Category: Business

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Random Thought The Business of Production

When is a market saturated?

A post this week by Justin Evans titled RED One Rentals Impending Crash hit my reading at just the right time. Over the weekend I recorded some interviews with Rick Young of MacVideo – a fellow Aussie now living and working in the UK – and a whole bunch of people who were around the foundation of the LA Final Cut Pro User Group. I started to form some parallels in my mind. As have many others to be sure.

Justin has one very, very good point: a RED One is not a good investment for a rental company. Sadly neither was setting up for Final Cut Pro rentals. In both cases a solution you rented as needed (because it was so expensive you couldn’t afford to own it) has been supplanted by “buy it and you’ll always have it to use.” That pattern also applies to HD video camcorders.

The DV Rebel’s Guide author Stu Maschwitze advises readers to own their own camera above owning an edit system. He proceeds to give several examples of where he’s been able to get dramatic shots that add high production value to his shows, just because he had the camera with him.

Projects that wouldn’t have been made are now being made. There are more opportunities to make money in video production than ever before. There are probably few opportunities to make enormous – dare I say “excessive” – profits.

Right now budget projects tend toward formats like HDV or AVCHD/AVCCAM because the cameras are very affordable and the quality “isn’t too bad.” Heck, it’s high definition with quality at least 10x that of my first pro video cameras, and in inflation-adjusted terms about 1/10th the cost. (Not to mention 1/10th the weight.)

But it does limit production in two ways: it limits where the product can go given the quality requirements of some outlets, and it limits what you can do with the image. Particularly with RAW footage – what the sensor saw is what’s in the image – you can push the image in Color Timing a lot, lot further than those formats that limit color information.

Quality has always cost. No-one’s ever been unhappy about that other than the cost-requirement limited what got made and distributed. So industries evolve high cost structures. Budgets get bigger because there’s more at stake and when successes happen, everyone who contributed to their success wanted their share of the (quite often extreme) profits.

Television is the child of film and radio and inherited many of the same cost structures for program production. Given the limited outlets of the day that was entirely appropriate. In the last decade there’s been an explosion of outlets. The number of cable channels have dramatically increased thanks to the Clinton-era Telecommunications Act of 1996. And there’s this thing called ‘The Internet’ that seems to be opening up increasing number of distribution opportunities.

Back in 1999, if you told me there’d be more than 1.25 million registered Final Cut Pro users within 10 years, I’d have been credulous. Although there were about 300,000 Premiere 5/6 users at that time, it was the dominant NLE – Avid having fewer than 1/3 that number of customers at the time. People seem to find a reason to pay for professional editing software beyond what ships free on every Mac.

Apple announced their customer number at the MacWorld ’09 Final Cut Pro User Group Supermeet, but these following are likely to be reasonably close. Avid’s user base has continued to grow and I’ll say a generous 200,000. Premiere Pro has to have well over half a million legitimate customers. Sony Vegas is up over 300,000 customers. Avid Liquid has about 400,000 customers iirc. Other NLEs, like Edius I don’t have a feel for. (Please feel free to correct any numbers in the comments or private email.) Add them together and there about 2 million people in the world who have paid for professional editing software.

You’ll note how I’m carefully avoiding calling them all “editors”. People are obviously using Final Cut Pro in ways that would be quite foreign to an experienced entertainment industry or documentary editor. But if they’re editing, satisfying a need and making a living from it, that’s a good thing. That’s a heck of a lot more people employed (or working for themselves in some way) – making a living doing what they like doing – than ever there was before.

It’s the same in the music and print design businesses. The transition to digital technologies demolished existing cost structures and opened up thousands of new employment opportunities.

Red Digital Cinema, with the RED One now and Scarlet and Epic coming up, will probably sell in numbers that “make no sense” if you expect the industry (film, television, entertainment, education and all other types of production) to not change.

The concept of an “Independent model of Television production” came from Mathew Winer, write/producer of Mad Men: Television production more modeled on Independent Movie production approaches. People like Television, and YouTube-like content supplements but does not replace Television programming.

What we’re currently seeing is a trend for “quality production” away from the big four Networks to smaller players simply because the market (viewers and therefore advertisers) for drama or comedy production on the networks is not big enough. Even ratings winners like American Idol attract audiences that would have seen the show cancelled even 10 years ago.

The cable industry doesn’t have the same cost structures as network, and the Internet has even fewer constraints. Josh Whedon’s Dr Horrible’s Sing-along Blog was purportedly produced for around US$100,000 on the SAG “low budget production” contract. His cast probably didn’t get paid as much as their Network Shows did, but at a time when nothing was shooting because of the writer’s strike, any work is good work. Particularly if that work is in a Guild that has a greater than 95% unemployment rate!

Shows like Mad Men and Friday Night Lights are doing high quality work with “very constrained” budgets. (Anyone know what the per-episode budgets are, let me know in the comments or private email.) What’s to say that under-employed actors and under-employed writers and under-employed-everything-else in LA (Toronto, New York, Vancouver, Denver, wherever) couldn’t produce their own shows for Internet distribution?

There are budget ways to do effects and better green/blue screen tools than ever before. Apple has put advanced color timing in the hands of anyone who wants to try and give their project the “big production” look.

The availability of “quality that no-one can complain about, ever” tools like those coming from Red Digital Cinema completes the production side. The tools of quality production are democratized. A new, new industry arises that aspires to decent middle class incomes with employment opportunities for anyone with the desire, drive and talent to create television, film, conference video, or event videography…

May a million United Artists bloom. If only we could get the distribution side solved.

Categories
Apple Business & Marketing Random Thought

What is the future of the trade show?

Seems like everyone is withdrawing from trade shows. Apple has removed itself from all trade show exhibits, with 2009 being its final MacWorld. That was the last trade show that Apple had not formally withdrawn from. Apple has better ways to meet the needs of its bigger market – Apple stores! Along the way, the Mac, while still important to Apple, is not Apple. Once upon a time you could pretty much use them interchangeably, but no longer.

Avid, and then Apple’s withdrawal from NAB 2008 seemed shocking at the time, but it makes sense. They have better ways to reach their customers: More cost-effective smaller – but focused on the Apple product – Pro Apps events and better online communication.

Today it became public that RED Digital Cinema would not be attending NAB this year. The stated reasons echo what Avid and Apple said last year: there’d be too many mock ups on the NAB booth because key components won’t arrive until a month later. NAB (like MacWorld) puts deadlines on developers calenders that don’t really suit them. RED will be holding “RED Day” somewhere, some time in the future instead. Their brand is strong enough, so they can do that.

Isn’t it crazy that in April Apple announces a version of Final Cut that doesn’t ship until September of that year? It was barely in beta testing and really not ready to be seen. Not exhibiting at NAB leaves Apple flexible as to whether they announce an upcoming version of Final Cut Studio at a special event coinciding with NAB; or they hold it back until after Snow Leopard ships because it will use features only available in Snow Leopard and not yet announced. Hypothetically. (Please, that is NOT a rumor, it’s a hypothetical case. I know nothing!)

Why were trade exhibitions valuable? There’s the opportunity for direct comparison, theoretically. But the camera folk are all over the place and you’ll probably get a better “shoot out” at a local dealer or through a user group. And you don’t have to shout at anyone to do it.

A Trade Show was a way for companies to get attention, because media focused on shows. But that kind of changed with the Internet. In 1998 my then editor at Digital Media World magazine in Australia wanted a decent article on the latest news. By the next year, he wanted a “color piece” because all the news was on the Internet and he didn’t need no expensive journalist writing that up. (It could have been written in India as one local Glendale, CA website does for its local news.)

They are also a way of stumbling over unknown little companies or technologies that you might not already know about, but with news sites like Digg, Blogs like newteevee.com, freshhdv.com (and another 293 I use to keep in touch) all feeding the latest stream of information, it’s unlikely I’ll miss something.

So why am I going to NAB 2009? To socialize and to see what I would have missed otherwise.

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Business & Marketing Distribution

Why do we have ad budgets?

Seth Godin has a post Do Ads Work that makes the case that the only reason why there are “ad budgets” is because the advertiser really has no idea whether or not the ads are paying off. They limit the potential down side.

If your ads work, if you can measure them and they return more profit than they cost, why not keep buying them until they stop working?
And if they don’t work, why are you running them?

There are some businesses that do follow that rule. In one of my dad’s businesses they knew that more than 60% of their business (at the time) came from their Yellow Pages ad. But in my production businesses I could never find an advertising outlet that measurably gave results better than the cost. (My own digital video business ad in the same Yellow Pages drew two enquiries in a year and broke even.)

So, we basically have a whole bunch of advertisers who don’t know if the advertising they’re placing is paying off, that’s cluttering up “new media”.

I think Doc Searls is right when he posts:

What we need is for demand to find supply, not just for supply to “drive” demand. We’re not cattle, and we don’t like being herded, even if it’s by friendly chutes like Google’s. This was true before online advertising went nuts, and it will be true after the chutes get trampled.

In that he echoes what I posted from Dave Winer last week.

Advertising is on the decline in relevance and usefulness because we are no longer dependent on advertisers to push information at us all the time, in the hope they hit the few that might want to buy their product right now.

As a result of the Internet, control = power is moving from the advertisers and their network appointment economy, to one where information about desired product, as well as entertainment content, is delivered on demand. On the schedule of the viewer and consumer.

Advertising budgets are necessary because most advertising doesn’t work. It merely devalues the content. Back to Doc Searls for a final comment:

It’s 2008. Isn’t it time we thought past advertising, toward revenue models based on serving customers, rather than guessing at them?

Advertising is not going to power new media. It may not even power old media for very long if we project forward from the way that print media is being displaced by online content.

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Business & Marketing The Business of Production

Why I fear for the future of quality production

NBC’s recent announcement that they were dropping five hours of prime time television to strip program a new Jay Leno show at 10pm weeknights made me think about the problem with high quality (i.e. expensive) “television” programming. (I define “television” as a style of production created by professionals, with professional standards with the intent of making money, regardless of what outlet it goes through.)

I first started worrying about this a couple of years back during the run of “Studio 60 on the Sunset Strip” – reportedly a $2 million an episode show. The problem is that these shows require large audiences to recoup the production costs, and the network operating costs and profit, from advertisers. A 6 million person audience of high-net-worth individuals was not enough to justify continued production.

It’s not surprising really, when you consider that a hit network show today, would have been dropped 20 years ago because of its small audiences. Quality drama and comedy production – shows like Studio 60, Friday Night Lights, Mad Men, CSI, Lost, Heroes, et al. – is expensive and does not get the huge ratings that are required. The hit ratings are reserved for American Idol and reality TV.

So, how do we produce that high quality if the audiences aren’t there?

One obvious answer is to cut production costs. As Matthew Winer, writer/producer of Mad Men, said at a TV Academy function last year, we’re going to have to get used to a “independent film production” mindset for TV production. While I’m not entire sure what he meant by that, it is clear that Mad Men is a quality product – Emmy Award winning quality – but is clearly being produced on a cable budget. (It’s also likely that AMC are subsidizing Mad Men as a flagship for the channel.)

Is this the future for production? Tighter budgets, fewer big name stars (but overall higher quality acting) and a more guerilla approach. Certainly that’s been happening with Friday Night Lights where they shoot in locations rather than sets; shoot multi-camera and avoid over-rehearsing to keep spontaneity. As a consequence, they’re often finished the day’s production by mid-afternoon.

Maybe that’s the future of production? For some other thoughts on the implications of the NBC decision, Kent Nichols blogged about it, and why it was good for new media.

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Distribution Random Thought

What is the future of advertising?

I hate advertising. I guess, if I’m completely honest, I hate irrelevant advertising like most people. Trouble is, I’ve yet to experience relevant advertising! I also don’t believe that advertising has affected my decision making process at any time. Last time we purchased a car I’d never seen a Kia advertisement: we had rented a Kia and it turned out a friend of a relative worked at a Kia dealership and could get us a decent deal.

I go out of my way to avoid advertising. In our last residence “TV” came off a PVR and ads were universally skipped. These days with TV coming from the Internet there are no ads in the downloads. The few times I’ve watched Hulu, the irrelevance of the ads was distractingly annoying.

The only sane way to surf the Internet is with ad blocking! I was recently categorizing the entries in my research database that involved loading pages directly in DEVONthink Pro, which claims to have ad blocking but nowhere near as good as the plug-in I use for Safari. After an hour or so it felt like my eyes were bleeding from the garish, flashing, irritating ads all over the place. It was a shocking realization of just how unappealing browsing without ad blocking was.

I am surprised, then, that the entire “new media” business seems predicated entirely on advertising support! (How many times do new business have to repeat the mistake of modeling themselves on their immediate predecessor – we know from history that the final model will never look like the preceding one.) This is within the context of at least one survey from Yankelovich Research that show 70% of Americans would pay to view content without advertising and go out of their way to avoid brands that “overly market their products and services”! Who wouldn’t after being barraged by up to 5,000 advertising messages a day!

But if there was no advertising how would we find out about products we wanted to buy – things that would be useful for our business. To which I would answer, the same way I do now: reading and research. Particularly searching on the Internet. Dave Winer nailed it:

The Internet is a wonderful commercial environment. It has trained me to expect the impossible from real-world retail. When I last visited Fry’s I wished I could hide all the items on the shelf that don’t match my search criteria.

Frys is intimidating and it has no search engine (in the store) making the online version much more satisfactory. In that same posting, one of his commentators – Hartsock – puts it this way:

“I look forward to the day when I can search like this: “pants waist:38in inseam:32in cargo” and find a listing of cargo pants that fit me and places I can go and buy them.”

In other words the information is being pulled by the customer when the customer is ready to buy. Not pushed at the customer thousands of times when they’re not ready to buy, which simply annoys and intrudes. As Dave puts it:

However this is not advertising! It is commercial information. The former is in our way, the latter is what we seek.

Advertising was useful in reaching mass markets with relative homogeneity – America in the 50’s when TV was new – but now there are few mass markets, tanking advertising spending and little advertising relevance. Now it’s time to realize that people seek commercial information that’s relevant, on their schedule and pace, not something pushed at them intrusively.

That’s exactly the same changes we’re seeing in media consumption: people want their programs, on their schedule on their device of choice. Advertising made sense for appointment television, but that’s dead!

In terms of our businesses perhaps it’s time to realize that being findable in search engine by having an active web presence is much more valuable than a big advertising budget.

Categories
Distribution

How big an audience is needed?

I was reading this post at Video Insider and something struck me as really, really wrong with the numbers. Not that the math was wrong, just the return from the audience seems incredibly bad.

An audience of 15 million people (impressions) brings in the grand sum of $330,000! The top rates network show last week America’s Got Talent has an audience of under $12 million. Now I don’t know the budget of America’s Got Talent but it’s probably over $330,000.

The top rates hour-long production is apparently CSI Miami. Again I don’t know the income or production numbers, but typically the budget for “high production value drama” is usually $2-4 million an episode.

The difference is, of course, that we’re not looking at a 44 minute “hour long” production on the web. But even so, there’s something to be learnt from the numbers. That short video on the web is getting about $20 for every thousand people who are exposed to the ad. If we work on the long term average for hour long shows – about 65c per viewer – and convert it to CPM equivalent, we get a CPM for Primetime on CBS of about $650!! That’s approximately $5,322,200 in gross revenue (plus reruns, DVD distribution and foreign sales.)

Now Smallville manages to have high production values with a relatively small audience of just 1.736 million. Obviously that’s not costing as much to produce with estimated total revenue (let’s say a $500 CPM) of $868,000. Heck Jim Kramer’s show remains on air (on cable) with an audience of around 160,000. Even if the “CPM” held at $500 (unlikely), the total revenue for that show would be well under $80,000 per show.

On the other hand you have shows like The Guild rely on donations from their audience of around 30,000 to fund their (roughly) $250 an episode hard, physical, must-pay-out costs. (Cast and crew currently come for nothing.) No advertiser has been forthcoming.

Or consider Break a Leg, a high production value comedy produced with full crew in HD. With audiences on YouTube (2 million views as a partner), Blip.tv (500,000 views) and Metacafe (front page and a contest winer but only 100,000) the show grossed $2,500, or a CPM of $0.96 – 96 cents per thousand views.

Advertising works to fund video production on TV – networks and cable – with varying degrees of success, but it does not appear to work for web shows. Even Hulu, considered to be a success these days, is only getting CPM of $25 for the same content they’re getting $400-650 CPM on broadcast. I can understand why their emphasis not on Internet distribution!

Does this mean that the whole “democratization of distribution” is a over? That only big media will do at all well. It does if we are going to continue to put new wine into old wineskins. Advertising was absolutely the way to fund “free to air” television, which most people now pay for additionally with cable or satellite. But it is incredibly unpopular.

According to Yankelovich Research,

“Seven in ten Americans would pay money to block or skip advertising and marketing messages.
Almost six in ten consumers go ‘out of their way’ to avoid brands that overly market their products and services.”

Even if you find an audience…

In an online survey of 2,600 respondents, about 53.6 percent of online video viewers recall seeing in-stream – either pre-, mid-, or post-roll – ads attached to some form of web programming. That’s the good news. Not too surprisingly, more than three-quarters (78.4 percent) of respondents said in-stream ads are intrusive and fully one-half (50.4 percent) say these ads disrupt their use of the internet.

And from that same survey:

When it comes to streaming ads, half (50.7 percent) of the respondents said they stop watching an online video once they see an in-stream advertisement. Two-out-of-five (43.2 percent) do stay on to watch the rest of the online video. While only a small percentage – 15.3 percent – said they immediately leave the site once they encounter an in-stream ad, about half (49.7 percent) said the such ads’ presence alone makes them less likely to view other online videos.

The only good news for advertisers was that the 18-24 year olds surveyed didn’t mind the advertising…

Over one-half (57.6 percent) will watch an an online video ad and not become too annoyed to finish viewing. However, the report says younger viewers also have fairly low recall rates.

I’ve always wanted to either turn my audience away, and annoy them with ineffectual advertising. That sounds like a winner. Not.

If Break a Leg got only a single cent each for those 2.6 million views over nine episodes, they would have banked $26,000. At a more-reasonable 10c, that’s starting to cover expenses with $260,000 (about $29,000 an episode). If the audience were fans maybe more, maybe 25c an episode then the show would likely be profitable with $72,000 an episode. That’s a much bigger audience than Jim Kramer and higher production values!

With all the research at my disposal, I cannot find a single instance of where new media (podcasts, online, etc) is producing a good return for its producers from advertising. Like 70% of Americans I’d prefer to pay to get rid of advertising, assuming the cost to me (and return to the producers) is the same as it is now. We just need to get rid of the middle men – the network programmers – who are only interested in the advertisers, not the show, the producers or the audience.

Categories
Apple Interesting Technology

QuickTime X???

Boy, it’s dusty in here!! Been busy with lots of things, including just this week releasing The Hd Survival Handbook, but there was one thing from WWDC that caught my eye.

Using media technology pioneered in OS X iPhone™, Snow Leopard introduces QuickTime X, which optimizes support for modern audio and video formats resulting in extremely efficient media playback. Snow Leopard also includes Safari® with the fastest implementation of JavaScript ever, increasing performance by 53 percent, making Web 2.0 applications feel more responsive.*

Now, I’m surprised at myself for even bothering to attempt to second guess Apple by hypothesizing wildly, but that doesn’t stop my friend James Gardiner so it won’t stop me!

There are few clues and most of my usual sources are cold. There’s the rub, anyone who has Snow Leopard is under NDA and won’t talk. Anyone who is talking is guessing – we should keep that in mind.

Tim Robertson hopes that “modern codec support” would include .AVI, which is funny because .AVI has not been developed since being abandoned by Microsoft in 1996 – 12 years ago, just after QuickTime was introduced! James Gardiner thinks it might be a Flash/Silverlight competitor. Who knows they could be right as we’re all guessing wildly.

In Apple’s world “Modern codec support” means H.264 in .mp4 wrappers, and just maybe H.264 in .mov wrappers but that’s depricated as they say. (You can still use it but it’s not the recommended method.) Apple have totally moved away from all the rich interactive features that attracted me to the technology in the first place. (Much of what was added to Flash 9, was available in QT3 but never pushed by Apple.)

Then there’s this on Apple’s Snow Leopard page

Using media technology pioneered in OS X iPhone…

The media playback support on iPhone is very basic: H.264 video, AAC audio, MPEG-4 Simple Profile video, mp3 in .mp4 containers with limited support for .mov playback of those codecs. That’s it. A simplified form of media player with none of the older codecs not supported by MPEG-4. None of the wired sprite features, no VT objects or panoramas. A simple, lightweight media player that developers can draw on. (I should note that Flash Player and Adobe Media Player now support those exact same codecs.)

Looking also at what Apple have been doing with Javascript, and knowing there’s already limited Javascript support in QuickTime, my further guess is that QT X will be very open to Javascript, Apple’s new favorite browser language thanks to Sproutcore and the new Webkit Javascript engineSquirelfish. It’s interesting that Apple announced QuickTime X and the new Javascript engine for Safari in Snow Leopard in the same paragraph. Other features went into separate paragraphs.

So my guess is that QuickTime X is a newly optimized media player engine with hooks to good Javascript for interactive programming. Perhaps even to Ruby/Ruby on Rails since Apple’s also adopting that.

But who knows for sure? Only those who can’t tell.

Categories
Distribution Interesting Technology Video Technology

Little boxes, on the set top, little boxes full of ticky tacky!

So, Netflix and LG announce yet another set top box. Well, actually they announced that LG would include the Netflix service on “selected devices”. Best guesses are that the service will be added to a dual mode (HD DVD and Blu-ray) player, or even the Television itself.

Here’s the problem with this: it’s Netflix on LG devices and only Netflix. No slight on Netflix, the service is good and the company needs to provide for a non-disc future. However, the industry should be gathering together for a single standard for delivering from the Interent to the lounge room, not proprietary deals with single suppliers. If we want movies from Apple then it’s another set top box (Apple TV). Vudu have their own movie service and their own proprietary box. Tivo is a little more open – it has an API for programmers – but it’s still another box on top of the cable or satellite box you’ll probably still have.

We need a single standard or interoperable standards for delivery of “Internet TV” to Televisions. It has to be simple. TV would not have caught on if we’d needed separate Television sets for CBS, NBC and ABC – but that’s exactly where these companies think we’re heading.

It won’t work. Any device(s) that link the Internet sources with a TV are good, but it needs an open standard – perhaps that’s what google are working on, but even then it won’t help integrate with cable or satellite boxes unless those providers have a significant change of heart.

Apple TV, for all the people who claim it to be a “failure” is the leading device to connect computers and televisions. While its sales are disappointing by Apple’s mega-hit standard, it’s estimated to have about 800,000 units sold in 10 months (took Tivo 4 years to get that far) and it’s way ahead of the competitors, other than Xbox or PS3 which both act at media extenders.

My mantra for 2008 – proprietary bad, open standards (even from one company) good.

Categories
The Business of Production

Is a return to the “Studio System” on the horizon?

If there’s one thing that’s very clear over the last decade, is that the tools of production have become cheaper. But so far only the tools of production – cameras, edit gear, accessories, color timing suites, et al – but for craft skills there seems to be the same dichotomy of old: work for next to nothing in “Indie” production, or hang out for one of the few really well paying (Guild) jobs in the traditional production system.

Neither option is particularly suited to emerging “new TV” or “new media” production.

There is justification for extremely high salaries in broadcast: a popular show makes good money for a network and if paying the stars of, say friends $1 million an episode (as they did in the final year) means they get another year of high-value advertising slots to sell, makes sense. But $6 million an episode (plus the actual production cost for equipment, sets, studio and crew) is not going to fly for “niche” programming, in a 10,000 channel world. Frankly, as actors they were competent enough, but it wasn’t the talent that made the show in the first place. Writing, talent, the way the ensemble works, direction et al all had a lot to do with the success of that show.

At the other end of the equation you have shows like Goodnight Burbank where some of the people make some money off the advertising revenue blip.tv secures for the show. There has got to be a middle ground, where profits can be made by the producer and everyone involved gets a decent living. I’m wondering if a return to the studio system of early Hollywood isn’t on the cards?

In that system, actors, directors, cameramen et al were employees of the studio on fixed salaries. Generous salaries for the day, for sure, particularly for the most bankable, but salaries none-the-less. No $20m payments for “stars” that don’t actually contribute to the profitability of the movie. They may make it easier to market, but the studios today do not get payback or value from the huge sums paid to “stars”. The downside of that system is that the studios (vertically integrated businesses including the cinemas in those days) made outrageous profits off the backs of their employees, leading to United Artists and talent as independent contractor.

It seems to me that there is going to be some sort of structure – cooperative, studio, whatever – that allows a minimum of a decent middle class income for everyone involved, but retains control of the show through the newly democratized distribution system. It would have to have far more transparency in accounting than is common in the current system, so that profits are shared *fairly* with those who are responsible for creating the value.

Yeh, utopian, and probably unrealistic, but I can visualize a system where creative talent gets to do what they love (perform, edit, direct, shoot etc) and get a decent income, in the face of ever more fragmented viewing habits. A hit show today wouldn’t have even been in the top ten 20 years ago and yet, shows are still made and people in the industry still seem to live from their work – those who get to work that is. The systems and methods that worked for 3 channels may not be as suitable for a 500 channel or 10,000 channel world.

What do you think?

Categories
Business & Marketing Distribution

When you lose your monopoly, business has to change

Seth Godin has written a reprise of an old article of his called Monopolies, seven years later, which I heartily recommend.

The recording industry once had an important role that justified its monopoly, as did Broadcast Television stations and other limited outlet industries. But inevitably the monopoly is broken – by legal fiat in some cases, but by technology in a whole lot more cases.

It’s hard for a monopolist to give up the position because monopolies are very, very profitable. Sad to think that a company that was once raking in multiple millions of dollars every year, for many years, suddenly has to compete on the quality of their offering in a completely changed market where they are no longer a monopoly. This is why the music industry (concert tickets, merchandise etc) is doing very well while the recorded disc business is slowly fading away.

Some of the time monopolists don’t realize what business it is that they are in. Railroad companies apparently thought they were in the railroad business, rather than the transport business, so when their long-haul monopoly was threatened by trucking, they didn’t respond fast enough, and faded in importance to society. Record companies think they’re in the disc business, when they’re really in a promotional business. That’s probably the only role left.

Other times, industries lose relevance because technologies bypass them. This is the position that broadcasters and cable channels are facing right now: they had an effective monopoly (mandated by the government in the case of broadcasters) because they had access to limited resources – broadcast licenses and access to cable distribution. However when we don’t need those limited resources to get entertainment “out there” to the viewer, what role is left? Finance company? There’s lots of competition there.

And finally, industries lose out when they focus on the wrong customer. Broadcasters and cable programmers have the wrong focus. They believe that their customer is the advertiser, and they are correct in an advertising supported entertainment model. However, the producer’s customer is the viewer and is often in conflict with the broadcaster’s customer.

Losing a monopoly is inevitable. You can avoid fading into irrelevance by focusing on the core value of your business to the customers and to keep focused on the customer’s needs. Unfortunately, the more broadcasters do that, the faster they’ll fade from relevance because they are unnecessary in an unmediated marketplace.