Tag Archives: Television

What, Me Worry?

If you follow the TV business at all you’ve probably noticed a bunch of recent articles about the acceleration of the cord-cutting phenomenon. This article from Business Insider is typical, as are the results:

In a recent Business Insider survey of 104 teens nationwide, only 2% of Gen Zs said that cable is their most-used choice for video content. Nearly a third said YouTube is their most-used source for video content, and 62% say streaming excluding YouTube, including Netflix or Hulu, is their most-used.

What’s happening is that many younger folks who once purchased a cable TV subscription are no longer doing so, and the pace at which that’s happening is rising quickly. As one piece noted,  “roughly 5.4 million Americans are expected to cut the TV cord this year, thanks largely to the rise in cheaper, more flexible streaming TV alternatives.” Is that significant? Oh yes:

According to eMarketer’s latest figures, the number of cord-cutters—adults who have ever canceled pay-TV service and continue without it—will climb 32.8% this year to 33.0 million. That’s higher than the 22.0% growth rate (27.1 million) projected in July 2017.

That’s a lot of money leaving the building, and yet there doesn’t seem to be widespread panic among the cable providers. Why not? Because they people who are cutting the cable cord are locking themselves into the broadband cord, and that, dead readers, is an even better deal for the cable guys. Why? Well, think about your own situation. I’ve got two options for TV service here – one cable, one satellite. Neither is appreciably different. The satellite is a bit less expensive but service craps out in bad weather so although it has some unique content and 4K, it’s not perfect. If I decide to cut the cord and take some TV over the air and stream the rest, I have only ONE option to get true broadband service, and that’s how most US markets are as well.

How this came to be is laid out in this Techdirt piece and I won’t repeat what they have to say. The short answer is that natural monopolies have developed and they’re not going to go away. Even if some company tries to enter the market (as Google Fiber did), the time to build the service is lengthy. Laws have been passed to prevent municipalities from entering the market and providing competition as well.

Given my druthers, I’d rather be a broadband provider than a cable TV provider. Your programming costs are almost non-existent, you know a lot more about how your customer is using the service (your ISP knows all, your cable TV guy is just figuring out how to track you accurately), your margins are great, and you probably won’t have any competition despite lousy customer service and usage caps. Who are the big broadband providers? Yep, the same cable guys who are “suffering” from cord cutting. You think they’re worried?

Advertisements

Leave a comment

Filed under Huh?, Reality checks, Thinking Aloud

An Expensive Trip To The Bar But A Much Better Picture

I had a what turned out to be a very expensive trip to a bar a few weeks ago. No, I wasn’t overserved nor did I need to cab it home from a remote location. It became expensive because I watched TV there. The picture was noticeably better than what I was used to and it turned out that I was watching a 4K TV with full High dynamic range, or HDR. Even though the program (a basketball game) wasn’t in native 4K, it was noticeably better. Once I figured out that DirecTV, my TV provider, has a few 4K channels and that some sports, including the upcoming Masters, are shown in 4K,  I was hooked. I did some research and found that one of the top-rated sets was on sale (almost half price!) and two days later, and hundreds of dollars for the TV and a new DirecTV box that handles 4K, my viewing experience was upgraded.

Photo by Tim Mossholder

One thing that I got along with the upgraded picture (even standard HD looks better) was a built-in Roku device. I’ve had a Chromecast for years and I also have my Xbox hooked into the TV. I have been using both for “over the top” viewing of streaming services like Netflix, Hulu, and Amazon. What has changed with the Roku is that all of these services and many others are available as channels on the TV. There’s no need to switch inputs or fire up another device as I have been doing. Which reminded me of a couple of things.

First, the lines between “TV” and “video” have vanished forever. One can argue that once consumers had remotes and DVR‘s they morphed into active programmers but with what is now the almost full integration of TV and OTT, making an unlimited amount of content available in high-quality video, it’s now all just TV.  The second point, one which might apply to your non-media business, is that consumers don’t care about the tools or the labels. They do care about control since they now have complete control in many areas of their consuming lives, or at least a lot more than they used to. You can fight this (broadcasters did for years) or you can facilitate this, but hanging on to an antiquated business model is the wrong choice.

Disney will launch an ESPN-branded streaming service in a couple of weeks. Since to me and many others there is no difference between traditional TV and streaming video, it will be just another channel on my TV (hopefully in 4K). For many cord-cutters, it will be a nice addition to their programming options. Disney has learned that the tools (or channels) are immaterial and the business model needs to continue to evolve as do consumers’ habits. Have you?

Leave a comment

Filed under digital media, sports business, Thinking Aloud

Who Are Those Guys?

I don’t know if you remember the classic film “Butch Cassidy And The Sundance Kid,” but I thought of it as I was reading this morning. Paul Newman and Robert Redford play the title characters who spend much of the movie being pursued by a group of men determined to bring them to justice. Every time they think they’re in the clear, the posse turns up again, at which point Newman or Redford asks “who are those guys?”

I suspect that a number of my former colleagues in television have had a similar experience over the last few years. I remember having one back in the 1990’s when ESPN became a major presence in sports. In the late 1980’s, we used to laugh about them at our TV sports sales meetings.  After all, even though the industry, spurred on by the 1984  Cable Act, was wiring the country like crazy, cable was barely in half the homes. Even as late as 1992, Springsteen told us there were 57 channels and nothing on.

Then BOOM. TV ratings started to dive and cable ratings started to climb. The peach baskets the broadcast networks used to stick out the window and fill up with money started to take a lot longer to fill up. Who were those guys? Well, we identified our competition and started to extract payments from cable carriers just as our cable brethren did. Things we different but more stable, and the broadcasters began buying the cable content providers.

Things continued to change. I’ll let the CEO of Turner (as quoted in Digiday) explain what happened next:

All of a sudden, our biggest competitors are no longer Disney, Fox, NBC, CBS and other networks; it’s these “digital companies” that are coming in and taking two-thirds of all digital ad revenues and 85 percent of the marginal growth in digital ad revenues.

Who are those guys? The point that any business can take away from the TV experience is this. Someone is always chasing you. You have something they want, whether it’s customers, market share, technology, data, or just plain attention. Like the posse, they’re going to be relentless. Unlike the posse, it’s never going to be the same guys all the time. You need to be attentive and take countermeasures, hopefully not like Butch and Sundance do by jumping off a cliff.

Leave a comment

Filed under Consulting, Thinking Aloud

Tolls

As you might have guessed from the name of my company (Keith Ritter Media), I’ve spent a great deal of time in the media business, both as a marketer and as a publisher. The business model used to be pretty simple. Create something about which people care, make them aware that you’re offering it, get them to read, listen, or watch it, and aggregate those people into a saleable audience. You hired salespeople to meet with the representatives of your real customer – the advertiser. Usually, these representatives were media buyers from an ad agency. You with me so far?

In TV, we’d offer a unit of time at a “gross” price and asked the agency to remit a “net” price, which was usually the gross minus 15%. That commission was the toll we paid to get the revenue. Obviously, how much of that the agency kept was between them and their client but it wasn’t really our concern. We did our budgeting on the expected net revenues we’d get which was pretty much a straight line derivative of the gross monies sold. Other media had similar models but in every case, the dollars received by the publisher were directly and clearly tied to the size and desirability (to marketers) of their audience.

That statement in no longer true for digital publishing and the fact that it isn’t has serious negative implications for other media as they shift to a more programmatic sales model. I have no idea how digital publishers are able to do financial plans since they can’t project revenue from audience size. That’s because they’ve allowed themselves to generate billions of dollars in ad revenue while only capturing somewhere around a third of what is spent. The 15% that used to be paid in tolls is now more like 67% although some estimates are even higher. More importantly, it’s usually impossible to predict the net revenues received from the gross revenues sold. Digital audiences are growing while publisher revenue is declining.

Where is the money going? A sponsor pays $1 for an ad impression. The agency still takes their commission, but added to the toll-takers are trading desks, DSP providers, data providers, supply side platforms, ad serving platforms, verification services (viewability, etc.) and who knows who else. In some cases, it’s the agency double-dipping, but most of the time these are third parties. Most of these ad services have no interest in either the publisher’s or the marketing client’s success. They aren’t about a quality ad environment. They facilitate a transaction. In some cases, a platform that connects both buyers and sellers charges each side a separate fee without disclosing that they’re doing so. In short, publishers, agencies, and marketers have created a system that works for no one but the VC’s that fund these ad tech companies. What happens when programmatic spreads to other media such as TV?

Publishers have many other challenges. Facebook, for example, makes more money off of some publishers’ content than do the publishers themselves without paying the publishers a dime. But the real threat to a healthy media environment is the toll-takers. When you create great content and grow your audiences, you should be the entity that benefits and not some opaque service provider. More eyeballs used to mean more money to the bottom line. Can we make that equation true again?

Leave a comment

Filed under digital media, Huh?

Death By 1,000 Cuts

When I was in the TV business, the most sought-after demographic was always young adults. While they often weren’t the key to the heaviest volume of product sales, it’s when we’re young that we build consumption habits and establish brand loyalty. Let’s keep that in mind as we look at some recent trends in media.

You’re probably not surprised to hear that cord-cutting – consumers ditching their cable or satellite TV subscription in favor of streaming and.or over the air services – has continued to accelerate. As the Techdirt blog reported:

MoffettNathanson analyst Craig Moffett has noted that 2016’s 1.7% decline in traditional cable TV viewers was the biggest cord cutting acceleration on record. SNL Kagan agrees, noting that traditional pay-TV providers lost around 1.9 million traditional cable subscribers. That was notably worse than the 1.1 million net subscriber loss seen last year.

They also noted that those numbers don’t tell the entire – and much worse – story. Those numbers report those who canceled an existing subscription. When you take into account the youngsters moving out of their parents’ houses or graduating from college and forming their own household for the first time, there are around another million “cord nevers” who are missed sales by the traditional cable and satellite providers. It really doesn’t matter what business you’re in. When you stop attracting younger consumers, you have a problem.

Why is this happening and how can we learn from it in any business? Techcrunch, reporting on a TiVo study, said that:

The majority of consumers in the U.S. and Canada are no longer interested in hefty pay TV packages filled with channels they don’t watch. According to a new study from TiVo out this morning, 77.3 percent now want “a la carte” TV service – meaning, they want to only pay for the channels they actually watch. And they’re not willing to pay too much for this so-called “skinny bundle,” TiVo found. The average price a U.S. consumer will pay for access to the top 20 channels is $28.31 – a figure that’s dropped by 14 percent over the past two quarters.

There is also the matter of convenience and personalization. Netflix, Amazon, and other streaming services do a great job in making recommendations and offering you programming based on your viewing habits. Has your cable operator done that for you lately?

We can learn from this. Cable operators who focus on broadband and “throw in” the TV offerings aren’t doing much better than those who don’t, since the overall out of pocket is sullied by broadband caps and other, often hidden, price increases that help the bottom line but only prolong the inevitable. It also just makes it easier for a lower-priced competitor to enter the market. I know enough about how the TV business works to recognize the issues with skinny bundles (it’s hard to offer channels on an ala carte basis due to contractual restrictions). We’re seeing more and more offerings that bundle channels outside of the traditional providers and that’s going to exacerbate the aforementioned trends as well.

What’s needed is a rethinking of the business model. Getting local governments to preclude more broadband competition isn’t a long-term solution (look at the wireless business!) nor it is the “free and open market” to which most businesspeople pay homage. Listen to your consumers and give them what they want, especially the young ones. Cord cutting isn’t some far off fantasy that naysayers have dreamt up. It’s here, and it’s killing you by 1,000 cuts. The rest of us can learn from this and, hopefully, not make some of the same mistakes. You agree?

Leave a comment

Filed under digital media, Reality checks

57 Channels

Anyone with whom I speak these days has a lot to say about competition. Every business seems to have many more players going head to head for customers, and I suspect that nowhere is that more true than in the media business. The Boss wrote about “57 Channels And Nothing On” a couple of decades ago. He characterized it as having been “Shot back in the quaint days of only 57 channels and no flat screen TVs”, and 25 years later the average home can receive nearly 206 channels, according to Nielsen. What is instructive to anyone is business, however, is that they watch fewer than 20, or under 10% (19.8 channels, to be precise).

Obviously, consumers are spending just as much, if not more, time with video content. It’s not a matter of the video business being imperiled. What is a problem, however, is the manner in which the traditional business model operates. Video providers have bundled together dozens (hundreds!) of channels and sold them to consumers who really had very limited choices in breaking the bundle of channels apart. You’re beginning to see “skinny bundles” which focus on a few popular channels. Although I’m not aware of any “roll your own” packages in which a consumer can choose any channels and create their own bundles, they aren’t far off. Rest assured that if the cable and satellite guys don’t offer them, someone will.

Consumers aren’t rejecting TV – they’re rejecting a business model which forces them to pay for TV they don’t watch. That’s something that isn’t unique to cable and satellite. Fast food does it. You might end up paying more for something if you don’t want the fries or soda and, therefore, buy ala carte. Software companies do it. The music business did it (an album was always cheaper than buying the best songs on that album as singles). 5 years ago, researchers found that consumers might actually value a bundle less than they would value the individual component products. There was a “negative synergy” associated with the bundle. The key to successful bundling it seems is to provide an option to buy the individual components or the bundle. When that option isn’t there, sales actually declined significantly.

We can’t sit on existing business models anymore no matter what business we’re in. We certainly can’t force consumers to pay for things they don’t really want to get those things they do want. I’m watching the changes in the video business with great curiosity (and some degree of thanks that I’m no longer in it!). You?

Leave a comment

Filed under Consulting, digital media

Mass Markets And Mass Media

I’ve written a number of times over the last few years about the changing patterns of content consumption and how those changes are affecting the media business. I read some statistics last week that make me think we’re almost at the tipping point where we’ll see some irreversible things happening that affect not just media but marketing as well.

First, the statistics. The report is GfK‘s The Home Technology Monitor and while there wasn’t much “new” in it, the acceleration of some trends is interesting:

New findings from GfK show that US TV households are embracing alternatives to cable and satellite reception. Levels of broadcast-only reception and Internet-only video subscriptions have both risen over the past year, with fully one-quarter (25%) of all US TV households now going without cable and satellite reception. TV households with a resident between 18 and 34 years old are much more likely to be opting for alternatives to cable and satellite; 22% of these homes are using broadcast-only reception (versus 17% of all US households), and 13% are only watching an Internet service on their TV sets (versus 6% of all TV homes). Overall, 38% of 18-to-34 households rely on some kind of alternative TV reception or video source, versus 25% of all homes.

Why this is meaningful has to do with the symbiotic relationship between mass marketing and mass media. As Ben Thompson put it in a Stratechery post:

The inescapable reality is that TV advertisers are 20th-century companies: built for mass markets, not niches, for brick-and-mortar retailers, not e-commerce. These companies were built on TV, and TV was built on their advertisements, and while they are propping each other up for now, the decline of one will hasten the decline of the other.

As you can see from the chart, viewing of traditional TV by young people in the first quarter of this year (traditionally a high-viewing quarter as many people stay inside during winter) dropped precipitously. There aren’t many mass markets and there really aren’t mass media. Why, then, are we focused on measuring things that are no longer really relevant? Anyone?

1 Comment

Filed under digital media, What's Going On