Just because some people are no longer watching THE television doesn’t mean that they aren’t still watching television. This is the key takeout of ‘Television is The New Television”, a new book from media industry commentator Michael Wolff.
Wolff ‘s book is an engaging insider’s perspective that looks to dispel some of the hype surrounding digital media and challenge the doomsayers who predict the death of the television industry in the face of new forms of media engagement. Wolff lays out the shifts in digital media revenue models and engagement strategies, providing a succinct summary of the race to the bottom that is the feature of many online businesses. With audiences being seen as the most valued media commodity, most digital businesses are focussed on ‘traffic’ rather than core and quality product and environment. This worked in the early days when high CPM rates meant revenue could outstrip the costs of buying the traffic, but falling CPM rates mean the arbitrage model is broken. Wolff argues that digital media’s key advantage over traditional media, the ability to provide absolute measurability of viewers and their actions, has turned out to be the tragic flaw. Advertisers have been able to use such granular information to devalue the currency. With so much focus on the numbers and on response rates, editorial has become marketing, it is all about traffic rather than sensibility: click, like, share.
Television, in the meantime, has gone from strength to strength. Wolff’s argument comes down to following the money and understanding the implications of where the money comes from. Digital media has mostly taken advertising revenue away from newspapers and magazines, decimating the classifieds and chasing the direct response end of the advertising market. Television meanwhile continues to have sport and higher end cultural content as a major part of its mix, allowing it to sell cultural currency. New platforms are competitive, but they are also providing traditional networks with new distribution and monetisation opportunities. Free from the sensibilities of advertisers, new streaming platforms are also providing new forms of content that are growing the market rather than cannibalising it. Viewer hours across all platforms are increasing, even if audiences for traditional network television slots are shrinking.
Wolff points out that advertising revenue only makes up about 50% of revenue streams for the television industry, with subscription, foreign content sales and content syndication providing growing new revenue sources. Some caution is needed here when applying Wolff’s analysis to markets outside of the US. Wolff uses the phrase ‘television’ very broadly but clearly what he is mostly talking about are the US network conglomerates such as CBS, NBCU, ABC and FOX who all have international operations as well as their domestic US networks.
The analysis does in fact reinforce the dilemma of the Australian free to air networks. In 2014, advertising revenue made up the vast bulk of their revenue: 95%, 80% and 76% for the Ten, Nine and Seven networks respectively.
The Australian networks need to diversify and drive more content related revenue streams such as subscription and content licensing sales as their environments continue to change. It may not be the case that digital media is stealing their premium advertising dollars, but it is changing the behaviour of increasingly discerning and well-served audiences.
The key message from Mr Wolff’s book is really not that revolutionary. Quality content is what drives engaged audiences and this in turn is what drives premium advertising dollars. Well told stories, whether reality, documentary or drama, key sporting events: these are the staples of traditional television, and will continue to drive television businesses if they continue to provide engaging environments for the audience. But despite ‘television being the new television’, there is no room for complacency for any market participant. And, just as television networks can’t afford to rely on advertising as their only revenue stream, digital media businesses also need to understand how risky an advertising-only model is for them. Relying purely on traffic to drive advertising revenue puts you in the click-bait game and at the mercy of social media algorithms. Unless they are able to leverage global scale, the digital media businesses that will win are those than can build a brand and an environment that stands for something. Quality: who knew??