Much of the discussion pertaining to TV content seems to focus on piracy and copyright. This begs the question, even if media companies could be in control of their content online, will they really want it out there? Let’s see.
Just a couple of months ago, I ran some numbers based on revenue growth forecasts for a) global advertising, b) TV advertising and c) online advertising and asked whether or not Online Ads Would Surpass TV Advertising by 2021?
This week, Understanding & Solutions came out and pegged online video advertising at $10B by 2011, with total global TV advertising growing from $160B in 2006 to $190B in 2011.
Last year, Fortune penned an overview of News Corp.’s business and pegged the US TV advertising market at $57B in 2005 with a potential to be a $73B by 2009, with filmed entertainment and licensing pushing the total revenue derived from TV in the US at $230B by 2009, up from 2005 sales of $185B.
As the president of a media company, I want to see all ad markets grow: TV, web, even print and radio. I am still trying to wrap my arms around VC Josh Kopelman’s excitement over companies that shrink markets, but slowly but surely, I think I am starting to understanding the logic.
Let’s apply it to something I certainly understand: marketing to men in general and advertising specifically. Using TV, marketers have to spend a lot of money to reach the elusive 18-34 men. As such, the objective to reach a male consumer becomes very expensive. Alternatively, using the Web, it is becomes that much more efficient and effective.
As more and more consumers get on the Web, then slowly the audiences that the Web offers to marketers relative to TV become one and the same. But because the cost of indexing, aggregating, publishing and producing content is cheaper online than offline, I think that online media companies can always offer better rates than offline ones. Over time, as every single request for proposals (RFP) comes in, more and more of these call for Web components to the point of them all eventually being web-based campaigns. Since there will always be one media company that will be able to offer a better rate (because inventory is infinite online, but finite offline) then the cost of advertising goes down.
In other words, I am not sure if total advertising will grow, neither will TV. I think it is very, very reasonable to think that much the same way that print companies like Washington Post are having a hard time converting online audiences to revenues that match their offline businesses, TV media firms will experience an even greater challenge because despite what some think, the challenge of converting a 22 minute show, 48 minute program or 90 minute film into something that Web audiences want to see is far greater than the challenge that print companies faced… and look at how poorly they fared.
I think that is one major, major reason why NBC and News Corp.’s NewCo/NewSite product has been slow to launch. It’s not just a question of taking content, creating a user interface and coming up with a name (well, 2 out of 3 anyway in NBC/News Corp.’s case). There are very deep and serious business implications for TV companies to get online: the faster they do so, the quicker they kill their businesses. This is why I understand the angst and envy that TV execs have.
I’m very bias in this debate: as a web content producer, I produce and publish online, but then I syndicate on the Web, on wireless, in out of home networks and soon, on TV. TV companies have to protect their content because the TV market is where the money is at, but the TV market is too expensive for marketers to support long term.
Right now, when you read all of this, it’s hard to buy this theory, but if you study history and consider the economics outlined above, and mainly, the multiples that online companies command relative to their offline peers, there is very little incentive for TV companies to get online. I ran some numbers and at the multiples that online media companies get, the online ad market can create $150B in market cap by 2010. But the total advertising revenue, even on the most bullish scenario, will be 1/7 of what TV advertising will be! See that analysis in depth here.
In fact, when it comes to TV content, their web strategy can be summed up by Must Not Watch Online TV… because if consumers do, then TV companies’ shelf life will be shorter than a low rated sitcom in its first season.
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