Investors are spooked by the prospect of digital media taking over the television business. But Michael Wolff, in his new book, doesn’t see it. And neither do I. Old-fashioned television is more than holding its own against digital and the endless stream of low-cost or no-cost videos they circulate. The threat to traditional TV companies is mostly other traditional TV companies.
Inevitably, the long Bull market seems to be running out of steam with Big Media contributing to the gas letting. Yesterday, Viacom, Disney and Time Warner fell 6.3%, 6% and 5%, respectively.
Some of the investor wariness is due to their recent performance (or lack on it) by the companies. But some of it is undoubtedly due to the powerful perception that a bunch of tech companies — digital, in a word — is about to completely overturn the television business.
Three weeks ago, I wrote about how old-fashioned broadcasting was holding its own against cable. Today, I am writing about how old-fashioned television is more than holding its own against digital and the endless stream of low-cost or no-cost videos they circulate.
I’ve been inspired by Michael Wolff’s new book, Television is the New Television. As the title suggests, Wolff’s thesis is that digital is not all it’s cracked up to be as a news, television or advertising medium. TV, as we have known it, prevails.
Most digital media have trapped themselves in a downward spiral, producing ever more low-cost content to grab advertising at ever lower prices, he argues.
And part of it is due to their failure to produce a satisfactory advertising environment, he claims. Traditional media offer advertisers a “theater” filled with people of a “specific mind-set and focus,” he says. By contrast, digital delivers an audience “as though in the middle of a busy street, its attention caught by sudden random movements, loud noises, screeching cars, ugly or comely passersby.”
When Wolff says television, he means high-quality entertainment programming with one-hour production budgets running into six figures and often into seven. It’s the kind of stuff that big-brand advertisers like auto makers like to be associated with.
When you define television that way, I would say not much has fundamentally changed in the TV business over the past 10 years or so — nothing to panic media investors anyway.
As I look around, the production and network side continues to be dominated by the same oligopoly as in 2005: Disney, CBS, Fox, NBCU, Viacom, Time Warner. Throw in Discovery and Scripps Networks and I bet the they still account for 90% of television viewing.
And not much has changed in TV distribution. Cable and satellite with an assist from broadcasting are still the means for delivering television to the home where it can be watched properly on 55-inch HD sets.
This week, Multichannel News published a story on how the cable and satellite business has consolidated considerably over the years. But the same companies — the consolidators — are still on top: AT&T, DirecTV, Comcast, Time Warner, Dish, Cox and Cablevision.
The one newcomer among the MVPD elite is Verizon Communications, and its interest in the business is waning.
So why the investor angst?
Well, first of all, there are a lot of scary things roaming about the mediascape, things like OTT.
But for the most part, OTT has been a bust. My Roku box offers a few dozen OTT channels, none of which poses much of a challenge to TVLand and NickToons, let alone CBS and HBO. The only one that I’ve watched is Crackle, solely to see Jerry Seinfeld’s periodic Comedians in Cars Getting Coffee.
OTT also encompasses the virtual cable systems like Sony PlayStation Vue and Dish’s Sling TV, on-demand outlets like Hulu and in-house ventures like CBS All Access.
Notice that these New Media ventures come from Old Media companies. They aren’t a threat to Old Media; they are Old Media.
Apple TV has been hinting it will get into the virtual cable game, but unless it does so with some extraordinary interface as the late Steve Jobs once promised I don’t see what advantage it would have over the others.
The other thing about OTT in its many manifestations is that it is dependent on cable companies for the last-mile broadband connection to the homes.
Cable’s broadband business turns out to be the greatest hedge in the history of telecommunications. Consumers may cut the TV cord, but not the broadband cord.
Cable’s challenge is to work the Washington policymakers to change the rules so it can milk the broadband business for more than it is now. It’s what the Net Neutrality fuss is all about.
The wireless broadband carriers are delivering more and more video to smartphones and tablets, but they are in no position to deliver television. It requires way too much bandwidth, and consumers, I dare say, are not yet ready to watch TV with a data meter clicking away in the background.
Only two companies are threatening the TV status quo in a major way right now — Netflix and Amazon, with their SVOD streaming services. They are pushing themselves into the cozy TV cartel.
For a subscription fee, they offer old movies and TV shows along with a growing a collection of actual original TV shows. Netflix earned its TV bona fides when it plunked down $100 million for House of Cards in 2013 and followed up with Orange is the New Black.
They are going well, but for the life of me I don’t see why the traditional TV companies don’t compete against them, except maybe they figure they can make more money by licensing programming to them. (Streaming movies on demand isn’t exactly a novel idea; Enron and Blockbuster had it in 2000.)
The threat of Netflix and Amazon is also mitigated by the fact that they are pay services so that while they may pull away some viewers, they are not going to siphon off the brand advertising that broadcasters and basic cable networks count heavily on.
For all the noise around Google, it’s still not a true television company. Its YouTube is a minor league operation filled with wannabes hoping for a network sitcom or at least a gig on Comedy Central.
Google has spent hundreds of millions to jump-start original programming, but it hasn’t gotten much bang for its bucks. It spreads the dollars too thinly and the YouTube platform seems to have been created expressly to produce a lousy TV experience.
Frankly, it must not be in Google’s DNA to spend the kind of money it takes to be a real TV player. The company was built on not paying for content and it can’t get past that.
Newspaper publishers have twisted themselves in knots trying to come up with a new business model for serious journalism. Well, Google discovered it long ago. It’s search. But Google simply isn’t interested in hiring reporters and editors. It would rather invent the driverless car.
On the whole, the traditional TV companies are in good shape for the foreseeable future. That doesn’t mean that individual companies will not suffer. They will. But the cause of declining viewership, advertising or subscriber revenue is more likely to be other traditional TV companies than it is a digital one.
P.S. Michael Wolff is set to keynote the TVB Forward Conference in New York on Sept. 17.