Broadcasters and Aereo: sometimes winning means losing

We have a lottery game here in Texas called “All or Nothing.” The point is that if you get ALL the numbers on your ticket, you win, but you also win if there are NONE of the numbers on your ticket. Hence, “all or nothing.”

I think the Supreme Court’s pending decision in the broadcasters versus Aereo case is a similar proposition for the broadcast TV industry, although the other way around. They will lose even if they win.

Historically, when given the opportunity — which this case does — to come down on the side of culture, the high court cannot resist, and culture — whether we like it or not — is moving to a one-to-one model of communications. There are exceptions, certainly, but the use of government resources, like spectrum, to enable old school thinking is up for grabs in the hands of the high court. What most people don’t realize is that one-to-one can mimic one-to-many in certain necessary situations, but one-to-many cannot mimic one-to-one. This is the essence of Jay Rosen’s “Great Horizontal,” and why this case is so fraught with danger for the status quo. You see, it isn’t about my ability to receive; it’s about my ability to send, and that’s why a whole host of laws have to be modified, including the use of the spectrum that’s owned by the people.

TVNewsCheck’s Harry Jessel published a piece last week that examined the question of what happens if the court sides with Aereo. As informative as the essay is, the comments are not only entertaining but also revealing regarding how broadcasters think in terms of defending themselves in the case. Here are six general themes:

  1. Its “unnegotiable” civil defense mission is what will sustain broadcast spectrum. The Telcos even now are working to develop a new system of civil defense warnings and assisting the government in real time and beyond.
  2. The question before the court can’t produce a loss for broadcasters. Since when has the “question before the court” prevented the Supremes from deviating? Sorry, I don’t view this as protection.
  3. Local bandwidth is too small to permit any significant competition to high quality OTA broadcast delivery. This is the same argument used by broadcasters when cable first came on the scene. Quality follows what culture wants.
  4. The most likely outcome would be for Congress to intervene, revising the Copyright Act to bring systems such as Aereo’s within the purview of the transmit clause. The Supreme Court doesn’t need Congress to make law.
  5. There is a finely balanced economic ecosystem going on here in which everyone thrives. But it’s an ecosystem that can be damaged if something disruptive, like a Supreme Court win for Aereo, took place. Nobody cares about our “finely balanced economic ecosystem,” except where it impacts their wallets, and that is a biggie that the court could impact.
  6. If the Supremes give the decision to Aereo, then broadcasters’ spectrum is safe, because Aereo depends on a broadcast signal in order for its antenna farms to work. Well, yes, and that’s a possibility, but Harry’s piece fully explores how that could be a net loss for broadcasters anyway.

If the broadcasters were to win, however, there’s a significant chance, in my view, that the price of winning will be its spectrum, because there is widespread and significant pressure to shift TV stations to cable in the name of spectrum use for the one-to-one world of the Web.

It is the law that gives broadcasters the spectrum. It is the law that says cable companies MUST carry the broadcast signals. It is the law says that broadcasters have a right to compensation for cable carrying their signals. And now broadcasters want the law again to boost their business model. Live by the law, die by the law, for the Supreme Court is the final arbiter of what is or isn’t law, and that’s why this case was such a crap shoot from the beginning.

Broadcasters are already acting as cable companies, and here’s the rub. If broadcast signals become cable channels, then must-carry laws are irrelevant, and retrains fees become renegotiable. Without the weight of law behind the broadcast companies, there’s little doubt in my mind that the networks will by-pass the local money tree in making their programming available via cable. Hence, the losing even if they win.

The problem for the Supremes — and the key reason I think they took this case — is the profound necessity of rewriting what copyright means, absent the immense Congressional lobbying power of the status quo. “Intellectual property” is an oxymoron created by the entertainment industry to give itself the weight of law in conducting its business throughout the world. It works fine in the one-to-many world of mass media, but it makes no sense in the Great Horizontal, and this is the conundrum for the court. Personal use of products must include sharing in a one-to-one universe, and every one of the old industries that thrived in a one-to-many paradigm must face this reality. It will take something like a court ruling to give the people formerly known as the audience (thank you, Jay Rosen) what they deserve.

The supermarket can’t charge me twice for a meal I share with neighbors, yet this is the absurdity of current copyright inside the network. The network is a cultural shift that’s here to stay, and its advancement is the duty of those in positions to make it so, such as our Supreme Court justices. Neither side in this case gives a ripple chip about consumers, the people, and that’s what the court will be forced to consider.

Folks, there’s much more riding here than the question before the court. In attempting to right what they view as a business wrong, broadcasters have opened Pandora’s box, and the chaos unleashed will likely produce a deleterious result for anything “business as usual.”

BONUS LINK, also via TVNewsCheck: Michael Berg’s legal view of the case (although tilted by an admitted bias towards the NAB).

What is a digital media company’s “inventory?”

Sorry, but I can’t resist.

In a press release this morning from IB (Internet Broadcasting Systems Inc.) announcing a new deal with the Journal Broadcast Group, IB CEO Elmer Baldwin said, among other things:

We’re helping them to discover new ways to monetize their growing digital inventory.”

This statement represents the group delusion under which legacy media companies operate, that an advertising “slot” on a website is inventory to be sold. The problem is that media companies don’t sell “inventory,” per se; they sell audiences, or more specifically, the eyeballs that might view that “inventory.” Many will accuse me of playing semantics, but it’s actually much more basic to business. The price for which this inventory is sold is based on CPM or “cost per thousand.” Thousand what? Thousand pairs of eyeballs. If, for example, the price the advertiser pays is “$10 per thousand,” then the media company gets 10-bucks when a thousand people view that ad as demonstrated by its logs. But the CPM model was created in the mass marketing days and works well when we’re dealing with significant numbers of eyeballs AT THE SAME TIME! It is a terribly inefficient and ineffective formula when applied to what is really a one-to-one environment as opposed to one-to-many.

I have stated ad nauseum that the only winner in these kinds of scenarios is the software serving the ads, because it captures and uses all of the data gathered while serving the ads. Eyeballs in the network increase in value in direct proportion to the data that’s attached to them. And so media companies play this “digital inventory” game as though it was the same game they play with their legacy properties. It’s understandable, of course, but that doesn’t change the reality.

Moreover, what this deal is primarily about is banner advertising. That’s the “inventory” — availabilities or “open slots” for banner ads on a media company website. The format has been dying for years, but if you’re a media company, it’s what you have, and so you make deals like the above and hope for the best. In addition, there’s the assumption that this “inventory” is growing, and that’s an important concept for mass marketers. We’ve never met a number that we didn’t think we could manage our way into making bigger. This is what leads media thinkers to ignore the invasive user experience in favor of tactics that produce more of that “inventory,” tactics like splitting web documents into multiple documents that challenge even the most patient consumer. The user experience MUST be number one, or the eyeballs that we think we can count on will go elsewhere.

The Web is NOT a mass marketing tool, despite what certain “experts” would lead us to believe. It certainly can mimic the properties of mass media, but the truths of everything important to business models lie hidden within the code that makes up the back end of what we offer. Silicon Valley knows this and is happy to play along with the “digital inventory” game, while picking our pockets at every opportunity.

How Brands Can Behave as People (And Why They Should)

Here’s the latest in my ongoing series of essays, Local Media in a Postmodern World:

How Brands Can Behave as People (And Why They Should)

This is one of the most important essays in the series, for it reveals a strategic and tactical shift in the way we behave online. Remember that no one is practicing this fully at this time, but I strongly believe this will become best practices for all companies in the not-too-distant future. Media companies, especially, should be practicing this already.

Brands need to emulate people

Stowe Boyd

Stowe Boyd

The brilliant mind of Stowe Boyd has come up with a concept that really fits something I’ve been struggling with over the last few months. The question is how do businesses function best in the network? Here’s Stowe from a GigaOm piece yesterday called “We’re at the customer support stage of social business:”

I believe that brands will try to look and feel as much like people as possible, online. For example, brands have their own Facebook pages and Tumblr accounts. A winning strategy of the near future might be to get Tumblrers to follow your brand’s Tumblr blog, and to make the posts look and feel as much as possible the way your prospective customers’ posts do. This is what is going to replace ads: following.

This is one of the most profoundly insightful paragraphs that I’ve read in years. Those of you helming media companies, for example, need to begin having blue sky sessions to define your company’s personal brand, and then you need to execute that brand across all forms of social media. Local media companies need to become experts at this, so that they can then lead businesses in the community in doing likewise.

At WLEX-TV in Lexington, KY, news director Bruce Carter handles Facebook duties throughout the day. It is experienced newsguy Bruce and his personality that speaks on behalf of his station and his newsroom on LEX18’s most important social media venue. I’ve long thought that this was a terribly smart tactic, because who knows the station’s wants and needs AND the news better than the news director? (Bruce was a client of mine when I worked with AR&D).

I’ve long said that all any business is in the network is a single node, just like everybody else. The network doesn’t “see” any company as bigger than any other node, for all are equal according to the Web. People follow people, or as Stowe is suggesting, people follow brands that appear as people. Here’s more from Stowe:

So the ‘answer’ to the issue of the future of advertising is already starting. Stop trying to advertise on mobile, and instead participate in the streams that people want to use on mobile, and people will follow your brands if you contribute to whatever it is the people are up to. I think this will have profound societal impact. And maybe less billboards.

I really have to applaud Stowe for this wonderful piece of thinking. And to you, dear reader, whether you represent media or any other business, please tune into this vibe. Your future is at stake.

The times they are a-changing have changed

Steve Denning's newest bookHere are a couple of great lines from a Forbes article by Steve Denning, “Resolving The Identity Crisis Of American Capitalism:”

Once making money becomes the goal of a firm, companies and their executives start to do things that not only lose money for the firm but cause problems for the economy…

…Customer capitalism involves a shift (of) the focus of companies to delighting the customer and away from shareholder value, which is the result of delighting the customer.

The shift to customer capitalism doesn’t involve sacrifices for the shareholders, the organizations or the economy. That’s because customer capitalism is not just profitable: it’s hugely profitable.

The shift to customer capitalism does however require fundamental changes in management. The command-and-control management of hierarchical bureaucracy is inherently unable to delight anyone—it was never intended to. To delight customers, a radically different kind of management needs to be in place, with a different role for the managers, a different way of coördinating work, a different set of values and a different way of communicating.

The shift to customer capitalism also involves a major power shift within the organization. Instead of the company being dominated by traders and salesmen who can pump up the numbers and the accountants who can come up with cuts needed to make the quarterly targets, those who add genuine value to the customer have to re-occupy their rightful place.

What I love most about Denning’s approach is the use of the word “customer,” when many others would use the term “consumer.”

Burn this into your mind and into the minds of those around you: We have entered a new era. Period. It’s not on the horizon; we’re already there. Those who take a leadership position and beat their competitors to the punch are GUARANTEED the top spot in this new era’s business infrastructure. It’s all about the customer today. Making money is the end, not the means anymore. It has to be that way. The beancounters and manipulators are lesser players in the new status quo, because, as Steven Covey wrote many years ago, “You can’t talk your way out of something you behaved your way into.”

Umair Haque wrote in 2004 that in a networked world, the emphasis must be on the product, not marketing. Jay Rosen says basically the same thing in his brilliant thoughts about “The Great Horizontal” and “Audience Atomization Overcome.”

Dylan’s classic song noted that “The Times They Are A-Changin’,” but I’m much more inclined today to say that they’ve already changed. When the brightest business minds of the day — and I certainly include Steve Denning in that group (John Hagel, too) — shift their thinking from hard core making money to hard core customer service, it’s time to give up on an agenda that only defends the past.

New Pew report should open eyes

Today’s new report from the Pew Research Center’s Project for Excellence in Journalism reveals some unsurprising but damning information about news websites that we can ill afford to ignore. Here are the key findings:

  • In-House ads, ads selling or promoting a news organizations own products, fill more space across these news websites than any other advertising category.
  • The finance industry is represented far more than any other on the news websites studied.
  • Discount or coupon advertising such as Groupon was fairly limited.
  • Most of the news sites did not feature ads targeted to consumers based on their online behavior.
  • News organizations tend to rely most heavily on static banner ads.
  • Even though search ads don’t appear on most news sites, Google’s advertising presence is still strong there.

What this says to me is that media companies continue to try and force “their” business model into a medium that rejects it. Moreover, I think this is right where Silicon Valley wants us.

Media, in its purest business sense, is an order-taker world. What we have is so scarce and so important that people call us to spend their money with us. In the good old days, regardless of which form of media we’re talking about, the sales force got into a nice rhythm of sitting at desks and counting the money. Oh I know that people will debate this, but a replacement for that rhythm is what we desperately seek today. We need something to replace it, because if we have to work harder to make and sell our audiences, the price of sale (POS) goes way up, and our business model itself collapses.

Searching for this replacement online, however, has been our mistake, because the obvious benefits of mass marketing are utterly disrupted by the Web, and mass marketing is all we know. All we’ve done is waste our time, and the Pew report makes that statement loud and clear.

Beginning with newspapers and continuing with television and other forms of media, we’ve built websites that serve (we think) the business model of mass marketing, and that has been nothing less than suicidal. So far downstream are we in this error that we can’t even imagine anything different for now, so let’s begin with a few basics:

  • Time is the new currency. We don’t care about this in the outside world, where scarcity earns us the right to stomp all over people in the name of “serving” them, but online, this is a crucial, crucial reality. We must conform our online products to this reality.
  • Do what you do best and link to the rest. In a world where infrastructure carries the monetization mechanism, it’s necessary to keep people inside that infrastructure for as long as possible. This doesn’t work forever online, however (think AOL, not Facebook), because the Web is bigger than anybody’s application. One of the oldest Web axioms is “If you send people away, they will come back.” This is a habit unpracticed by media companies, but one we must begin embracing.
  • Create “for” the Web by accepting the following: The Web is not TV. The Web is not newspapers. “The Web is more a social creation than a technical one,” said Sir Tim Berners-Lee. The Web is a three-way form of communication: up/down, down/up and sideways. The Web is real-time flows and streams, not static displays.
  • News content online must be unbundled, so that users in the network can pass it around to meet their needs to inform and share. Our need to drive users to our infrastructure is contrary to this, and we must find the courage and creativity to do something about it.
  • Advertising is content — the only new content that really matters. Advertisers are the new content makers, and we need to be exploiting our strengths as experts in the world of content creation in order to serve this burgeoning market.

There are so many things I could say about what we need to be doing, but that would take all day and then some. The point of this Pew report — and many others like it — is that what we’re doing isn’t working, and that’s being kind.

We’ll never get out of this hole unless we first stop digging.