Tag Archives: Television

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

An Hour More And Less

More and less? A typo right off the bat? Nope, not a chance. That’s a statement about time, which as I think we all know is a zero-sum game. Even if you don’t sleep there are still only 24 hours in a day. Why this is of note today is a report from the Nielsen folks and the implications the findings hold for you.

The results come from Nielsen’s Q1 2016 Total Audience Report, which you can read here. There is also an excellent summary on Adweek’s site. As the latter states: 

The total media consumption across all devices and platforms jumped one hour from the first quarter of 2015, to 10 hours, 39 minutes. (A year earlier, there had only been a seven-minute year-over-year jump in daily media consumption.) That’s mostly due to smartphone use, which has soared 37 minutes, and tablet use, which has increased 12 minutes. Internet on PC jumped 10 minutes, while multimedia devices, including Apple TV and Roku, were up four minutes. Video game consoles and DVR use was flat, while DVD use dipped one minute and live TV dropped three minutes year over year. Nielsen’s data indicates that consumers aren’t pulling away from linear TV, but instead are making additional time for these new devices.

An hour more each day with media sounds wonderful if you’re in the media business. The real question this raises with me is from where are consumers getting that extra hour? Do you think they’re sleeping less? Leaving work early? Maybe they’re watching on the job (so much for productivity). No, I suspect they’re just not doing something else. Shopping, dining out as much, going to other recreational activities. All this means is that as selective as consumers were in allocating their time to your non-media business they’re going to be even more so. That reinforces the need for all of us to provide value every time we have a consumer interaction or we won’t be having as many down the road.

As an aside, I’ll remind us that most of us, even if we make package goods, are now in the media business. Social sites, home base (your website!), and content we provide to others are all media, so it’s not a lost cause. Obviously, it’s fiercely competitive out there, and the hour more each day that consumers are spending in the space doesn’t mean they’re any less frugal with the time they spend. The job for each of us is to make up for the hour less they’re outside of media where we live and capture their attention within the extra hour they’re spending inside. We can do that through great content, content which is focused on providing value and solving their problems.  Make sense?

Leave a comment

Filed under digital media

You Always Hurt The One You Love

There is an old song made famous by The Mills Brothers. The first two lines are:

You always hurt the one you love
The one you shouldn’t hurt at all

Today’s screed is the unbelievable tale of a media entity that is doing just that. Why unbelievable? Because if I asked you to tell me the absolute dumbest thing any company could do you just might respond with exactly what this company is doing. Let me explain.

The Walking Dead is AMC’s (and maybe TV‘s) biggest show. Not unexpectedly, there are many fan groups that interact via social media. One of the biggest – about 400,000 strong – is a Facebook group called “The Spoiling Dead Fans.” As you might guess from the name, part of what the group does is to make predictions about what will occur in upcoming episodes, and lately, it’s about who was killed by a barbed wire coated baseball bat (named Lucille). These fans, as you might guess, would be classified as “hard-core.” They watch the show, the discuss the show, they pick apart every episode for clues. In short – they’re what every media entity wants: engaged, excited consumers.

So how has AMC rewarded these loyal fans? In their words:

In the past two years, AMC has filed several wrongful DMCA notices against us with full knowledge that we could not file counter-notices, hired investigators to intimidate our members, and threatened our local members with arrest, among other questionable acts.

Yep. They’re threatening to sue them. AMC believes “the predictions on the board are based on copyright protected, trade secret information about the most critical plot information in the unreleased next season of The Walking Dead”. If you’re not shaking your head about now, you should be. It’s not as if the fans have released footage or are torrenting purloined episodes. All they’re doing is keeping the show top of mind while it’s off the air between seasons. Is suing them for that really the best response?

If you’re over the age of 30, you’re old enough to remember when the music industry spent a lot of time and money suing consumers rather than using those resources to come up with a better business model (Steve Jobs did that for them). I think that alienation persists to this day.

I can’t imagine any instance where suing your best customers – hurting the ones who you shouldn’t hurt at all – is the best solution to a problem. Frankly, I’m not even sure that in this case there even is a problem. You?

Leave a comment

Filed under Huh?, Reality checks

The End Is Nigh?

Walk around any big city and inevitably you’ll come across some person wearing or carrying a sign proclaiming that the end is nigh.  They’re warning about an impending apocalypse.  While they’re generally seen as a little odd (a polite way of saying nuts), I suppose at some point they’re going to be right.  Hopefully, that time isn’t close.

With that preface, and with the recognition that my timing might be off, I think we’re seeing signs that the end is nigh for the TV industry in which I grew up as a businessperson.  If you’ve been paying any attention to the media landscape over the last decade, you’ve seen some changes in what I’ll call Big TV (cable and broadcast).  To a certain extent, TV has adapted and their basic revenue model hasn’t changed a whole lot.  Sure, broadcast TV has done a good job of mirroring the cable model of dual revenue streams by gaining carriage fees, but the ad model – dollars for eyeballs – is pretty much the same as when I sold, even though the demographics are a bit more precise as the industry adopts additional data sources.

So why is the end nigh?  Let me offer a quote from YouTube’s CEO as presented at their “newfront” and quoted by Cynopsis:

 

To make her case, CEO Susan Wojcicki rattled off a startling statistic: “YouTube now reaches more 18–49-year-olds than any network ­ broadcast or cable,” she said. “In fact, we reach more 18–49-year-olds during primetime than the top 10 TV shows combined.” Her assertion is backed up by a Nielsen study of US viewers that Google commissioned. Wojcicki also confirmed news that broke earlier in the week: Between 2016 and 2017, Magna Global,Interpublic’s ad-buying unit, has committed to spending at least $250 million on YouTube instead of TV.

It’s a truism in media that dollars follow eyeballs (eventually).  Other than live sports and breaking news, those eyeballs have been departing the BigTV guys for a while, at least in the traditional form via the traditional channels (we program, you watch when we offer a show). While the digital dollars have been increasing (and will pass TV spending this year), very few marketers admit to cutting TV for digital.  Magna has because according to them, 18- to 49-year-olds watch an average 26 hours of linear TV per week, down from 32 hours in 2009.  Dollars follow eyeballs. As Adweek reported:

Magna Global’s $250 million investment in YouTube advertising will come straight from its TV budget. The $250 million investment is four to five times Magna Global’s typical YouTube budget. As a result, the firm will spend less on traditional marketing overall this year as TV ratings dip.

So you tell me – is the end really nigh for Big TV or am I just another nut carrying a sign around?

Leave a comment

Filed under Consulting, digital media