the confidence these companies have that they can affect and return higher growth. I hope it is soon.

Hulu Will Kill Network TV

Remember the first song played on MTV, "Video Killed the Radio Star". Well the same is being said for online video and the biggest culprit may be Hulu. According to this Mediaweek article, "Hulu is the demon seed that will wipe out the network television business as we know it. In a new report, the Soleil Securities analyst estimates that the online video hub will cost TV networks $920 per viewer in advertising if their audiences are cannibalized by Hulu. And she believes the bulk of viewing on Hulu is indeed taking eyeballs from TV."

And while I can't speak to the revenue that could be lost, I am in total agreement that the Hulu model subverts the current cable subscription model. Some speculate that Hulu needs to change into a subscription model, but the challenge is if the revenue could offset the loss from cable. Others will simply use broadband to bring video for free; others may simply ask for a la carte pricing. IPTV means programming brought to the screen through a broadband wire. No cable subscription necessary.

Hulu executives disagree. They see Hulu as a companion to TV not a predator. "The report assumes the bulk of Hulu viewers use it as time-shifting device to catch up on shows they missed on TV and to avoid commercial interruptions. Hulu CEO Jason Kilar in April told Bloomberg that the site wasn't stealing customers from cable television." Unfortunately, as you change viewer habits, you change viewing. Younger audiences, with an eye on their wallet, are cutting the landline phone for a wireless phone only. They are doing the same with cable, letting their broadband service be their access to video programming.

At the very least, Hulu is playing on a slippery slope. Once you go down the mountain, it is much harder to climb back up.

CBS: Best House in a Bad Neighborhood

With the start of the new Fall season, I came across this article and found it especially telling. With tonight's airing of The Jay Leno Show, NBC has taken to low cost programming to compete in a profit conscious world. And while all the networks have utilized reality programming to keep its costs low, CBS has also produced the most comedies and dramas, the staple of most television networks. Will CBS's strategy prove the right one or not. "CBS is especially exposed. It's the only network without a vast corporate sugar daddy to keep it afloat regardless of what it puts on the air. It also lacks a stable of basic cable networks and the dual revenue streams (advertising revenue and subscriber fees) that such outlets offer. "

To me that is its bigger problem. NBC has a slew of cable nets including MSNBC, Bravo, and others. ABC has Disney and of course ESPN, Fox has fx, Fox News Channel, and others. CBS spun off its Viacom properties and that was probably not a smart move. When their US Open coverage had two women semifinal matches airing at the same time, they could not spin off one channel to a basic cable outlet. They could simply bring cut ins. Those that may have cared for the other match could not watch it. Now perhaps that is not their bigger problem but it is one example of the synergy they are missing.

Still, CBS's reliance on a traditional programming strategy should remain a right one. More programming to repurpose, better ratings, and higher advertising revenue. As we revisit them, it will be fascinating to see if NBC made the best move or CBS wins the race.

Will The Jay Leno Show Change TV

On Monday at 10 pm, NBC will premiere The Jay Leno Show, a talk/variety show, and air it Monday through Friday. 5 hours of low cost programming, live to tape, to compete with DVR and VOD technology. Revenue for the show through advertising may not be huge, but the profit margin may change how TV gets programmed.

The last format that changed TV was reality programming. A decade ago, broadcast shows like Survivor, Amazing Race, and yes American Idol made average people into stars. And these shows beget even more reality shows on cable. Cooking shows, wedding shows, home buying shows and yes even parenting shows. We idolized Rob and Amber, Kelly Clarkson, and now Jon & Kate. Low cost programming that generated ratings.

On Monday, new format may change TV again or prove a bust. The Jay Leno Show will fill multiple hours of prime time real estate and will either become the "must watch show for the 2009-10 season, or the worst idea since "Captain Nice" and "Manimal". Don't judge the success of this format on the returns from Monday night. It will take a good month or two to gauge its stickiness. Curiosity will cause us to watch in the beginning to see what all the fuss is about. But whether we stay is another story.

My personal opinion is that 5 nights a week is too many. And the first night's guest list doesn't seem to match who Jay's core audience is designed to reach. There will be a lot of sleepless nights for NBC executives as they watch and interpret the ratings from this experience. At the end, they will be deemed either geniuses or fools. I doubt there will be a middle ground. And should it indeed fail, NBC can at least say they kept Jay from jumping to another network to compete with their Tonight Sow brand. Perhaps that is something they can take away from this programming chess game.

PS. And should The Jay Leno Show succeed, we will have seen TV change again from the golden days!

Time Inc. Looking AT An E-Reader

Time Inc., owner of print titles like Sports Illustrated, Time, People, and others, may be adding E-Book distributor too! "It's a big shift in strategy by Time, which earlier this year said it would not introduce its own e-reader. But things have changed, and Time's plans for the e-reader market are on a fast track. According to the in-house presentation, Time Inc. is seeking to unveil its plans within the next three months." It seems smart to own both the content and the distribution; why give away some of the profit to middleman. That is what cable is facing today with its programming. Sell networks through a cable operator who packages it and sells it as a cable subscription or sell the network or just individual programs directly to the consumer through a broadband connection.

Time may not be alone in this strategy. "Publishers are interested in the market as well. News Corp. is exploring an electronic reader for its large newspaper business. Hearst, a large magazine publisher, also unveiled its own plans for an e-reader in March."

Will 2010 be the year that E-books really take off and get wider acceptance by the consumer. Will the price point drop and the flexibility improve to make it the must have device of the year. Content producers are certainly getting on board that train.

Bloomberg Likes The Magazine Business

Bloomberg continues to prove itself a very successful business. It started with financial terminals and has successfully grown its radio and television businesses. SO now it appears they may be going after a magazine and seeing an opportunity to synergize its media operations further. "According to people familiar with the matter, the financial-data giant is now seen as the front-runner, ahead of "Bid 'em Up" Bruce Wasserstein, the Lazard boss who also owns New York magazine." There may just be certain efficiencies that can help Bloomberg find profitability with the magazine.

Both Comcast and Time Warner Looking For More Acquisitions

It seems the recession may be over, Comcast and Time Warner have both announced their interest in acquiring content. And there may be a number of content companies up for grabs: Scripps, Rainbow, even NBC.

Both Comcast and Time Warner see a reason to expand. Time Warner Chief Financial Officer John Martin said said: "'We are trying to focus our resources in capital, we've identified areas where we will be willing to invest...like local TV and home production, games and networks where we could opportunistically and thoughtfully expand, and opportunities to identify emerging territories where we could build.'" Comcast has a slightly different angle. According to Chief Operating Officer Stephen Burke, "'We wouldn't be doing our job if we didn't figure out a way to get bigger in the cable content business', said Burke. 'At our core, we believe content and distribution work well together.'"

I am sure the M&A world is buzzing now!

Pop Goes the Critic - Winelibrary.tv

The web has created new TV stars and has become an effective way to target and reach the masses. Case in point is Gary Vaynerchuk and his online creation, winelibrary.tv, a fast paced show that brings the enjoyment of wines down by to the masses. And I count myself in that group. Love to drink it, not so label worried, I have picked up a greater appreciation for wine without paying for the most expensive bottles. And having the advantage of living near his store in Springfield, NJ, I get to walk up and down the aisles, looking for recommended labels and other deals.

What has been most interesting is how successfully Gary has used social networking to hawk his brand, Gary V. First the web site, then Facebook and Twitter, and at the same time using the traditional media of TV, newspapers, etc. to raise awareness of himself and his passion for wine, and the Jets. "He estimates his audience for each episode of Wine Library TV (he’s just recorded No. 733) at 90,000 people, and he has nearly 900,000 followers on Twitter." Just watch a few episodes and you will be hooked too.

Beatles are going digital

It's about time, the Beatles are finally available on Rock Band. No it is not earth shattering nor is it a game changer. Still, the Beatles, known for its change to the music scene, may do the same for digital. "This Beatles week signifies one thing above others - that there’s value in shifting content from atoms to bits, if you can take advantage of those bits’ unique qualities. That same lesson has been learned from the migration from VHS to DVD to Blu-ray and from vinyl to cassette, CD, MP3 and beyond."

There is still one piece missing and one that we hope is announced soon, that all Beetles songs are available for download through iTunes. Sure, they have been accessible through illegal P2P sites, but its time to bring them back to the masses to enjoy.