Revenue Challenges, TiVo Are Dominant Themes at Future of TV Conference

The industry is still trying to sort out the nascent digital media world, as panelists reported different data on new media. In a session on “Digital Media Trends to Watch,” CEA Chief Economist Shawn DuBravac said digital media requires different business models. The theory stems from experience gained from trying to apply the same sales strategies to online and brick-and-mortar retailing, DuBravac said. “We always try to take a business model that’s successful in one environment and cram it into another environment,” he said of the CE industry. “That won’t work when it comes to the digital media we'll see over the next decade.”

DuBravac said the various industries need to be respectful of the characteristics and attributes that video screens share as well as those that they don’t share when it comes to the living room TV experience and smaller mobile video devices. Citing the game environment, he said 45 percent of games played on mobile game players are puzzle and strategy-based, vs. the action games played on a PC or a console system connected to a TV. “We need to recognize the types of content consumers are using across the different media and why they're using that content.”

That’s in contrast to findings by the worldwide IBM study of consumers regarding digital content to be published in an upcoming report, Beyond Advertising: Fact and Fiction. “As PC mobile and TV media devices’ adoption increases,” said Bill Serrao, of IBM’s Global Business Services, “the consumer is looking for an integrated experience across all these devices. The consumers don’t want to see independent content across each device.”

In a panel on “The Outlook for the Television Industry & Digital Media,” moderator Lydia Loizides of the National Academy of Television Arts & Sciences referred to Hulu, the joint venture headed by NBC and Fox, as “one of the greatest success stories of 2008 that impacted TV viewing online.” Representatives of NBC and Fox said that Hulu results had exceeded companies’ expectations.

Jean-Briac Perrette, president of NBC Universal Digital Distribution, said there was concern over Hulu’s effect on the linear TV business prior to launch in March, but “the good news is the TV business is very healthy from that standpoint.” He also said NBC’s numbers were boosted by extraordinary multi-platform viewership with the Summer Olympics, election-related gains at Saturday Night Live and residual effects on 30 Rock. “Multiple-platform exploitation,” he said, “seems to be raising the audience versus cannibalizing it or taking away from television.”

Traditional broadcasters, including David Poltrack, chief research officer of CBS, took aim at online video upstart YouTube. Poltrack said broadcast and Hulu streaming is “starting to rival YouTube” in terms of viewers’ time spent watching online video. He said 75 percent of Internet- active people stream some amount of video each week and an increasing amount is more professionally produced. Poltrack, too, plugged synergy between the online and linear TV worlds, citing the two versions of How I Met My Mother. On TV, the median age of viewers is mid 40s versus the online median age of 28. “The two platforms really do work together to build the base of the franchise audience,” he said.

While viewership is improving, revenue is struggling, Poltrack said. In response to an audience question, “If viewing is up, why is the ad sales market down?” Poltrack said the two aren’t completely related. “The advertising budget is determined by projected sales in the category, so we can’t control that. We can try to get as big a share as possible, but if [advertisers] aren’t selling cars and no one is walking into retail stores, they're going to cut their advertising budgets. I don’t think the reduction in advertising budgets is voluntary.”

The economy aside, the industry is also challenged by the lack of a business model encompassing multiple viewing platforms. “A lot of the growth is coming from time-shifted viewing and advertisers not paying full dollar for the audience,” said NBC’s Perrette. He cited the challenge of fragmented audiences coming from mobile, Internet and VoD. “There’s no single common currency for re-aggregating that audience. While the audiences are growing, the overall trend of having to re-aggregate those viewers through common currency hasn’t happened yet.”

The digital market hasn’t had such positive results for local stations, said Peter Price, CEO of the National Academy of Television Arts & Sciences. He said stations are “really having a tough time.” Stations, with margins sometimes exceeding 50 percent, were the traditional revenue generators that funded a lot of the development on the entertainment side: “Those monopolies are getting quickly eroded.” Weather and traffic, he said, have become commodities that viewers don’t need the local meteorologist for. “The stations are taking a big hit and I don’t think that’s going to reverse itself anytime soon. There’s a sea change in the business like there’s a sea change in the monopoly newspaper business.”