AR&D Reinventing Local Media

Dear Eyewonder,

Please remove these irritating rollover ads, before somebody hires a hit man to kill the poor geek depicted in them. I mean, the guy has, well, a face for friggin’ radio, man. Couldn’t you find some cute model to pitch the ads? Why did you select this guy?

Look, nobody’s perfect, but this is an ad, for crying out loud.

These things are worse than bloody pop-ups and reach a level of irritability second only to the rantings of some car dealers who’ll do anything to get noticed. I notice them, all right, and promise never to do business there. Here in Dallas, we have commercials for a dealer that keep screaming “eleven, eight, eighty-eight” over and over again. I think it’s a Kia dealer, but I’m not sure (how’s that for a ringing endorsement of the ad’s effectiveness?).

AUGH! There. I feel better.

Terry

CBS boss Les Moonves told PaidContent.org in Cannes (Rafat must have a big budget) that their arrangement with iTunes has been good for CBS.

“We enjoy our relationship with them–we find that it is found money for us. We are getting paid a decent amount of money for everything. Weeds does extremely well because Weeds is only in 13 million households in the United States - therefore there are a lot of people who get that show only through iTunes because they don’t necessarily get Showtime. Do we have questions about the price point with iTunes? Absolutely. (But) we feel iTunes is very good … promotional vehicle for CBS products” We do not quite feel the same way as NBC does and we plan on continuing that relationship with iTunes and we’re very happy with it.”

I think CBS has generally been on the right path in acknowledging the distributed nature of media, and this statement by Moonves is an example of right-thinking, IMO.

I actually shook my head this morning while reading a Broadcasting & Cable story in which NBC Sports head David Neal predicted that the summer Olympics in Bejing next year would move High Definition TV to mass market status.

“It will be a signature moment for the adoption of high-definition as a mainstream delivery medium for consumers,” said Neal, who predicts that over 50% of U.S. households will have an HDTV set in 2008.

Um, how do I say this nicely? How about, “I’d like some of what you’re smoking, Mr. Neal.”

First of all, statistics in this area vary widely. A Magid survey last year found HDTV in 15% of U.S. households, while a Consumer Electronics Association study puts the figure at 30% this year and projects it to be 36.5% in 2008. Since the CEA represents companies that sell the things, I think it’s a safe assumption that their numbers are, well, “forward thinking.”

I know very few people with HDTVs, mostly because I run with folks who can’t afford them. I don’t have one yet, although with all the sports we watch at my house, it’s inevitable we’ll get one. Right now, I have better uses for that $1,000, and I don’t think I’m in the minority.

But to suggest that the summer Olympics will be the event that moves HDTV adoption to 50% is, at best, wishful thinking. The economy isn’t exactly humming these days, and the digital switch for broadcasters in 2009 doesn’t require HDTV. I think prices of true HDTV sets would have to drop by half in order for Mr. Neal’s dream to come true.

For broadcasters, there’s a lot riding on HDTV, because it would mean a new closed network in which to do business. That may have been a good idea a few years ago, but I’m afraid things in the world of distributed media have overtaken that idea and that the extremely expensive push to HDTV is now problematic for many broadcasters. It’s certainly not the savior that many felt it would be a few years ago.

I don’t have any doubt that we’re headed for an HDTV world, because content choices are multiplying and the consumers who have it, love it. But this kind of rhetoric from yet another NBC executive is just hyperbole, and that has certainly reached mass market proportions.

There’s a new RSS feed that you’re going to want in your reader. Diane Mermigas — one of the most prolific and spot-on writers about new media on the planet — has moved her star to MediaPost and is offering a DAILY essay in their publications. Diane’s credentials and contacts are seemingly endless, so her mind resides in the deep end of the pool.

In today’s offering, Diane looks at local media companies and says to watch for increasing activity in the mergers and acquisitions of television stations. Here’s one graph:

The high cost of digital conversion will prove too much for smaller analog TV station owners, who will either sell out or be shut down by the federally mandated conversion in February 2009. Whether or not it is related to that watershed event, there have been more than 90 TV stations for sale in roughly 63 markets reaching about 28% of U.S. TV households, according to Bear Stearns. The piecemeal sellers include LIN TV, Nexstar, News Corp., Montecito and Lincoln Financial, ideally looking for 14-times earnings. Highly leveraged and stock deals have been at risk in light of the pressure on financial markets and acquisition multiples.

Here’s the RSS feed. Enjoy:

75-year old Mona Shaw might be able to tell you why. It’s because nobody listens to customers/consumers anymore, so we’re taking things into our own hands. Mona’s story involves Comcast, missed appointments, and lousy service. So she paid the local office a visit with a hammer, destroying a keyboard and a telephone and knocking over a monitor. She was arrested for disorderly conduct, but what does a 75-year old woman care about that?

“It’s totally not like me to do stuff like this,” she told Potomac News. “But it is so irresponsible and so disrespectful [what they did]. I can’t think of any company reacting that way. It’s like they got you in their clutches and they’ll do what they damn well please.”

I don’t know whether to laugh or cry.

Last week, popular rock band Radiohead announced that they would be by-passing the recording industry and taking their new album directly to their fans. Moreover, they shocked everybody by announcing that fans could actually name their own price. Holy mother-of-RIAA!

Now comes an even more devastating announcement from long-standing rock powerhouse Nine Inch Nails. In a post on their website yesterday, NIN announced their freedom from record companies, saying that they, too, would deal directly with their fans. There’s a ton of resentment in a statement by Nine Inch Nail’s Trent Reznor:

I have been under recording contracts for 18 years and have watched the business radically mutate to something inherently very different and it gives me great pleasure to be able to finally have a direct relationship with the audience as i see fit and appropriate.

Technology may be the enabler (or redeemer), but the energy for this comes from the people that the industry is in place to serve — both the record makers and the record buyers.

I think this is huge and has cultural ramifications far beyond music. If you are in any middleman position in the information and entertainment worlds (aggregator exception noted), your future livelihood is in jeopardy.

Gizmodo (nine inch) nails it:

If two of the biggest acts in the industry can see the digital writing on the wall and totally embrace it–that the old way of doing business is broken–why can’t the labels? What Radiohead and NIN are showing is that the business model “of the future” feared by entrenched interests isn’t arriving some time in the horizon. It’s touching down now.

The digital writing on the wall literally shouts to all media to get onboard the Cluetrain and acknowledge that an empowered citizenry is not a passive citizenry, and that J.D. Lasica’s personal media revolution is a real revolution, against the power grid that controls our lives for their profit. As I’ve written in the past, the public never wanted quality bundled with crap, which is the formula for profit from the whole copyright cartel. The cable industry, for example, will lose the bundled programming argument for the same reason, because ultimately, people will be able to pick and choose what they want.

Trent Reznor’s exclamation is nothing less than freedom from slavery, and there’s no going back.

(Seriously big hat tip to Duncan Riley at TechCrunch)

The New York Times has a story with the headline “When Reality TV Gets Too Real.” It’s about the potential for legal trouble for show producers when participants, well, behave badly. Okay. I get that.

Now jump over to an LA Times story about how Hollywood’s all a-twitter over a potential strike by the Writer’s Guild. Those are the people who write scripted shows for TV.

One of the issues is that the union wants to extend guild pay and benefits to, you guessed it, reality shows.

Um, huh?

Here is the latest in my ongoing series of essays about local media in our postmodern world. I think this is one of the most important I’ve written, because it argues that the real media disruption these days isn’t media at all, but advertising. I also argue that Google — and perhaps all search — should be left out of Web ad statistics, because they skew the overall ad picture.

Google Lifts Only Google

Enjoy.

This is a bit of a personal post, for I’m about to change something that’s been with me for years. Effective with my next essay, which will likely be published later today, I’m changing the title of the series from “TV News in a Postmodern World” to “Local Media in a Postmodern World.” I want to explain to you why.

When I first started writing about new media, I stayed within my comfort zone, television news. After all, I’d been a news manager for 28 years before retiring in 1998 and getting into the Internet. I could see where things were going and tried to shout warnings, although I have to admit that few people were listening.

I wrote about the news business and journalism’s history. I argued objectivity versus argument and became a voice on some level in the discussion of journalism’s evolution.

However, when I began consulting, the question from media companies was always, “Where’s the money?” Hence, my emphasis has changed over the years, and this is especially so since joining AR&D in the summer of ‘06. The reality is that professional journalism needs money to do its thing, so following the money — the business side of media — became my passion.

More and more, my writing began to reflect this. I didn’t really drift away from journalism as much as I drifted towards the business of news — and that includes broadcasting AND print.

So I’m changing the name. Besides, I think “Local Media in a Postmodern World” will make a better book title. Don’t you?

I recommend Chuck Klosterman’s essay in Esquire for what it says about all journalism these days. Chuck’s a sports writer and thinks it’s not too late to “save” his trade. I don’t agree with him, but this is a worthwhile read, because it’s a great example of a nostalgic plea from a modernist institution.

He wants sports media to:

• Stop reporting on TV ratings
• Kill the “argument” model
• De-emphasize “The Fan’s Perspective”
• Decrease the speed and amount of reporting

The horse has left the barn, Chuck. Your suggestions are just observations, therefore — wishful thinking in lofty prose.

It’s a great read, because it teaches not only about how much all of journalism has changed in recent years but also about the widening gap between reality and the voices of those who used to be in traditional media power.

I strongly recommend you give a listen to Shelly Palmer’s latest podcast. It’s with Ray Beckerman, Esq., partner at Vandenberg & Feliu LLP, Shelly and Ray discuss the RIAA’s judgement against a Minnesota woman for uplinking 24 copyrighted songs. It’s only 16 minutes long, and it gives what I think is some very valuable insight into the whole issue of the music industry suing its customers.

Beckerman is a copyright expert, and his take is spot-on. He calls the ruling a bad interpretation of the law and believes the verdict will be set aside, primarily because the judge incorrectly instructed the jury. He adds, however, that the RIAA will rush to settle the case for next to nothing, because they need the verdict to use in other cases. It’s fascinating — and, frankly, scary — stuff.

The gallant attorneys for the RIAA have won at least a symbolic victory in their battle against music customers. The jury in the case against a Minnesota woman deliberated only for a short time before awarding the record companies over $9,000 in damages for each of the 24 songs the woman uploaded to music sharing site Kazaa. The $222,000 award won’t even pay for legal fees in the case, but that’s not the point. The RIAA won. The law rules. Don’t we all feel safer?

There are two points. One, this “victory” won’t even put a dent in people sharing music online. Two, a key ruling by the judge in the case is likely to be challenged somewhere along the line. Reporter Jeff Leeds of The New York Times called it a “hotly contested technical question,” and it was the lynchpin of the verdict itself.

…for jurors to find her liable, the record labels did not have to prove that songs on Ms. Thomas’s computer had actually been transmitted to others online. Rather, the act of making them available could be viewed as infringement, the judge ruled.

The RIAA can’t possibly be rejoicing over this, because — as the Electronic Frontier Foundation noted: “Every lawsuit makes the recording industry look more and more like King Canute, vainly trying to hold back the tide.”

We badly need copyright law to be rewritten in a way that both producers and customers can live with. Otherwise, the record industry is doomed, for suing your customers is generally not a good business practice.

In all of the churn produced by wave after wave of disruptions to the mainstream media industries, we don’t hear much about the unions who allegedly exist to “protect” the workers in the industries. This is probably a good thing, because a recent action by the Newspaper Guild makes me want to question the sanity of that group.

Angry that some Time Inc. bosses wanted to make Web work a part of everybody’s life last summer, the Guild “went to bat” for the employees and won a new contract provision stating that Time Inc. employees can’t be forced to work with the Web. All such efforts must be “voluntary.” From a union perspective, employers are always trying to take advantage of employees. There’s no room for any other point of view.

According to the WWD.com “Memo Pad,” the problem is that “The Guild” doesn’t represent the dot-com employees who work for Time Inc., so they took issue with what the Fortune Magazine and Time Magazine managing editors were trying to do.

As part of a settlement between Time Inc. and The Guild on the issue, the new contract says Time Inc. will ensure Web site work will be voluntary for Guild-covered employees, and “there will no negative impact on any employee for not volunteering to do Web site work.” It also says the company will “grant Guild coverage to any Web site employee who ‘routinely or regularly’ performs ‘any work or services for any entity covered by the contract,’” and will cover magazine employees who are transferred to the Web sites.

Rather than take the position that the future for its members is online and work to ease the transition, the union waved its archaic flag and beat its chest to insure ITS survival. The problem is that the best interests of its members aren’t being served. When layoffs occur, where do you think they’ll come from? Certainly not the Web side of the business.

There’s no such thing as a “you can’t lay me off” card in traditional media, circa 2007.

There has never been a time like this in the history of media and its unions, and when a union postures like this to try and gain a foothold in the new world, all it does is screw its members. Tough times, I know.

The first advice I give to any content creator these days is to study and become THE go-to guy/gal in the newsroom in terms of Web work. This doesn’t preclude that, of course, but it absolutely sends the wrong message to the brotherhood.

I’ve decided that spam is playing a significant role in the dismantling of the mass marketing paradigm. You’re free to disagree, of course, but I think that the unintended consequence of spam is that it teaches about hype and to pay attention to advertising claims. How many of you aren’t more skeptical of all ad claims (and all media), because spam has taught you that there’s an element of spam in every unwanted (commercial) message?

Aren’t you automatically more suspicious of anybody’s “selling?”

Now think about the millions of young people who’ve been similarly taught, and you’ll see what I mean.

I’ve come to this conclusion after reading that my “penis will make more shadow than a tree.” I’m reminded of the TV ads for the old grapefruit diet pills. “They’re so darned easy, they’ve GOT to work!” Yeah, right.

Speaking of truth-in-advertising, have you heard about NBC’s game with the ratings for “Heroes?” Nielsen provides special provisions for syndicated programming that allows them to use multiple dayparts over a week to determine ratings. This is because syndicated shows don’t all run on the same day or in the same daypart. Well, NBC (Who else?) has creatively adapted the provision for “Heroes,” because they ran the opening week’s episode on Monday AND Saturday nights. The Nielsen number they’re selling combines both viewings. Nice.

The problem for advertisers is they really have no idea how the show actually performed in its original time period, so some are up-in-arms.

There will be more of this, I predict, as the status quo continues to try and hide the realities of disruptive innovations.

Now where are my penis pills?

How do I say it more clearly? Honestly, folks, we need better leadership than this in the seats of media power, and until that happens, we’ll just continue to miss the point, over and over and over again.

At an anti-piracy summit in Washington Wednesday, NBC’s Jeff Zucker actually called for AT&T and other Internet-service providers to install filtering software to, and get this, “weed out pirated content and unclog networks.” This is one of the most dangerous and desperate things I’ve ever heard come out of the mouth of someone who, among other things, is charged with certain responsibilities vis-a-vis the First Amendment. And the REAL PROBLEM is that this line was likely penned by the Telcos, not Zucker or his writers. I mean, come on! “Unclog networks?” Where have we heard that before?

AT&T would LOVE to filter the Web.

Tying piracy to clogged networks is simply ludicrous. The statement serves the best interests of those who want a tiered Internet, and if that happens, we can kiss innovation goodbye.

What Zucker and the other copyright crybabies want is to go back to the good old days, where money is made from the scarcity of content. And in these arguments, everybody overlooks the assumptions that support the arguments in the first place.

Here’s assumption number one: if we can control access to our copyrighted content, people will have to come to us to get it and pay whatever price we think the market will bear. And the underlying assumption of that is that our content is so great that people will follow whatever path we set for them. And, of course, another assumption is that the only value of new technology is multiple ways for us to monetize our content. It is with utter glee that Hollywood views the opportunities before them.

But along the way, something went wrong with the plan — the cash cow formerly known as the audience refused to play the game. Their refusal, however, isn’t demonstrated in stealing property — as Zucker and his friends would have us believe. People have found that they can live without it, and they’ve discovered — in significant numbers — that it’s a lot more fun to make their own stuff than to watch another episode of unoriginal original programming and a thousand commercials.

A Hollywood Reporter article about Zucker’s speech cites an air of desperation from the NBC Universal CEO:

“The unfortunate truth is that today we are losing the battle,” he said as he urged members of the Chamber to join the entertainment industry in a national effort to combat the threat.

“Our unified voices will carry far more weight than the pleas of the individual industries,” he said.

To back up his call, Zucker cited a study by the industry-friendly Institute for Policy Innovation study released Wednesday that found the impact of intellectual property piracy among all the copyright industries is nearly $60 million a year, cost about 373,000 jobs and $2.6 billion in lost tax revenue.

Perhaps in the old days we would believe such numbers, but let’s play the assumption game here again. Firstly, the “Institute for Policy Innovation” is a den of lobbyists, and in this case, you can bet they weren’t paid by the people formerly known as the audience. Hence, these numbers are simply pulled from the sky — built out of full-price scenarios and using audience estimates from God knows where.

And this whole anti-piracy message gets the attention of Congress, because copyright is our number one export. We entertain the world, so Zucker is very likely to get support from Capitol Hill.

When I was in Amman last Christmas, I wrote about street vendors selling DVDs of current movies — videos shot from a camera on a tripod in a theater. They sold them for $1.50 per DVD, and I assume these are some of the criminals that are robbing Mr. Zucker and his friends. I don’t dispute that, but think about this for a minute: Who buys these DVDs? Is it the people who could afford to go to the theater and watch the films?

The argument that, absent the DVDs, these same people will go to the theater to watch the movies is fantasy, and therein lies the rub.

Technology is blowing the whole entertainment world apart, and rather than seek creative — and profitable — solutions, the people who run the giants of the copyright cartel keep trying to pull the whole thing back under their control. They are joined by the giant Telcos, who are their allies in the command-and-control battle in Congress. If the Telcos can create a tiered Web, where only those with deep pockets get the quality bandwidth, then Zucker will have his wish. Bring on those “unclogged” pipes that are filled only with pirated property. While I’m sure he doesn’t think so, Zucker is actually a puppet in the hands of AT&T.

If a tiered Web happens, it will stymie innovation, but it won’t stop the personal media revolution. And this is the real problem that the studios don’t want to consider, because, well, anybody can produce crap.

And here’s the real kicker. The studios won’t make a dollar more than they are today. Not one single dollar.

You can take that to the bank.

Staci Kramer at Paid Content notes that the NFL is in discussions to create an ad network across its 32 team sites. The league would sell some ads and the teams would keep some for themselves.

…the move could bring in significant revenue by adding national advertisers to the team sites. The sites also could make money from ads sold against NFL video that would be offered; teams producing their own video still could sell those ads.

Let me add that once an organization discovers the value of creating an ad network, there’s no reason that network can’t be expanded. This is exactly what we’re trying to teach local media companies about their own markets. If this happens, the NFL will be able to serve ads not only to their own sites but also to any related site that wants to get onboard. It’s a very smart play for male demos in the evolving world of online advertising.

Since I work in the biz, headlines like this one from MediaDailyNews get my attention:

Despite Challenges, Agency Predicts TV Ad Spending To Hit New High

The header is accurate, but it describes global television advertising. In the U.S., things are quite different:

In the U.S. TV advertising share is expected to erode amid a relatively tepid domestic advertising economy.

“The continued slump in the U.S. housing market has led to a sharp drop in property and construction advertising, particularly property classifieds in newspapers. This, and the recent credit squeeze, has led us to downgrade our forecast for growth in the US (emphasis mine) this year from 3.3% to 2.5%,” the agency (Publicis’ ZenithOptimedia Group) predicted.

I guess it’s a matter of perspective. From the agency’s point of view, it doesn’t matter which country is running the ads. That’s little comfort to the broadcast industry in this country.

If I worked for a Belo newspaper this morning, I’d be really nervous about the company’s decision to separate newspapers and television into two companies. My bosses would be telling me that this is a good thing, because we can now focus just on ourselves and our web properties and let those TV people do their own thing. I’d smile like all good troopers smile, but when I was alone with my thoughts, this is the way they would go:

Hmm, newspapers are dying faster than TV stations, so this likely means the company wants to prepare for the inevitable. What about my stock? What about my retirement?

They said something about $750 million in newspaper revenues created by 3,800 employees. Then they said that the TV stations also do $750 million in revenues with 600 less employees. How’s that going to play out in the balance sheet? Won’t investors see those extra employees as a drag? Oh crap. I’m going to lose my job!

Wait a minute. Does splitting up mean they’re going to sell the papers? Who would buy them? Oh God, don’t let it be Murdoch!

Meanwhile, I think I’d also be a little nervous if I worked at a Belo TV station. I mean, there’ll be rejoicing that “we’re finally not going to be dragged down by those dying newspapers,” which will be followed by gasps of recognition that they don’t have newspapers as an excuse anymore. Welcome to the world of shareholder satisfaction, guys.

These are volatile times for any form of mass media, and we shouldn’t be surprised by moves like this. It’s all about satisfying Wall Street, and we’re going to have to watch and see if this “works” for Belo. If so, watch for others to follow suit.

AFTERTHOUGHTS:

• It occurs to me that Belo is actually selling the newspapers — to the public. Is anybody buying?
• Part of the deal is that the TV side will get all the debt, $1.2 billion worth. That means the newspaper side has a fighting chance to transition to a web-based business, but it saddles the more profitable side with servicing all that red ink.

One of the first things I learned when driving a car was to focus my eyes on the big picture — to point my attention on the horizon as much as possible. Driving while looking only at the pavement just ahead of the car seemed natural, when I first got behind-the-wheel, but the instructors taught me that the real dangers were beyond. Besides, they said, staying between the dotted lines on the road would become second nature. They were right.

The managers who work in local television suffer from staring at the pavement, and who’s to argue with them? The relentless push for revenue is job one, so the multi-car pile-up further up the road is insignificant by comparison. They’ll deal with it when they get there.

This analogy was brought to mind again last week at the National Association of Broadcasters’ Small Market Television Exchange in Austin. The theme of the Friday morning session was multiplatform opportunities, during which I made a presentation and moderated a panel discussion on how to make money on the web. We had a great panel of industry people, and a ton of value was made available to the 300 or so in attendance.

During a break following my segments, I ran into two issues that left me shaking my head and seriously doubting the future of our industry. “Futile” was the world that came to mind, and it all had to do with the car-driving scenario.

One gentleman asked what was, to him, a perfectly logical question: “I bring in millions of dollars through broadcast sales and perhaps a hundred thousand from the web, so why am I spending so much time on this?” The question was rhetorical, but it really needs to be answered for him, because it implies he’s not fully engaged with web growth. Who would be, given that perspective? It also suggests that his company has mandated something with which he doesn’t fully agree, and that’s certainly a part of the problem. But mostly, it reveals an almost incredible ignorance of what’s taking place in the world of media, and this, I think, is the nut of it all.

I crossed over the line of disbelief so many years ago that it’s honestly stunning to find people like this who don’t even see a line. It also makes it tough to speak intelligently about the subject, because I feel like a sales guy trying to convince people that the earth isn’t flat. It is remarkable evidence of the condition of the industry, and I drove back to Dallas seriously examining whether the transformative task was something that could really be accomplished. I mean, what DO you say to the flat earth crowd?

The second issue was expressed this way: “You can talk all you want about theories and convergence and rates, but in the end, if I’m responsible for getting money in the door, I don’t care how it gets there.”

This understandable expression of the financial pressure we place on our web people is also an example of looking at the road just in front of the car. I’d probably do the same thing, given the immediate demands (and expectations), but this is a stunning example of business management that doesn’t see the danger ahead.

Folks, we’re building new businesses here and competing with those who don’t have this kind of pressure. It doesn’t take a genius to figure out who’s going to win the ultimate prize, because focusing on short term returns is the beginning of the path to irrelevance in the new media world.

Here are ten assumptions that I’ve come to believe about local television and that, for me, need no further elaboration.

1. The TV audience for local media isn’t coming back.
2. News — and especially local news — is being increasingly commodified.
3. The local weather franchise is moving to The Weather Channel, Weather Underground, and a host of outside providers who’ve made their applications easy to find and easy to use.
4. Advertisers themselves will put a halt to the blue smoke and mirrors of mass marketing.
5. We will never, NEVER overcome revenue losses to our legacy platforms through portal websites alone.
6. The people formerly known as the audience are entertaining themselves and each other. The best we can do in this scenario is to support it — let people show off. Teach them to know what we know.
7. The network-affiliate system isn’t just changing; it’s history.
8. A successful internet sale is AGAINST television and all mass media. This is why the lack of dedicated web sales people is beyond problematic.
9. The local advertising community needs to be taught about internet advertising, and we have to do it.
10. Local media MUST move forward along two separate paths of profitability, one maturing as rapidly as the other is growing.

The problem, of course, is that this is a significant leap of faith for many, because their eyes are fixed firmly on the road directly ahead, while I’m signaling danger up the road. The distance between the two is closing at incredible speed, however, and as I was pondering on the ride home, I’m afraid it might actually be too late for some.