The Bottom Line

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1973 2003 2013

Pay attention to the chart above.

It contains the inevitable seeds of the future.

Study it, because if you work in the television industry, it tells what is going to happen to you.

The blue line represents the total number of hours of television needed to ‘feed the beast’. The red line represents the average number of viewers per channel.

On the extreme left, we have the world of 1973. A time when there were essentially three networks, PBS and a handful of local stations.

Television signals were pumped through the air as part of the electromagnetic air-driven spectrum. As a result, there were physical limitations as to how many legitimate television networks or stations there could be. The EMS could only initially support a very few channels.

Those three networks then divided an audience of about 100 million households.

This meant, that on average, any network could deliver to an advertiser 30 million households. If you deliver 30 million households, or something even close to that, you can charge a great deal for a 30-second spot. This meant that the programs generated vast amounts of money for the networks, and in turn the networks could spend vast amounts of money on producing those shows. (With plenty left over for the news, which was supposed to lose money, as it’s existence and excellence protected the license).

As you can see, in 1973, the model was very favorable to broadcasters. Networks and local stations were a machine to mint money.

Now move to the middle of the graph.

The year is now 2003, and cable begins to penetrate the market.

Suddenly we move from 3 networks to 500 cable channels. The limitation on number of channels is now no longer the EM spectrum, but rather the capabilities of coaxial cable to carry signal. And as a result, there are a lot more channels. And a lot more channels means a demand for a lot more content.

In fact, we go from a gross demand for content of 64,000 hours in 1974, to nearly 4.5 million hours in 2003.

However, at the same time as the number of channels is expanding, the size of the audience remains the same. Now there are many more channels dividing a pie that is essentially the same size as it was in 1973.

Audiences are smaller everywhere – even at networks. B&C reports just today that viewership for The Today Show is off 6%, as is GMA. Local news viewership is down 30% in the decade. Total viewership for the evening news shows is now less than Cronkite used to get alone, although the population of the country is roughly 33% larger.

This continuous fractionalization of audiences has an impact on per hour revenue and that has an impact on what a channel can spend to produce or purchase each hour of video.

It’s a funny situation: The demand for the product skyrockets as the amount that the networks can pay for that product collapses.

As the web comes online with video, we move further right in the chart. In a few years we are in what is effectively an infinite number of channels – everyone needing video from NBC to The New England Journal of Medicine online. Where will it come from? Who will produce it?

My guess is that video content will be created much as print content is currently created.

There is a magazine store on 6th Avenue and 55th Street, just up the street from me. That store has 7,000 magazines for sale. Think of that as 7,000 cable channels. There is a Wood Boats magazine, about a dozen Tennis magazines, about 150 Hair products magazines. On and on.

Who makes the content for these?

Open the magazines and look at the mastheads.

They are staffed by 8 or 9 people.

The content for the magazines, the articles, are written by freelancers who work at home on computers processing words. Now you can do the same with video. It is no different.

My guess is that the thousands and thousands of video channels, whether on cable or online will be fed just as those 7,000 magazines (all profitable businesses) are fed – by video freelancers who sit at home, create content on their laptop and email it to their clients.

It works for print.

It will work for video as well.

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23 responses to “The Bottom Line

  1. Good points. No doubt.
    Big changes.

  2. Where did that graph come from?

    Something made up by the author of this blog or some other source? Why isn’t that made clear?

    It looks to me like yet another prediction of things to come by someone who has already been more wrong than right with his past predictions so, why should I believe it now?

    Yes, the Internet is becoming more of a news delivery vehicle and yet the truth is, the traditional news outlets are leading the way in news coverage on the Internet. Only the method of delivery is changing. Not the people who create the content. Checks will still arrive. The traditional companies are still going to be around. So why worry for those of us employed with current news organizations? I’m not afraid of more competition.

    Unless a better source for the graph can be provided, I think it’s more propaganda than fact.

    Again.

  3. Michael, what are you doing? Trying to take credit for creating freelancers now? I’ve been a freelancer for 37 years, how do you think that most, if not all, the cable programs have been produced since day one of cable television? The typical production company today is nothing more than a freelance producer with a Mac and FCP in his home office. He comes up with a concept and tries to sale it to a cable company; if the cable company accepts it then he will start working and hire other freelancers as needed. How else do you think that programs are done today? There’s no shortage of freelancers I can assure you that. The problem that programs originator and producer are running into today is finding other qualified freelancers that can provide quality work, those are always busy and hard to get. Most cable company today require only high quality formats, Discovery as example will only accept either HD1080 preferably shot with a F900 or 720 from a Varicam. They might consider HDXD, small formats are not even a consideration. I shoot for these people all the times.

  4. I made the graph.
    The source is me.
    Do you see something factually wrong with it?

  5. You are forgetting some little details Michael, in 1973 television was free. Broadcasting companies did not enjoy the cable revenue sharing like there’s today. The big three were constantly in competition to provide better programming and better programming back then cost a lot of money. You weren’t there, I was. Film was the only field acquisition format back then and that required a lot of attention and manpower. Rating were the most important factor because if suddenly the number of viewers of any given program would drop so was the network revenue. In few words they did business the old fashioned way, they had to please their clients, what a concept.

    Today people are paying big bucks for getting TV in their living room and they deserve better programs. I still don’t understand were you’re going with your post. Is anyone out there that did not know that 300 millions of population divides by 500 channels will yield a smaller number than divided by 3? The point is how many people are in reality watching those 500 channels, they can only watch one at the time and regardless of how many channels are available to them they will still pick those with the best programs. The only reason that I have a bunch of channels is because I have no choice, I bet if the viewers had a choice to get channels a la carte they would not pick more than 30 or 40. Can you in all honesty say that you regularly watch more than 15 channels?

  6. I dont watch more than a handful of channels, – I doubt anyone does. And maybe in the end that is all that there will be, but I doubt it. And in the meantime, all of the channels have to run programming all of the time. they can’t go black and say ‘sorry, come back at 6′. So the demand for a huge amount of content, with most of them having very little in the way of resources, is very much there. And I think will only continue to grow.

  7. Factually wrong?

    Well, there are no facts yet for the year 2013 for one thing other than the ones you’ve made up in your own head.

  8. So what is your problem. As Nino points out above… “Is anyone out there that did not know that 300 millions of population divides by 500 channels will yield a smaller number than divided by 3?” I don’t think there is anything inaccurate in this. Do you?

  9. i want someone to construct a graph that illustrates the correlation between nino and $ showing up at the same time vs. showing up individually.

    it’s odd to witness them post seperately. odd, i tell you. very odd.

  10. Michael, what channels do you envision needing programming? For the first time in two years I went thru the channel line up. What a bunch of crap I’m paying for. I have Dish Network with the 150 channel package, plus I’m paying extra for a few foreign channels. I believe I have the middle package; I had to get it this way only because it was the only way to get ESPN Classic. After going thry the main channels, something that’s definitely don’t need programming, I haven’t seen any that might need independent programs. Most are movies or talk shows channels and a lot of the stuff is studio productions. They must change their daytime lineup because I remember seeing some outdoor sportsman or fishing shows programs, but those are usually bartered with syndicated shows.

  11. “it’s odd to witness them post seperately. odd, i tell you. very odd”

    Is odd only to odd people.

    Perhaps it could be that great minds think alike?

  12. Nino
    Here in NY I have almost 1,000 channels. There are the movie channels, the sports variants: ESPN1, 2, 3 and so on… The predictable cable channels… but the biggest growth area seems to be in the VOD area. There are tons of ‘instructional’ channels for video on demand – educational, home repair, medical.. on and on.. And they all have endless (and pretty unwatchable) ‘instructional’ videos. I don’t know who is making this stuff – it isn’t you or me… but there’s a ton of it.

  13. I have said before, that there will be so much content, that the general public will not have time or energy to sift through everything. They will then migrate to sites 1.) They trust 2.) Provide quality.

    There are already hints of the “truth” of a new trend. A trend away from user generated content…as a business model.

    Please read this article that came out Sunday.

    Obviously, this cannot be seen as a major trend away from user generated. Because this new revolution is just at its infancy stage. There WILL be a ton of video content produced by everyone and anyone. The market WILL change. Former broadcast moguls will need to adapt and change. Who knows exactly where it will end up.

    But I feel quite safe in making my own prediction.

    User generated content – citizen video journalism included – will not be able to sustain a big enough audience to survive economically. Those business that have the BEST chance of surviving economcially are those who provide 1.) Trust 2.) Quality

    Also, there should be 3.) Variety

    The four Cs of video journalism are 1.) Content 2.) Craft 3.) Creativity 4.) Comittment

    User generated, citizen journalism cannot on a consistant basis provide ANY of these elements.

    Again, not to say the seismic shift isn’t happening and will continue to change the models. There will be a lot more independently produced material. There WILL be more VJs and they will produce more and more content.

    But it will not spell the END to quality content, craft, creativity and comittment.

    Those things are definable.

  14. I forgot to put up the link to the article.
    Please read. Here it is: http://www.denverpost.com/headlines/ci_6598064

  15. Same detractors, different day…

  16. Excellent response Eric. I too have been rethinking my perspective – looking at UGC on commercially viable niche websites.

    The various print pubs looking to online video content will do well if implemented properly. Once shooters figure out that they need to work towards and maintain near or the same production values as what is currently used in broadcast, then we will see a shift in the quality of content online. Some will have to go by trial and error (myself included), others will already have those skills in place and will only have minor adaptations to transition to video online.

    The bottom line is there is a major paradigm shift taking place – it’s in its birthing pains currently, but it will eventually come into cyberspace as something worthwhile and as unique as cable channels were when they were first introduced.

  17. This whole post is made up about a graph that is not based on anything but more guess’s from someone who has proven himself more wrong than right over the years.

    Now he wants to draw a couple of colored lines and act like they are proof of something which does not exist.

    The only shift taking place is the one where all the forcasts of “knowing” keep getting blown out of the water because they can’t sell the VJ Kool-aid.

  18. The graph is a pretty good representation of long term trends in the industry.

    Sitting by my pool in the Hamptons, laptop besides me, (lets hear it for wifi), I have to say the VJ “Kool-aid” is selling pretty well, at least from here.

  19. Your thoughts about what is important to you are quite clear.

    I’ts not about better television. It’s about your own pocketbook. No surprise.

    You admit the graph is not based on anything but what you think will happen. Trends you continue to misread when it comes to actual success in producing a better news product again and again.

    But, I keep forgetting, you goals are floating right there with you now.

    Enjoy. I know you will at the expense of so many others.

  20. $ (formerly known as min!-me) – Who made you the all knowing, all seeing of video???

    Once again – you rant without having any valid, accurate information to support your position.

    What part of “we as Solo VJ’s understand that there are no guarantees” don’t you get??? You keep blathering as if we never acknowledged that fact.

    Another typical b-roll moment brought to you by $ (formerly known as min!-me).

  21. Hi Cliff!

    Enjoy your hobby!

  22. Michael:
    The conversation drifted from your original point, which was a good one. As our industry evolves, operational efficiency will play a significant role. In our organization, jobs once done by eight people are now done by a part-timer and some software. Jobs once done by a staff of producers are now done by interns and volunteers enabled by easier-to-use software, a meaningful foundation gained in the classroom, and inexpensive gear. Everywhere I look, I see a complete transformation of the ways that we make and distribute television. We are about to launch a new brand based upon reinventing just about all of it– on a sustainable economic model.

  23. The gist of this is that as a “consumer” of video, I will pay to receive what I want.. I envision/hope that the content identification fields of the ATSC standards will be used by intelligent devices (media center PCs, DVRs) to choose what I want by title, producer, writer, or whatever other fields are populated. This could then, in turn, allow me to pay for it after the fact, by show, rather than per channel – very very similar to the magazine model.

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