Cannibal. It’s a word that scares regular folks.
Cannibalization. That’s a word that sends management at media companies scrambling. The reason is simple: a lot of the gains coming from digital units will not be incremental, but rather, will come as a result of cannibalization from offline units.
Today Paid Content talks of Merrill Lynch Jessica Reif Cohen’s comment that: “it remains unclear how much of this revenue is incremental, as increased digital advertising appears to be displacing advertising from their traditional networks, which are no longer showing meaningful growth.”
I have been saying this (definitely not alone, though) for some time now, that this is precisely why TV networks will be slow in really migrating their content to the Web, and rightfully so. No self-respecting media executive will want to forego any part of the $75B TV advertising market for the potential of online video advertising. It’s a ludicrous assertion to think that “all media is digital and it will be multi-platform overnight.”
Psychology (greed and fear) will trump business anyway, especially when the business fundamentals don’t support a decision in the first place. Media companies are generally seen as mature. Their stock moves when their net income or revenues jump. So not monetizing content is simply not an option for management. This is a simple reality that promoters of the “put the content online and worry about it later” mantra do not seem to consider.
We have not even covered TV syndication revenues… but think about it: Seinfeld makes millions for the rightholder in TV syndication, why on earth would the producers plunk that programming on the Web and forego the audiences, advertising and syndication revenues, they just won’t.
And hence the pyramid breaking down online content:
At one point in our lives, sure, maybe the line blurring TV, Web, and Wireless programming will blur a lot more, but in our lifetime (as in until we are not senile, but perhaps while we are still alive), what you see on TV will be considerably different from what you see on the Web. What you see on the Web will resemble what you see in wireless, though the format etc. will be different given the screen size, bandwidth reality, battery life etc.
If you think about it: magazines and newspapers are both print, but the content in them - to a large extent - is different. The same can technically apply to online. We sometimes forget that dynamic.
In other words, the line between what you watch on TV and Web will be determined by economics; the line between what you watch on Web and wireless will be determined by technology. But the fact is that to think that you can simply take a sitcom and slap it on a computer screen, let alone a cell phone, is lunacy.
In fact, if you consider that estimates for online video advertising have jumped from $1B by 2010 to $3B by 2010 in 18 months, it has a lot to do with people believing that cannibalization will be stronger than initially believed because advertisers follow the consumer, and the consumer is online. But because human beings are slow to react and adapt, TV advertising will not disappear. It will go from $75B to $70B… maybe $65B in extreme cases, because TV remains a very viable and strong media. Magazines will perhaps lose a good chunk of revenues, as will newspapers, but these will not disappear outright either. After all, I don’t mind spilling my coffee on a paper, spilling it on my PDA, that I can’t stand. I also can’t take my laptop in the “think tank.” You see where I am going with this.
On this blog, I cover advertising a lot more than downloads, but even with downloads, I am just not sure the model - actually, make that, the demand - is there. I can’t bring myself to fork over $10 to see a movie in the theaters, will I really pay $5 to watch it on my cell phone? Don’t think so.
The simple truth is that we are watching a revolution of content creation, aggregation, distribution, syndication and monetization that is shaking the media business’ foundations. The economics are not there for every player to be all of those things, companies will pick and choose which areas they want to focus on. Technology and media will blur in some cases, and the winners are those that quite frankly, have the least amount to lose…
Subscribe:
March 5th, 2007 at 12:07 pm
Froosh,
Interesting post. I’ve been thinking a lot about this topic lately, with Joost taking off and YouTube continuing its dominance.
I think you’re right about TV obviously wanting to hold onto their advertising dollars. But, if they don’t act, they are going to see them slip away. (Standing still is really moving backwards, if everyone else is running.)
I really want web video to take off, because I find it to be an exciting prospect. But, until online advertising allows for true “mass marketing,” TV will hang onto the advertising money.
- Tessa
March 5th, 2007 at 12:09 pm
Froosh,
Interesting post. I’ve been thinking a lot about this topic lately, with Joost taking off and YouTube continuing its dominance.
I think you’re right about TV obviously wanting to hold onto their advertising dollars. But, if they don’t act, they are going to see them slip away. (Standing still is really moving backwards, if everyone else is running.)
I really want web video to take off, because I find it to be an exciting prospect. But, until online advertising allows for true “mass marketing,” TV will hang onto the advertising money. Shelly Palmer summed it up pretty well:
http://advancedmediacommittee.typepad.com/emmyadvancedmedia/2006/10/tvvideo_web_inv_1.html
- Tessa