Panic at local affiliates

OK, panic might be too strong of a word. But there definitely is great cause for concern at the local affiliates.

Let’s say your local Seattle affiliate station runs ads against its shows. All these shows are either run in syndication (Sienfeld) or are current primetime shows (CSI). Local news is the only content you produce and maintain total control over. If your success depends on getting popular shows (and their viewership) to your station which allows you to sell local advertising, what do you do when your audience is dwindling in favor of online entertainment (everything from Facebook to YouTube)? To make matters worse, the national networks – in an effort to chase this shifting audience – start streaming new shows online with ads?

The local affiliates are totally cut out. From what I understand, the national networks have made some deals to give local stations a cut of the online streaming ad revenue. While this helps the locals out, I don’t see this as something that can be maintained. My understanding is that the nationals still need local affiliates since the bulk of TV viewership is still over broadcast/cable. You can’t piss them off too much, because they may turn to another company for syndicated content. So they get a cut.

And other methods to prop them up are afoot. Affiliates are trying to bring more traffic to their websites to help offset losing TV viewership. So the national networks are looking to give them exclusive online content – but in the end, who turns to their local stations’ website for Seinfeld content? The national networks still need the local affiliates as partners and may be willing to lose money on the online component so long as the affiliates keeps getting Seinfeld.

But one day the balance will shift.

What happens when the bulk of TV is delivered through the internet? This completely cuts out the need for the local affiliate. I don’t see the national networks continuing to provide the cut of ad revenues at this point. Granted that time my be 10 years away (Sooner I think). But it will stop. And it will be sudden. And it will hurt.

So the local affiliate needs to be planning its next move now. This s a tough spot to be in. Is there hope? Some industries vanish as technologies change just as others start up. My hunch is that local TV will combine with local newspapers. This will bring greater coverage of local matters (combining the journalism of the press with the ‘on the spot’ filming that local TV news handles. This will give more thorough written and filmed coverage to local happenings. I think this would be great. Will it be as profitable as being a full television affiliate is today? Who knows. Maybe not. But I don’t know if there are a lot of other choices.

- MediaBits

Next – NBC Direct launches, offering you less power than your VCR from 1986

ROW: Rest of the World

People keep asking why none of the new online TV services support international customers. People (rightly) point out that international fans shouldn’t get a second class experience and that the web is “world wide.” All true.

So what don’t the studios get?

They get it but unfortunately the problem here is (surprise) money. In the pre-internet world of entertainment, local partnerships were the key to business. Whether this meant local affiliate stations or foreign networks, the studios simply sold their content to these partners. This approach had many benefits. Namely, distribution meant delivering a tape and that was it. Simple.

Since television has historically been an ad supported platform, ads have to be sold for the content to be profitable. In the US this ad time is split 50-50 between the local affiliate and the studio distributing the show. (Note: Not sure if this is the standard deal amongst all syndicated shows or not but I know it is commonly the case. Also not sure if it is always the case that the affiliate does not pay for the show but just gives the studio the ad time. Feel free to chime in if you know.) This is why you can be at home in Boise and watch the 7pm airing of Friends and see some ads for national companies (Tide!) but then see an ad for a local business (Crazy Eddie’s!). The studio sold the spot to Procter & Gamble and the local affiliate sold their spot to Eddie. In the US, this is a fairly workable system. The studios have ad sales departments that sell the national ad inventory.

But the situation becomes much more complex internationally. Selling ads to a Norwegian company for the local airing of Friends is much more difficult. Besides the language issues, there are bound to be different standards for pricing, laws, etc. Multiply this by all the countries that want to air Friends. The easy way out is to just sell the broadcast rights in that country to the highest bidding network. Then the network sells the ads.

So what does this have to do with internet distribution? Well, there is no infrastructure at the studios to sell ads against episodes streamed into different countries. Since on the internet the studio is the distributor, they need to sell the ads. Can this problem be overcome? Sure thing. Somebody will figure it out or a start-up will launch a service.

But one more thing… What about the millions of dollars being made by selling the shows to foreign networks? In a studio, every division is responsible for growth. It is not an easy choice to cut TV sales departments off at the knees in favor of an untested online international distribution platform. Plus there may be mulit-year contracts in place. And what happens if you piss off the foreign network by launching your international streaming service? Will they drop your other shows? What if your service tanks and you have to go back to that network?

These are hard questions. I think international online distribution will come but its a big leap for a large, slow-moving corporation with a successful revenue source to make.

- MediaBits

Next – Panic at local affiliates

And we launch

So what is this blog all about? Well, I have been working for an entertainment company for a while now. I do some work related to my company’s online operation. While this blog is not going to be about my company in particular, nor will it divulge confidential information from my company or others, I’m still going to keep this anonymous. That gives me the most freedom to talk openly and honestly about the goings-on in the online entertainment arena.

I needed a place where I could voice my opinion on the changes happening in the industry and hopefully provide an interesting glimpse into how and why these decisions are made. I often read posts on blogs and forums from non-industry people wondering why such foolish choices are made and why Hollywood is going this way or that. I hope to answer some of that. Sometimes it is poor decision making. But it is also due to the fact that entertainment is one of the most confounding and complex industries I have ever been a part of. This will be your peek inside – you’ll want to pull your hair out. Plus, I want to learn from you. I feel that I have a pretty good sense for what can and will be successful. I want to know what you think. Am I on the money or off my rocker? We’ll find out.

All the movie, music and TV studios are trying to find the way to move forward and make money online. The web is a bundle of contradictions and changes. Its fraught with danger and opportunity. It requires new and untried distribution models which threaten existing revenue.

Nobody gets it. Nobody has a plan.

I’ll use this place to evaluate new attempts as they develop. Entertainment won’t go away – but will the same companies be dominant in 10 years… Thats the question.

- MediaBits