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.