A VC« VC Cliché of the Week | Main | Singles vs Albums »
The Future of Media (continued)
I said in my Future of Media post that they key to media in the online world was four things:
1 - Microchunk it - Reduce the content to its simplest form.
2 - Free it - Put it out there without walls around it or strings on it.
3 - Syndicate it - Let anyone take it and run with it.
4 - Monetize it - Put the monetization and tracking systems into the microchunk.
Since then, there has been a fairly vociferous debate on this blog and others about "free it" and whether or not a paid model for downloadable content will work.
Sure a paid model will work. But its a niche business.
The mass market wants free and ad supported content, the way they get it on TV today.
Ad Age has a good piece up today that suggests that Apple would be smart to encourage the media companies to put up free ad supported TV content in iTunes. In a ironic twist, in order to read the piece you must fill out a nasty registration form that requires you to uncheck a bunch of boxes or get spammed by Ad Age. When will people learn that fooling people into getting spammed is a bad business model?
Anyway, back to the Ad Age piece. Frank N. Magid Associates, a well known market research firm in the media business conducted a survey about consumer attitudes toward iPods and downloadable TV shows. The results are not surprising to me:
The survey found that 54% of respondents would be more likely to purchase an iPod if TV programs could be downloaded free of charge in exchange for watching a 30-second advertisement.
Among those actually planning to purchase a video iPod, 72% said they would be more likely to download a TV program in exchange for watching an ad. The Magid study surveyed 798 iPod owners between the ages of 12 and 55.
“It appears that the option to download content of choice for free will dramatically increase interest in purchasing a video iPod, thus potentially increasing video iPod sales and penetration,” the study concluded.
The mass media market is a free media market supported by advertising.
Comments (12) | | TrackBack (1)
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d83451b2c969e200e550222f9e8833
Listed below are links to weblogs that reference The Future of Media (continued):
» The Future of Media from In-side
Okay, so Im posting about something I read over on Freds blog about the Future of Media, and, yes, I posted a comment there. However, another of his readers, Brian made an interesting comment:
When $60 billion worth of tv adverti... [Read More]
Tracked on Mar 9, 2006 1:52:29 AM
Posted March 8, 2006 in Venture Capital and TechnologyComments
I don't want all of my media to be 'ad-supported'. Free access and Free distribution are two entirely seperate issues.
Fred, In a world where access to media is increasingly free / cheap, I don't understand why you also want distribution to be free - all it does is creates a slacker-class of middle-men who add no value - digital media doesn't need distribution - all it does need is "inbound links"
Correct me please but I still think that you are arguing for either;
1) an ad on everything we see or hear or,
2) devaluation of all creative works to $0.
Either way, it's not a solution for me. Are you saying that I can scrape this blog every day and re-post it - and that it's your responsibility to ensure that you embed adsense in the content? I seem to remember a wild backlash when they did happen a few months ago.
Posted by: David G | Mar 8, 2006 12:20:38 PM
Fred, I love your passion about this, and I think microchunking is right on. But it's a slightly webcentric view to say that mass media is free.
Broadcast TV and radio are 100% free (and low-margin). Other than that, there's a paid component to nearly all major sectors of media & entertainment.
True, where there is a blended model, ad revenues tend to be the largest slice of the revenue pie over time -- but in the early stages of many of those businesses, fee revenue predominates (eg cable tv, satellite radio).
These aren't all niche businesses:
Cable/Satellite TV = paid
Satellite Radio = paid
Newspapers = paid
Consumer Magazines = paid
Film = paid
DVD's = paid
Video Games = paid
MMPORPGs = paid
Books = paid
Concerts = paid
CDs = paid
Mobile entertainment = paid
Blogs are free, though!
Posted by: Nicholas | Mar 8, 2006 3:27:25 PM
digital media doesn't need distribution - all it does need is "inbound links"
"inbound links" are distribution.
You can pay for them, you can barter for them, they can be given to you gratis, but getting those links is distribution.
Posted by: Erik Schwartz | Mar 8, 2006 4:12:49 PM
It is a balance of both, neither paid nor free is superior to the other.
In reference to what Nicholas says above, all of those are paid media, but does that mean each and every person that consumes it is the one paying for it? Out of all the newspapers and magazines you have read, how many have you paid for? Books?
The secret is making money off of the free content, may be that means adds, may be it means paid content too. You flip through a magazine at a newsstand, if it is good enough you subscribe.
The key is balancing paid and free. Use the free content to hook in viewers, make as much money from advertising as you can, and then up-sell the paid content to a segment of that audience. Just look at DVD sales of television shows. This is a market few people believe existed, and bam, it turns out millions of people want to drop $60 to get one season of their favorite show on DVD.
Posted by: Andrew Johnson | Mar 8, 2006 5:16:53 PM
One ad per show is too low. That one ad wouldn't even pay for the bandwidth required to download the episode to the user. I agree that ad-supported is the way to go, and TV has too many ads right now, but you're going to have to watch a bunch of ads in order to make it a viable model. Also, the encoding that Apple is using right now is too crappy to look nice on a television. Some people think it's OK, but people really want to watch this stuff on an HDTV.
Posted by: Chris Neumann | Mar 8, 2006 6:48:38 PM
Erik - "inbound links" are (free) adverts, not distribution - you cannot "consume" content merely by reading a link, therefore links don't distribute content, they merely advertise it.
Posted by: David G | Mar 8, 2006 9:14:14 PM
The survey found that 54% of respondents would be more likely to purchase an iPod if TV programs could be downloaded free of charge in exchange for watching a 30-second advertisement.
Among those actually planning to purchase a video iPod, 72% said they would be more likely to download a TV program in exchange for watching an ad. The Magid study surveyed 798 iPod owners between the ages of 12 and 55.
Those results are actually surprising to me.
Even if we're only talking about "free" broadcast TV, we already pay for that programming by watching (or ignoring) something on the order of 8 to 10 minutes of commercials per half hour program. It'd be a *huge* step up to be able to watch that program in return for a single 30 second commercial.
The surprise for me is that such a relatively small percentage of the sample group can do the math to figure out that 30 seconds of advertisement is a better deal for the viewer than the current 600 seconds.
Posted by: W.B. McNamara | Mar 8, 2006 9:26:23 PM
What about looking at CPM? What's the average CPM for an ad-supported show on TV (~$30 for prime time)? If you look at iTunes @ $1.99 per download, you're looking at a CPM of $1,999.00. Even if there's an 80% overhead, you're still *well* above the $30.
I don't think *any* advertiser is going to pay the equivalent. If you find one, please let me know (seriously).
I believe that there's room for ad-supported content in the new distribution realm, I just don't see the incentive for old-media to turn away what equates to 10x the CPM (at least) they can get from paid downloads. It's going to be up to the independents to do it.
Posted by: joshpaul | Mar 8, 2006 9:28:17 PM
If you don't mind Fred I will repost a comment I made on JaffeJuice.com referencing the same article.
This study illustrates a problem with the current interactive/convergence/on-demand/new media thinking. A typical hour of broadcast TV has ~13-15 minutes of commercial time. There is a reason for that number of ads.
Although Yahoo's Lloyd Braun, the ex-ABC chief, has taken a lot of flack recently, he knows of the perils of producing original programming. The costs to produce a quality, original sitcom, drama, or even a reality show isn't cheap. New shows fail 70% of the time. Even successful programs cost an average of $2 million to produce. That means networks have to stuff as many ads into program timeslots as possible to recoup their investments. Last October, USA Today reported that the amount of ad time per hour of programming on broadcast tv rose from 9:53 (min-sec) in 1994 to 15:48 by 2004.
http://www.usatoday.com/life/television/news/2005-10-11-ad-glut_x.htm
In order to support the costs of an on-demand, interactive, new media world, consumers will still need to be inundated by dozens of (mostly irrelevant) commercials. As is now envisioned by ad and media executives, the solution to consumer TiVoing is to prevent commercial avoidance by disabiling the fast-forward button upon the start of the upcoming ad pod.
If networks implement this restriction and conclude it justifies a raise in ad rates for new media tv, above the average mid-teen CPM that traditional tv now receives, I predict any increase will be short lived. Consumers will revolt by muting the sound and turning to some other task like reading their e-mail/IMing until their program resumes. Why would any advertiser pay higher ad rates in the face of such consumer defiance?
Why should consumers put up with a media model which restricts their control(prevented from ad skipping) and doesn't save them time either (i.e., the same 45 minutes of program to 15 minutes of ads/promos)? They wouldn't, I wouldn't. Consumers might as well stick with their old tv habits.
When $60 billion worth of tv advertising still relies on paper diaries and people meters to figure out what consumers watch, then it may take a new generation of leadership and entrepreneurship to understand how to attract, satisfy and keep consumers in a world where they hold all the cards.
Posted by: brian | Mar 8, 2006 11:32:07 PM
David, from 97 to 2000 while I ran the entertainment group at Yahoo!, we referred to what you are calling advertisements as "distribution" deals.
It is the common terminology amongst the major online media players.
Posted by: Erik Schwartz | Mar 9, 2006 4:56:40 PM
erik - got it! - tomato tom"ah"to - what i meant is "distribution": the right to distribute content / media - i.e. re-publish it - why should that be free? - the topic of fred's post - we called your "player" distribution the "portal deals" - glad that's sorted!
Posted by: David G | Mar 10, 2006 1:05:09 AM
The big thing I can't understand is why this is an "either/or" war. Tell you what, spend an extra 5 minutes programming, and have two buttons packages for selling your media.
One is "free" but ad supported, and the other one costs $1.99 but is ad-free.
Let consumers pick, and it will only increase our own "sales" whether the money comes from direct from consumer revenues, or from advertisers. Both distributions will feed off of each other.
Posted by: Jon | Mar 12, 2006 1:48:15 PM
Main RSS Feed of All Posts
VC and Technology Posts Only
