Churning Out The Piffle
By
Tim Price Jun 09, 2006
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One wonders whether old line media companies have prohibitions these days against editorial staff generating too much positive copy about the Internet and new media. For those old line media companies who have expended exorbitant sums on mistimed or otherwise fruitless digital adventuring, the ongoing migration of advertisers toward a more virtual plain must really stick in the craw. But then, there aren't that many dead-tree holdouts any more. Whether they mean it or not, most media companies have adopted the web, even if the embrace is about as passionate as something ordinarily reserved for one's mother. (In the UK, one thinks amongst others of The Daily Express, whose not particularly functionally rich website helpfully reminds us that the real newspaper is 'On sale at your newsagent now!')
There has been more evidence of late, reported by traditional media, that big business continues to toss a few more chips in the direction of the web. The Wall Street Journal reported last week that Procter & Gamble was trimming its commitment to conventional television advertising. Perhaps because it doesn't work as well as it used to in a more innocent, more deferential, pre-internet age. Procter & Gamble's decision is most definitely a big deal: the WSJ reports that last year it was the US' largest television advertiser, spending roughly $2.5 billion of its $3 billion ad budget on the medium.
There are any number of reasons why traditional TV advertising doesn't work as it once did to reach the punters. One of them is called the Internet. One of them is called the Sony Playstation. One of them is called the TiVo. One of them is called boring, uninspired, repetitive dross (a product that the larger music companies seem to have difficulty reconciling with the apparent decline in new music sales). Whatever the specific reason for a fragmenting mass media audience for any given medium, one thing seems to be clear: the business of monetizing eyeballs (which is what commercial television essentially is) is up against it in a new media world.
To put it just a shade more bluntly, any media business entirely dependent on a one-channel-meets-many-eager-viewers model is probably finished, particularly if that channel is largely or wholly dependent on monetizing its audience through advertising, because the era of mass audiences for specific media 'events' is largely behind us. An explosion of content choice is great for consumers and not necessarily disastrous for advertisers, but it is probably bad news for advertising agencies who will surely have to work harder to deliver those eyeballs and accept less juicy fees in the process and it is definitely bad news for advertising-dependent media. Put to one side the issues over economic cyclicality and advertising revenues in a slowdown. In the UK market the fortunes of media and entertainment companies, as expressed by the FTSE All-Share Media and Entertainment Index, hit bottom in early 2003, down over 60% from early 2000. But they have never really recovered.
And the competition is getting more intense. Google and its competitors are sucking advertising revenue away from traditional media, not least because online advertising offers immediate traceability and performance analysis that offline never will. And the Financial Times reports that Yahoo under Terry Semel may be on the verge of getting serious about producing its own original content. They may not succeed overnight (they have certainly failed in the past) but that is likely to be scant comfort for TV executives churning out piffle and wondering why their audience share keeps declining.
Chris Anderson, editor-in-chief of Wired Magazine, first wrote about a concept he called 'The Long Tail' in October 2004. The book of the same name is scheduled for launch early next year. His essential thesis is that new digital technologies have enabled the 'infinite shelf-space effect' whereby products that could never have broken through traditional broadcast and bricks-and-mortar constraints can find new distribution mechanisms online. He cites the example of Joe Simpson's mountaineering book 'Touching the Void' which, he claims, would have sunk into obscurity without reader recommendations on Amazon.com. 'Touching the Void' may be a bad example. But it is clear that the Internet permits and facilitates all kinds of profitable, niche commercial and media activity that would be stillborn offline given the logjam that surrounds conventional broadcasting and delivery mechanisms.
The problem for traditional media still grappling with the Internet is that any form of online development involves a degree of business cannibalisation. That cannibalisation might be in the longer term interest of the company but it's unlikely to be in the short term interest of much of the management.
Some random reactions. Perhaps the likes of BSkyB - being supported by subscription revenue rather than pure advertising - are in a better longer term position in a multi-channel world and should offer a premium multiple, economic cyclicality notwithstanding, above the likes of ITV. The media choice problem is hardly restricted to the UK; one notes that shares in Viacom, for example (which includes CBS, MTV, Showtime and Paramount) are also close to their lows of the last five years. Perhaps investors focused on returns are ultimately better off funding aggressive venture capital in new media than they are in funding traditional hits-dependent media businesses where the willingness of incumbent management to reinvent and replace 'tried and tested' existing offerings is as close to nil as makes no difference. Or maybe they're simply better off not in media at all - after all, there's plenty of choice.
Tim Pric Senior Investment Strategis Ansbacher & Co Ltd
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