Wednesday, February 11, 2009

IN THIS ISSUE:

LOCAL BROADCASTING NEEDS TO BECOME THE DISRUPTOR
THE DIFFERENCE BETWEEN NEWS AND MUSIC
FIGHTING COMMODITIZED DISPLAY ADVERTISING
TEN THINGS TO TRY RIGHT NOW
WHERE IS YOUR FAITH?

LOCAL BROADCASTING NEEDS TO BECOME THE DISRUPTOR (Terry)
the frog doesn't realize he's being slowly cookedThe frog in the hot water pot analogy has been used many times and by many observers to speak to the disruptions that are hammering away at the business models of media in general. This is increasingly true with local television, though broadcasters often don’t think so. For example, Steve and I write about how, piece by piece, the network-affiliate relationship is being dismantled and that when it’s gone, the only thing left to broadcast will be that which is syndicated and that which is produced locally. That’s not necessarily a bad thing, but local TV will be a far cry from what it once was.

In a chilling Wall St. Journal article yesterday, the business of local broadcasting was painted as bleak.

Now, with their viewership in decline and ad revenue on a downward spiral, many local TV stations face the prospect of being cut out of the picture. Executives at some major networks are beginning to talk about an option that once would have been unthinkable: eventually taking shows straight to cable, where networks can take in a steady stream of subscriber fees even in an advertising slump…

Many local stations — once treated like royalty by broadcast networks — are scaling back their original programming, cutting down on weekend news shows and trimming staff. Nationwide, 2009 TV-station ad revenue is projected to fall 20% to 30%, according to Bernstein Research.

We should have seen this coming when the networks first began building and buying their own cable channels. They may have been niches, but they were direct-to-the-consumer via a wire that bypassed local television stations. NBC, CBS, ABC and Fox all own popular, and one assumes profitable, cable channels.

Must carry has always been a local affiliate issue. Other channels got paid, so why shouldn’t ours? The problem here is that we were making cable money off programming provided by the networks. This weakened the affiliate compensation paradigm, and now the networks are talking about broadcasters paying them for programming instead of them paying us.

Then came the real bomb: ABC broke everything two years ago when it began offering its hit programs directly to consumers via iTunes. What started as an experiment has turned into serious money.

Alec Baldwin in hulu.com's SuperBowl adNow comes word via CNN that more and more people are shifting their viewing to the Web due to the economy. If it’s between cable and the Web, households are choosing the Web, and our friendly networks are right there to help them. And what’s the online competition to cable besides iTunes? Take your pick, including the increasingly popular hulu.com.

Internet TV services such as Hulu, Joost and Veoh also are feeding off a new generation of tech-savvy users in search of cheap access to video content. Add to the mix players such as Netflix — whose Roku set-top box offers more than 12,000 streaming videos and who is teaming with LG Electronics to embed new TVs with the service — and there’s enough online TV options to justify a subscription-free lifestyle…

…“The IPTV players are in a great position to wage an all-out war for eyeballs over the next six to 10 years,” he (Ronald Lewis, a Denver, Colorado-based technology adviser) added. “The future of TV is definitely IP, but it will take some time to get there.”

And while that war wages, the networks will put more of their resources into fighting to win, because the fewer middlemen, the better in the new economy. Every time the networks sidestep the affiliates in the distribution of their programs, the more it destroys the whole business and marketing models of local broadcasters.

Winning here means growing revenue and two recent stories in the trades have shed light on this.

the affiliates get hosed againABC is out selling “new research” from Nielsen that says people will tolerate more ads on streaming shows, such as “Gray’s Anatomy.” An article in AdAge notes that the network has been running the data up agency flagpoles “in hopes of getting them to buy into the concept.”

Network programming on the web, whether on ABC.com, CBS.com, TV.com, Hulu or any other distributor, has typically had a single sponsor. Sometimes ABC has featured one national advertiser and one local advertiser. Online programs have also generally had one ad per break, in part to keep viewers from clicking away, and in part to lure marketers to try what was once a new concept.

As a bonus, the networks disable the fast-forward button, so ads can’t be skipped, and since ad recall is higher, they’ve been able to charge higher cost-per-thousand rates than TV. But because there are many fewer ads, online revenue per viewer for the networks is still far below that on TV.

According to The Hollywood Reporter, Albert Cheng, executive vp digital media at DATG, told a NATPE panel two weeks ago that “We can actually increase delivery, reach and frequency by looking at a model that will have more sponsors and more ads.” Good for them.

The networks and advertisers are holding their breath about this, because everybody knows it’s risky. Donna Speciale, president of investments and activation at Mediavest Worldwide, told the panel, “The key is what is that very fine line and balance before we push them over the edge of being pissed.”

Despite all that, we know the networks and we know the demand for revenue, so let’s follow the dots on this one to see who really gets it in the shorts. The networks will slowly push the envelope (the frog and the hot water) and load the shows with more expensive ads that can’t be skipped, and find the balance that works (for them). The advertisers will be so happy that they’ll shift entire budgets to this, because, well, viewers will HAVE to engage in their commercials. From the networks’ perspective, everybody wins.

But what about the network affiliates in the cities and towns across the country? This lowers (even further) the value of broadcasting those programs to the point where it’s actually a net liability. What can be TiVo’d will be TiVo’d, and what self-respecting advertiser wants to be a part of that? The aim, therefore, becomes removing TiVo from the equation entirely, and who gets hurt by that? The local affiliate system of program distribution.

Another controversial thing we need to be watching is ESPN’s strategy of forcing ISPs to pay for ESPN360 content that their customers consume. ESPN360 is the network’s premium content, which you cannot access — even if you want to — unless your ISP has paid the ESPN fee. Nobody knows how much that is, but it’s ESPN’s way of treating the Web like a cable system, something that does not sit well with the network neutrality crowd (which includes our President). The Dallas Morning News described the controversy this way:

You can’t subscribe to ESPN360. Only your ISP can. And if your ISP isn’t paying for access to ESPN360, you can’t watch it. Conversely, if your ISP does subscribe to ESPN360 but you’re not interested in watching it, you can’t get a refund from your ISP for whatever portion of your monthly Internet bill goes to ESPN.

You have to carry this thought-stream to its end in order to see the ramifications of such a model. What if, for example, you could only get Google, if your ISP paid a fee? It’ll never happen, regardless of how much influence the former media moguls exert.

For local broadcasters, the concern ought to be obvious; if ESPN can make money this way, so can anybody, and it just furthers the shift that we’re seeing away from the old distribution model to the new.

So what do we do if we’re employed in local television or the manager of a big local television company?

By now you know that we believe Mobile Digital Television is the new opportunity for broadcasters, because the only way a program can reach the MDTV chips of portable devices is via a digital broadcast signal. The big advantage that local broadcasters will have is that these signals will be free, so it’s a powerful competitor to companies working with cellular carriers to deliver portable television via a subscription model.

There will be a battle, for sure, over whether cellular companies will carry phones with the new chips, but consumer demand for free services will make the difference, assuming the broadcasting community can band together to put every kind of pressure on the culture to make it happen. We may have to pay a fee for access to ESPN’s programming and shows like The Closer, Rock of Love, Nip and Tuck, Real Life, Good Eats, and dozens of other cable-only programs, but in the end, the advertising revenues could be significant.

So instead of sitting back and letting outside forces disrupt our business, MDTV allows us to become the disruptor. Admittedly, that’s a new position for us, but we have nothing to lose and everything to gain. Imagine that; broadcasting disrupting cable.

Then it won’t really matter what the networks or the creators of programs do, because we’ll once again have an exclusive touch point with consumers.   Link>

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THE DIFFERENCE BETWEEN NEWS AND MUSIC (Steve)
The Beach BoysRecall “Wouldn’t It Be Nice” — the Beach Boys song off their classic album “Pet Sounds,” in which a wistful boy fantasizes about the happy times he’d be spending with his girlfriend if they were older.

Maybe if we think and wish and hope and pray it might come true/ Baby then there wouldn’t be a single thing we couldn’t do.

It’s a wonderful sentiment, a joyous song — and a fantasy. Brian Wilson wrote it when he was a baby-faced 24-year-old. Wilson has learned a lot about life since then. According to Wikipedia, Wilson described the song as “…what children everywhere go through.” But we are not children, and we have to move on from wishful thinking to the more pragmatic realities of adulthood. If we think and wish and pray… it won’t change our business.

I write this, not to add snark, but to bring my small voice to the latest go-around of the fantasy that news must charge for its content, and people will pay. I will say, at the outset, I too believe this would be fantastic. But the more time we waste on this idea, the less time we have to do the hard work of reinventing ourselves — and saving jobs.

Walter IsaacsonThe notion comes from longtime, credible even outstanding journalists. It’s the cover story in this week’s TIME magazine. Walter Isaacson, a journalism icon, writes the story called “How To Save Your Newspaper.”

“The key to attracting online revenue, I think, is to come up with an iTunes-easy method of micropayment. We need something like digital coins or an E‑ZPass digital wallet — a one-click system with a really simple interface that will permit impulse purchases of a newspaper, magazine, article, blog or video for a penny, nickel, dime or whatever the creator chooses to charge.”

But here, Isaacson is not naïve. He knows his history. “Admittedly, the Internet is littered with failed micropayment companies. If you remember Flooz, Beenz, CyberCash, Bitpass, Peppercoin and DigiCash, it’s probably because you lost money investing in them.”

Isaacson may have been inspired by a controversial article from the January 11th edition in the New York Times. Columnist David Carr put a lightning bolt through the blogosphere with his “Let’s Invent an iTunes for News.”

Remember that when iTunes began, the music industry was being decimated by file sharing. By coming up with an easy user interface and obtaining the coöperation of a broad swath of music companies, Mr. Jobs helped pull the business off the brink. He has been accused of running roughshod over the music labels, which are a fraction of their former size. But they are still in business.

The basic premise here is that news is like music: it is unique, each newspaper (or TV station) is like a band, and everyone will have their own taste. If we make it easy enough, people will pay.

The flaw is this: news isn’t music.

If you want Peter Gabriel’s original version of “In Your Eyes,” your only choice is his recording. If you want a good copy of it, and you’re going to listen to it over and over, you’ll fork over 99 cents. To hear eight different versions of “In Your Eyes,” including versions by some bad bands, you’re not likely to pay much at all. News is the opposite. For the consumer, there are hundreds of versions of the same story, and it doesn’t matter to them who the “singer” is. Even at the local level, the choices are plentiful.

“But,” the argument continues, “if everyone in the local market charges for local content, people will have no choice. Just as with the newspapers, they will pay again.” Theoretically? Anything’s possible. But this is simply not going to happen. The old model is scarcity. Any attempt to create scarcity is artifice and just plain bad economics. The premise here still misses the point that media built its empire on advertising, and the advertising dynamic has changed for good.

Recall that Apple only needed the four major labels on board to dominate the market. Imagine trying to get hundreds of news outlets to agree on anything.

Actually, you don’t have to imagine. It was tried. And it flopped, in part, because you can’t get all those news outlets to agree. The New Century Network was launched in 1995 amid great hype. It was the solution, and I’m surprised it hasn’t come up more in this debate because it is the precedent. Nine media companies participated. It blew through $25 million, and every participating media company wanted it to go in a different direction. Please, I beg you, read this BusinessWeek article from 1999. It will end any notion anyone has that this concept can be pulled off.

“Created in 1995 to unite newspapers against Microsoft Corp. and other competitors girding to woo electronically advertisers and readers, New Century Network came to embody everything that could go wrong when old-line newspapers converge with new media. ”Newspapers are reacting in very traditional ways to a very untraditional marketplace,” says Peter M. Winter, president of Cox Interactive Media, who was New Century Network’s original chief executive. ”And they’re being superceded fast.”

This was written nine years ago. Yes — things have changed since then. Some times that’s a reason to revisit an idea. But in this case what has changed is that there are thousands more places to get information and to advertise.

And here’s the thing that really puzzles me in this debate. We have capital‑J journalists supporting it. These are folks who wouldn’t dare to put an ad on their front page for fear of being called biased. Now they’re going to charge by the story? Won’t the incentive be to create stories that people are most likely to pay for? Isn’t that a conflict of interest? There’s a whole industry dedicated to creating pretty bad music that sells by the millions. Is that what journalism wants to become?

As we discuss this, Terry raises another excellent point: our role to set and maintain the public discussion in our communities. This is, after all, the reason why we got into journalism. It’s part of “the noble calling.” Terry points out that putting up pay walls takes newspapers out of that business by their own doing. The argument that “no news gives itself away for free” is simply incorrect. TV and radio news are free (your cable bill notwithstanding). New business models are evolving that are free. If newspapers give up the role as mediators of the public discourse, the free bloggers and rising local news entrepreneurs will take it.

The solution doesn’t lie with wishful thinking or micropayments. It lies with reinvention. And that starts in how we support our business and run our newsrooms. What did your folks tell you? “If at first you don’t succeed, try, try again.” We’ve really only tried one, count ’em, one advertising model: the CPM. It didn’t succeed. Try again. You know what they say about people who try the same thing over and over and expect a different result.

Instead of bemoaning the change, embrace it. The Web is a marvelous place for local media. It enables the conversation of news and it allows local sales to flourish. We don’t need to find old ways to sell news. We need to find new ways to advertise and support it. That requires investment, time and skill. When any company can become a local media company, we need to use the strength of journalism to set ourselves apart. We also need to send out our content all over the place. Sometimes there’s a direct monetization, sometimes not. But the overall strategy has to be “we are a sound, reliable, innovative local media company that organizes the local Web around us.” It does work. (See Terry’s recent piece, “Don’t just serve ads; enable commerce” for how to do it.)

We have to act. Now. Or, to bring it back to Mr. Wilson and the Beach Boys: You know it seems the more we talk about it / It only makes it worse to live without it.   Link>

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FIGHTING COMMODITIZED DISPLAY ADVERTISING (Terry)
A fascinating article by Saul Hansell in the New York Times makes a case against third-party ad networks for commoditizing online advertising, thereby weakening its value. Hansell references an interview with Charles Tillinghast, the president of MSNBC.com, who believes this was brought about in 2001, when web publishers agreed on standards for such ads through the Interactive Advertising Bureau (IAB).

The problem is coming in banners and other display ads, the very sort for which the industry created standards. For news sites overall, Mr. Tillinghast estimates that the rates paid for display ads are down 20 percent to 30 percent over last year.

The reason for this, he said, is that the standard sizes have allowed the advertising networks to turn display ads into commodities.

“We made it possible for any Web site to run ads through the ad networks,” he said. “That’s created an oversupply of space.”

This did not sit well with Randall Rothenberg, CEO of the IAB, who wrote in his blog that Tillinghast’s argument was “historically jejune.”

Blaming Internet banner standards for commoditization is no different than attributing television advertising pricing fluctuations to standardization of the 30-second spot, or faulting the magazine page for the pressures on magazine advertising.

…Indeed, the accusation ignores the very reason IAB members…developed the ad standards in the first place: to reduce the complexity and transaction costs associated with interactive advertising, and allow the medium to scale.

Regardless of who’s right, Tillinghast offered some ideas on what he plans to do about it.

Mr. Tillinghast said he was trying to create more nonstandard ads. MSNBC, one of the most-visited news sites, is looking to develop complicated new formats that are unusual and can’t be bought from networks. These might include ads with more interactivity and more ways to collect data about users for advertisers, he said.

Steve and I strongly concur with what’s being said in this article, but here’s the rub. In order to do this, you have to have the flexibility to serve your own varying ad sizes. You also need the template flexibility in your CMS to alter column and row sizes and widths on-the-fly. In other words, you need local control of the technology that is serving your content and advertising online.

This won’t go away, and we believe it’s THE single, most-overlooked factor in the reinvention of local media.   Link>

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TEN THINGS TO TRY RIGHT NOW (Steve)
Here are ten things you can implement in your newsroom right now, cheap or free, that will improve workflow, Website performance or both.

  1. Twitter. You’ve read it before. Get several staffers on this. A Twitter DON’T: Do not hook up your RSS feed to it. You’ll “overtweet” and people will drop you, fast. Twittering shouldn’t take up more than a minute — if that.
  2. Submit your best stuff to Digg, FARK, Newsvine and other sites where people vote on the best stories. Make sure you’re transparent: tell people these stories are coming from the station. Also, be sure to do this sparingly. Only submit stories you’d pass along to a friend — the “Oh My God” stories.
  3. Pick up a whole bunch of cheap digital cameras and video cameras. Choose your poison — Flip video cameras start at $150, list price. You’ll find them cheaper if you hunt around. Give them to staffers and tell them to leave the cameras in their cars. You never know when they’ll find video.
  4. Have a reporter live stream from an event. Try it once. You’ll love it. Here are 20 live streaming tools.
  5. Facebook. At the risk of being repetitive — do this. One station in a group AR&D consults with started a Facebook page in January and Facebook instantly became a top five referral URL. Now note — it was a low four-figure number for its first three weeks in total. So don’t expect a land rush. But it beat AOL.com as a referral. You want to get the conversation going. Speaking of…
  6. Make your stories shareable on as many social networks and sites as possible. Check out ShareThis.com for the free tool.
  7. Get WordPress MU. The MU stands for “Multiple Users.” You can build out, manage and launch multiple blogs. It’s free. There are tons of free plug-ins — and you can host ads on it.
  8. Link out. You have to have lots and lots of links to other sites. It’s good for your Google ranking and it’s good for the audience. You’re not a walled garden. Send ’em away to get ’em back.
  9. Aggregate. Take in RSS feeds from other sites in your community. See above re: sending ’em away.
  10. Don’t sweat the “J.” We’ve been held back for too long worrying about whether something is or isn’t “journalism.” Meanwhile, other sites are kicking butt. The Web is a moving target. We can’t afford to spend months sweating the J. Try it. If it works, great. If it doesn’t, move on to the next thing.

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WHERE IS YOUR FAITH? (Terry)
In my 2006 essay, Right Brain Renaissance, I noted that we were entering an era when the left brain — that which handles logical and linear tasks such as organization, management and accounting — was incapable of getting us out of the hole we had dug for ourselves in mass media. We needed, I wrote, right brainers to lead us out. Like individuals, companies have left brain and right brain functions as well. It’s the way we get things done. The question is which side is calling the shots?

We make plans and set goals, for example, based on left-brain formulas. In the media world, that means we find where we want to go and craft logical plans to get there, and this has — and will continue — to serve us well. But we’ve entered an upside-down world in media today that demands right brain goal-setting and planning.

I cannot tell you how many people I encounter in the media boardrooms of the U.S. who are waiting for the left brain plan before moving into the Media 2.0 world. Yet the conventional wisdom among those companies (and their supporters) who are already into the Media 2.0 space is to just build it and create the business later.

This is because the right brain is the innovator, the home of the kind of creativity we need to dig ourselves out.

left brain and right brain functions

This came to mind recently, because cutbacks and other management methods of balancing the books are all left brain responses to the disruptions that are attacking us on every front. It occurred to me that the question of what to do in all this mess is really one of faith. Growth is always a reflection of faith. So is discovery, regardless of the scientific methods used in uncovering the deep secrets of life. Leaders are loaded with faith, and faith is a right brain function, because if you can measure it, it’s not faith.

So where is your faith today? Is it in the management tools of the past, or is it in your belief in yourself, your skills and gifts, and in your ability to move the rock? These two, I increasingly believe, are in conflict.   Link>

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QUOTE OF THE WEEK
In the age of mass media, the press was able to define the sphere of legitimate debate with relative ease because the people on the receiving end were atomized — connected “up” to Big Media but not across to each other. And now that authority is eroding. Jay Rosen from a brilliant essay, Audience Atomization Overcome: Why the Internet Weakens the Authority of the Press.