druthers, the status quo would be
just dandy: networks distributing
programming to local broadcasters
and selling the aggregated audience
to advertisers at ever higher costs
per thousand.
But nobody has their druthers.
According to Nielsen Media
Research, in the last reporting period, CBS’s prime-time audience was
down 2.9%. ABC was down 9.7%,
Fox was down 17.5% and NBC was
down 14.3%. The numbers were
particularly devastating for Zucker,
whose weak schedule has exacerbated viewer exodus, resulting in lost
revenue, yielding huge spending
cutbacks, producing cheap, even-less-popular programming (no dramas or sitcoms in the first hour of
prime time, more and more “The
Big Loser” and next “The Jay Leno
Show” only in the last hour), leading to still more viewer defection
and so on toward oblivion. Zucker
keeps the lights on only because
mass marketers, desperate for
access to even the Incredible
Shrinking Mass Audience, have
continued to pay more and more for
less and less.
The average price of reaching
1,000 households with a 30-second
spot in prime time, according to
Media Dynamics, has jumped from
$8.28 in 1986 to $22.65 in 2008—
but effectively more like $32,
because between 150 and 200 of
those 1000 households use DVRs to
skip past the ads.
But the ratchet effect is over.
What the law of diminishing
returns could not influence, the
deep recession has. Now the advertiser exodus, too, is under way. As
of mid-February, 71% reported
having slashed their 2009 budgets,
and 6% more said the cuts were on
their way.
That’s why Zucker finally
admits to considering a once-unthinkable proposition: once affiliate contracts and pro-sports deals
expire, ceasing to be a network at
all. NBC: the cable channel.
And that’s not just the last
resort of the Big Four laggard. It’s
also the last resort of the Big Four
leader. At CBS, where fourth-quarter profit was down 54%, Les
Moonves has publicly speculated
about a similar move “five or 10
years away.”
KATJA HEINEMANN
CABLE
Just fair warning, guys: Cable has
problems of its own. It’s no more
DVR-proof than broadcast. It is also
suffering a sort of distribution
autoimmune disease, wherein the
body attacks itself. The very coax
the industry has been stringing for
50 years is now the pipe for broadband, which households increasingly are using to bypass pay cable
entirely.
Charter Communications will
soon be in bankruptcy after losing
more than 75,000 basic-cable customers in the fourth quarter of
2008. Churn, the expensive process
of replacing lost subscribers with
new ones, is taking its toll.
Comcast’s sign-ups in the fourth
quarter were down by half from
2007. Here’s what Glenn Britt,
CEO of Time Warner Cable, told
analysts in his last earnings conference call: “People are saying, ‘All I
need is broadband. I don’t need
video.’”
Britt was referring to “
over-the-top,” which, if you don’t like the
autoimmune analogy, can equally
be thought of as being shot with
your own gun. The game changer
in this respect is Boxee, a software
app that aggregates all your videos
onto one screen and allows you to
feed them into your TV machine.
This is what they mean by “
convergence.”
But Boxee is such a threat to the
business model of both cable and
broadcast that Hulu—which dis-
tributes NBC, Fox and Viacom programs online for free with minimal
advertising—demanded to be
removed from Boxee’s offerings.
Because if you can watch TV
programs on your actual TV, with
very few ads and no subscription
fees to a cable middleman, why
wouldn’t you?
ONLINE PUBLISHERS
Yahoo, at about 3. 5 billion daily
page views, is the most visited website in the world. In 2008, it had a
profit of $424 million on $7.2 billion in revenue. Not too shabby,
unless you compare it with 2005,
when the company had a profit of
$1.9 billion on revenue of $5.3 billion. Last spring, after a prolonged
dance, it finally rejected Microsoft’s
takeover bid at $33 per share, or
about $50 billion. Yahoo now trades
in the range of $12, for a market cap
of $17 billion.
What does it mean when online
usage soars, yet the most popular
publisher’s value is cut by two-thirds? It means Wall Street sees
Yahoo’s margins headed steadily
down—not just because it gets
trounced by Google in search but
because its CPMs are going in the
wrong direction.
The fundamental obstacle for
online publishing, according to the
president of the Interactive
Advertising Bureau: “It couldn’t be
more straightforward,” Randall
Rothenberg says. “It is a disequilibrium between supply and demand.”
Yeah, that about sums it up. As
(my former Ad Age colleague)
Rothenberg details, “Today the
average 14-year-old can create a
global television network with
applications that are built into her
laptop. So from a very strict Econ
101 basis, you have the ability to
create virtually unlimited supply
against what has been historically
relatively stable demand.”
So the biggest online publishers,
with all their vast overhead, have no
more access to audience than
Courtney the eighth-grader. And
there are hundreds of millions of
Courtneys, millions of them on
Google AdSense, driving the price
of ad space down, down, down.
Rothenberg also acknowledges
to problem of ad avoidance, as evidenced by average click-through
rates approaching zero. Yet, for all
his economic realism, he stubbornly insists there’s a solution:
“Better advertising. More informational. More entertaining. More
beautiful.”
A latter-day Creative Revolution,
that is.
“The interactive industry is
finally and belatedly beginning to
see that the way we built our sites,
based on the direct-response foundation, infused the environment
with ugliness and clutter.”
Granted, fewer dancing silhouettes and pop-ups might be nice, but
if you need to trump Econ 101 and
basic human behavior, the job calls
for something a bit more efficacious. Like a magic beanstalk. It’s
worth noting that Wenda Harris
Millard’s analysis about the structural glut of ad inventory took place
at a conference of the IAB, where
she is chairwoman. Her previous
gig: head of sales at Yahoo.
But why pick on poor Yahoo?
Consider Twitter, Facebook and
You Tube, which among them have
altered human behavior of a grand
scale. Two and a half years ago,
Google paid $1.65 billion for
YouTube. The 2008 payoff: about
$90 million in ad revenue—which
might (but probably won’t) cover
the costs of copyright-infringe-ment litigation and certainly won’t
cover bandwidth charges.
Facebook, whose 2007 valuation of
$15 billion has shrunk to about
$3.7 billion, had 2008 revenue estimated at $300 million. And
Twitter had $0.
Thus, the mantra: “We have the
audience. All we need is a business
model.” As if adequate revenue
were somehow guaranteed by
physics or heavenly deity. It isn’t.
I’ve pored over Isaac Newton and
the Ten Commandments. There is
no “Thou shalt monetize.”
Google
From Page 3
October, when he said brands were
the way to sort out the “cesspool”
that the net is becoming. “Who’s
actually driving people to these secondary, tertiary and Looooong Tail
sites?” one big-time publisher said.
“It’s Google.”
Publishers said they’re not asking for a leg up over amateurs and
link-happy bloggers. “This would
in no way mean that only professional content publishers would get
an advantage,” one said. “It really
just says that the original source,
and the source with real access,
should somehow be recognized as
the most important in the delivery
of results.”
‘PLAINTIVE CRY’
Google says it’s trying but can’t just
flip a switch to deliver pro publish-
ers’ dreams. “There’s absolutely
value to original content,” a
spokesman said. “There’s value to
derivative content, too. We look at
this in many ways from the point of
view of the user. But the truth is
there are so many shades of gray
even within, quote, original content.”
Not everyone supports the publishers’ push. “It’s the plaintive cry
of people who have lost their
monopoly trying to scrounge a little
of it back,” said Michael Wolff,
Vanity Fair columnist and founder
of Newser, which aggregates and
links news from around the web.
“Sometimes it’s true that you’d
rather get what The New York
Times has to say about something
rather than a host of bloggers. But
more interestingly it’s not always
true. And it is in fact less and less
true.”
Publishers are nonetheless looking forward to the next closed-door
meeting of Google’s Publishers
Advisory Council on April 30,
when many hope to get some solid
response from Google. They don’t
just want “We’ll fix it.” They want
more insight into Google’s black
box of data and decision making.
They’re also beginning to cast
around for new leverage.
Publishers on both sides of the
Atlantic are increasingly adopting
the Automated Content Access
Protocol, which intends to tell
search engines what they can use
and how. It’s focused on copyright,
but widespread adoption might
give publishers new clout with
Google.
Some publishers concede, however, they could help themselves
more too. “Google has designed an
algorithm,” one said. “They don’t
owe us that we show up a particular
way. They do publish a whole lot
about how to make your site show
up as much as possible. If people
haven’t taken action on it, that’s
their own damn fault.”
