JESSELL AT LARGE

TV Is The New TV; I’ll Second That

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.”

BRAND CONNECTIONS

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.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or [email protected]. You can read earlier columns here.


Comments (8)

Leave a Reply

CT White says:

August 21, 2015 at 4:32 pm

I’ve read the book and I agree with Jessell. TV is not gone yet because it has better content. The biggest challenge to the industry is how to stop the constant decline in viewership. Audience wants TV, but in their own terms. The answer is in the technology itself: move as fast as you can to deliver the same content over IP, change the advertising model, and narrow cast to increase effectiveness of target advertising.

Grace PARK says:

August 21, 2015 at 4:50 pm

This is the same Michael Wolff who wrote in 2012, “Facebook is not only on course to go bust, but will take the rest of the ad-supported Web with it.” Really? Michael Wolff? The problem for TV has nothing to do with content and everything to do with those brands you reference. Like Coke. CFO Gary Fayard said “The 30-second spots on television (are) no longer the way to do it.” As my old friend Bob Papper so wonderfully put it long ago, “TV didn’t hurt radio by taking away its listeners; it hurt radio by taking away its money.” I’m not so optimistic as you, Harry, even though I think broadcasting will continue to produce revenue for a very long time.

Brian Bussey says:

August 21, 2015 at 4:51 pm

1st separate the players.
1. Broadcast TV and it’s free over the air distribution over 100% of its DMA makes it impossible to dominate. When money is tight you do not choose between broadcast and anything.
2. In Houston, the retailor who specializes in the most expensive TV’s for sale (on earth) only uses rabbit ears to make a point. He cannot import a 1080I signal from anywhere other than broadcast stations. No cable company offers it…. for money. The Masters on a 80 inch 4K is kinda scarey, the picture is so good. and it sells TVs.
3. Cable TV Network’s stocks got hit because there A. way to many of them playing the same program at a different time and B. the legacy distribution model is under attack and C. they don’t have enough viewers to generate sales at the retail level. Anybody ever looked at the churn rate for local cable advertisers?
4. Millennials will be paying off their student loans until their kids start college and then they start the spiral all over again. $200. Cable bills are toast. Children born on the web learned their craft by stealing copyrighted music and movies. They think other people’s work should be free. I would hate to have to market to this demographic group.
5. The web has never been more than an extension of broadcast. That’s all it will ever be..

Matthew Castonguay says:

August 21, 2015 at 5:04 pm

The networks own Hulu…what I don’t understand why they have such an ambivalent relationship with it. It’s time for them to go all-in on Hulu and crush the likes of Netflix and Amazon. While they still can – ie; while they have mountains of high-quality owned-content relative to the upstarts, and before retrans $ come under serious downward pressure. Yes, risky and yes risks cannibalizing the retrans golden goose a bit…short term pain for long term gain. Survival. In other words, a big investment.

Shaye Laska says:

August 23, 2015 at 9:22 pm

Still bullish on local broadcast. TV features, immediate live scale audience, by demo. Lowest CPM, highest reach, interplays beautifully with mobile and digital. I notice many apps and digital pure plays are using TV to “launch”. Maybe TV is the answer, not the question.

Doug Smith says:

August 24, 2015 at 2:37 pm

Broadcast is alive & well but complacence is the industry worst enemy, live programming specifically live sports is the key to bring 18-34’s. Too many infomercials and not enough new creative programming on all platforms turn off the this demo, which is the future.
Embrace OTT, etc find away to make it work for you.

    Wagner Pereira says:

    August 25, 2015 at 12:02 am

    Let me know when the pure OTT start showing a profit and not a loss.


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