Auletta: Broadcast Nets Making New ‘Frenemies’

Broadcast networks that sell the rights to their programming to platforms like Netflix are making a long-term financial mistake for short-term gains, says Ken Auletta, author of Frenemies: The Epic Distruction of the Ad Business (And Everything Else).

Ken Auletta (Photo: Wendy Moger-Bross)

Speaking at the opening session of TVNewsCheck’s TV2020 Monetizing the Future conference in New York on Wednesday, Auletta, who is a staff writer at The New Yorker, says he believes advertising will continue to be a main revenue source for broadcasters and that allowing viewers to be conditioned to watching programming without advertising will not be beneficial to them down the road.

Auletta says while CBS picked up $250 million in its programming deal with Netflix, it lent support to a new “frenemy” and says other networks who have made or will make similar deals will also create new frenemies.

“It’s not good in the long-term” for TV networks, he says, adding that consumers who watch programming without commercial breaks on over-the-top platforms conditions them to get used to watching shows anytime on platforms outside of traditional TV and they might not come back.

In the long-run, Auletta says, it will have a “profound impact” on TV viewership and ad revenues. “When you supply [outside OTT platforms] with your programming you get a short-term [monetary] profit, but in the long-term it can be a disaster.”

Auletta’s book, published in June, talks about how various segments of the ad agency and media business are now infringing on the territories of each other. PR agencies and consulting companies are now moving into areas that were previously the domain of media agencies and even clients are taking on duties previously handled by their own agencies.

While the TV networks are doing deals with other programming distributors who are, in effect, competing with them.

Auletta says when he first began working on his Frenemies book three years ago, he believed that advertising as a revenue source for media companies was eventually going to disappear. But after close to 500 interviews he feels otherwise.

He says in the long-term, advertising will be vital for companies to stay in business and prosper. But they have to make sure that as the way people are targeted with advertising evolves, advertising cannot turn people off or freak them out.

He says some in the ad industry say the key to making a successful ad in the future is to make it not look like an ad. Or to reach people in more unconventional and targeting ways. Like targeting them as they surf the web with messages based on their previous purchases.

However, Auletta adds, there is a danger in that. He says advertisers have to be careful “not to creep out consumers” or to “cause them to freak out by knowing too much about them.”

Still he says, advertising going forward will continue to be vital to companies and media companies that continue to bring in large amounts of advertising will continue to lead the way. He points out that 97% of Facebook’s total revenue is from advertising, while the total for Google is around 90%.

And not only would Facebook and Google perhaps cease to exist without the massive ad dollar support each one gets, Auletta says the future challenges for the ad market overall are “profound.”

“Without advertising, newspapers are going to die, magazines are going to die,” Auletta says. And he believes not even OTT companies can survive on subscriptions alone.

Read all of TVNewsCheck’s TV 2020 coverage here.