TV or Not TV

Posted by John Maxwell Hobbs on 2012/06/11 in Cutting the cord, Musings | Leave a comment

There’s a good article by Henry Blodget about the move to online video at Business Insider

Here are some reactions off the top of my head:

Interesting and clear. Blodget has a good track record on predicting trends.

However (and this is a big, “however”) in my opinion, the doomsayers are missing the real story here. Print, music, and television are not in trouble, it’s actually advertising that’s in trouble and businesses that rely primarily on ad revenue are hurting. The story behind Facebook’s stock nosedive reinforces this – their only source of revenue is ads, and investors don’t believe that’s sustainable.

The writing’s been on the wall with this for a number of years – brand loyalty has dried up, people using PVRs skip through commercials, user testing has shown that people have become effectively blind when it comes to banner ads on websites. Currently, the only thing that seems to be working are Google’s sponsored links inserted in search results, and those are delivered to people who are already looking for what they are offering. It doesn’t hurt that it’s hard to tell the difference between the sponsored links and standard search results.

On the other hand, subscription based services are booming, even in this economy. Blodget points out that ratings are going down on live cable viewing, but there is not a concomitant drop in revenue for those businesses. And based on the fact that they don’t rely on advertising revenue, ratings are not all that important to them as long as their subscribers keep playing their bills Even though he complains about the price of his family’s subscription, Blodget has yet to “cut the cord” himself. This is the area to watch and where we could see the precipitous drop that newspapers have seen as the “a la carte” viewing options become more popular. It will be interesting to see what effect Sky’s new pay as you go IPTV service will do to their subscriber base.

Other subscription services are doing well, even growing – iTunes, Spotify, Netflix, Lovefilm, while not all of them are profitable at the moment, are adding subscribers and an accelerating pace. Specialist print publications are doing very well right now and that’s because subscriptions are their primary source of revenue and ads simply top up their earnings. They can charge higher subscription fees and ad rates because of their specificity of subject. In fact, many people buy these magazines for the ads.

The future of networks was a bit glossed over. In essence he’s saying that the network model will die, except where it won’t. I think this is more about the strength of a network brand as a trusted curator. .