What’s Outside the Box

Gen Y and the early Millennials are the last group of people who will remember broadcast ubiquity and an advertisers’ ability to rent a captive audience. They’re also the last who remember the internet as a collection of websites. They’re very key to the future budgets of Film and TV because of this history and adaptability.

First, some background: the internet’s most recent evolution was described by Wired Magazine’s editor-in-chief Chris Anderson in his provocative article “The web is dead, long live the internet” as the rise of apps, offering smoothed-off portals to the mountains of data out there on the internet. Custom tools, good for no other purpose but as the app intends.

Display advertising online is a leftover tactic from the pre-app and pre-mobile internet. A lot has changed about how to make money since the rise of mobile and apps. This new tech is changing user behavior and expectations. Conventional media companies, and even web giants, know that the internet doesn’t favor old-fashioned advertising models that stem from old-fashioned broadcast models. Let’s look at some strategies and see how they relate to TV.

The monetization strategy Anderson called “artificial scarcity” – the decision to lock users into a particular framework or resource, hoping they’ll be willing to pay for a product sufficiently indispensable – has proven to be one of most fruitless paths to profit. Piracy shatters most of those locks.

Of course there are exceptions. The video-game sector takes an absolute walled-garden approach. Their products are NOT broadcasts, however. They are environments hermetically sealed off from the outside world. World of Warcraft’s 12 million players are worth well over a billion dollars a year to the company that runs their virtual environment. It’s a valuation that rests on the game’s impervious isolation as well as the powerful “sunk cost fallacy” of the players maintaining their earned points.

The other monetization model for Film/TV to explore is the “platform” model: Google is not synonymous with its own website any more than Facebook or Amazon are with theirs. In each case, their value lies in the vast data engines they operate, for which a website is simply one point of access. People can build apps that tap into the vast data these platforms own – data which is their core commodity – their product.

Now to TV/Film: Seventy-four percent of Millennials say they watch video content while also doing other tasks on a laptop device. What older people call the second screen is the first screen for young people. Live TV still dominates, yes, but the use of a second screen while watching TV is nearing a tipping point. This carries with it user expectations and willingness to break through walls which hinder their new behaviors… taking Napster away from Millennials didn’t save the record industry, did it?

A lot of ink is spilled about the industry making TV more social for multi-tasking Millennials. I don’t think that’s the issue. Nielsen and Live TV watching, or even Live+3 is losing dominance. 44% of houses have a DVR. Syndication and licensing fees are great but don’t make up for the what could be lost on this trajectory. These concerns were voiced by Business Insider recently in an article called “Don’t Mean To Be Alarmist, But The TV Business May Be Starting To Collapse.”

I am not advocating for Subscription Video on Demand to replace pay-for-TV subscription fees. No. The Atlantic ran the numbers about cable rates and per-show costs, and tossed cold water on the techno-utopianism of Les Moonves:  

Les Moonves, the chief executive at CBS, said in an interview that if the cord-cutting revolution takes off, he is prepared to distribute TV directly to viewers through apps. ‘If the universe changes and they [viewers] want us to bring the content directly to them, then we can,’ he said.”

“The [cable] bundle confounds consumers by making us feel force-fed, but it also tricks us into thinking each individual channel is much cheaper than it really is.” 

MVPDs like cable companies are paid carriers. They are a mix of a walled garden and a platform. Therefore, cable networks like AMC are in a tougher spot than CBS because they’re stuck where they are – tied to despised cable companies – until piracy gets so easy that the cable nets are forced by advertisers to lower their CPM rates. I hope they’re padding them now, while they can.

But the essential problem is still there. And it’s not cured by “social,” it’s exacerbated by social.

If your product is as sharable as newspaper text, music mp3s, or video streams, and you don’t adjust your monetization model to suit either a walled garden or a platform, you need to change your product to suit a hyper-distribution monetization model …or think outside the box entirely.

So how can a video stream provider, whether it’s a cable net or a production company, behave like a platform or an environment? That’s my whole thing. And it goes back to Chris Anderson’s essay which raises a few questions:

What is your core commodity? If you’re a storyteller, have you thought maybe it’s your story? Now you can start thinking like a platform. Is the only way to experience this story via broadcast? The answer must be no. Now you can start thinking like an environment and a platform. That’s how we begin.

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