An executive with Warner Bros. predicts television studios will bypass local television stations and networks in the next decade as they deliver content straight tot he consumer via broadband and cellular. Hmm? Isn't that what we were saying back in the early 90s. Isn't that what our discussions and studies at KU focused on during my grad work?
"We will go directly to consumers with content," President Bruce Rosenblum said Tuesday in a notably candid insider's talk to Stanford law students. "Your generation" is witnessing "a complete disaggregation of the networks," he said. Warner leads in supplying prime-time shows to the networks, and going around those big customers will usher in an era that will be very expensive for his business but offer it exciting prospects, said Rosenblum, 50. "The sad part is, I won't see it," he said. "That's five to 10 years away." (Communications Daily- Feb. 21, 2008)
This is exactly why local TV stations should be worried. They should have been worried long ago. They should be as worried as any local newspaper struggling to keep live going in the old media world. I can't picture a local station surviving on local news programming alone. Maybe one or two stations could carve out that niche in a major market, but that will never work in Erie or Youngstown or Clarksburg.
More from Communications Daily's post:
A "first glimpse" of the coming new world can be seen in Warner's growing online effort, Rosenblum said. He disclosed that a distribution deal with Fox and NBC Universal's Hulu.com is "imminent." His company also is creating its own ad-supported channels, Rosenblum said. An animation channel with the working name of T-Works will go live in April under an unspecified brand, he said. Studio 2.0, which will create brief videos for broadband and mobile, is working on more than 20 projects, at a total cost less than that of an hour of a broadcast network drama, Rosenblum said. Cutting out the networks will mean that studios make more money on their shows than they have, he said.
But Warner will have to spend heavily to make itself and not the network the brand that viewers connect with a show, Rosenblum said. "That's what we're not equipped to do," he said. "We can get there if we're willing to make the investment in marketing. That's the hiccup." It's a touchy subject, including within Warner's parent, Time Warner, which has broadcast and cable networks of its own to promote, he said. Cable shows streamed online are branded with their networks because Time Warner CEO Jeff Bewkes "wants to make sure there's value in TNT and TBS."
Apple's iTunes Store has helped prove by negative example that video will remain ad-supported as it moves to broadband and mobile, Rosenblum said. Paid downloads of TV episodes to iPods haven't been a "significant" business for Warner, he said.
The TV industry's relationship with Apple creates deep tensions between the sides and with retailers. "As a studio, we want to set the price" on episode downloads, Rosenblum said. "We don't want to be a one-size-fits-all business. Apple wants a one-size-fits-all business." Apple's goal, "to sell hardware," motivates it to offer as many TV episodes as possible at the same price, he said. Studios and networks "sell content," and they dislike iTunes charging the same for The Office as Gilligan's Island, Rosenblum said.
Studios "resisted" selling through iTunes "for a long time because we make money on the sell-through" of DVD compilations of shows, said Rosenblum. But they've realized electronic distribution is "a great business -- no costs associated with it," to speak of, he said. "The margin is a lot better. Where's the problem in that? Who gets upset? Wal-Mart." Streaming costs have been "dropping rapidly," Rosenblum said. "In five years, they'll be irrelevant. The cost of pressing [disks] is significantly higher."
Subscription plans work better for movies than for short-form video, Rosenblum said. "As a consumer, I love Netflix," but "our studio can't stand it," he said. "That subscription model doesn't work well for us." Netflix pays for a DVD once and rents it over and over, he said.
All the networks are looking to ads to create revenue from new digital media, as seen with Hulu and ABC.com, Rosenblum said. Evidence online the past 18 months shows "by far" that this model works best for video, he said. It's a holdover from the tube, Rosenblum said. "We've done a great job teaching you to watch commercials" instead of paying money for programs. "The real test" will be whether viewers stand for having to watch an ad before a YouTube video, he said. But "it seems to work for ESPN" on the Web.
The big TV studios are in a strong position to take at least their share of the value of programming that broadband and mobile throw up for grabs, Rosenblum said. "Studios have the capital resources" to do the experiments required online and, more important, "the human resources to it right," he said. Their Web operations give them "infrastructure and expertise to build on," Rosenblum said. And they have large libraries of old shows and expertise in "episodic storytelling." Though the studios face new competition from anyone with a "video camera and the ability to type 'YouTube,'" it's "Wired mythology" that the proverbial "four kids in a garage" will beat the established show producers, he said.
And Warner has a leg up on the other big studios -- all corporate affiliates of major broadcast networks, Rosenblum said. The CW network, half-owned by Warner, is different --- a niche operation -- so his studio has had to be "more innovative, more creative and more aggressive" than rivals to thrive selling to sister networks, he said. The new world is defined by the absence of any "dominant distribution outlet," any "primary gatekeeper," Rosenblum said. That's the world Warner already knows, and other large studios need to learn it, he said.
The TV industry -- now better termed "electronically transmitted content," or ETC, as in "et cetera" -- won't change completely, Rosenblum said. Big broadcast networks' share will keep dropping, but they hold onto their importance continuing to draw more viewers than other outlets, he said. Commercials will survive skipping by PVR, revenue from them supplemented by other sources. Asked about interactive sales directly from shows, Rosenblum said, "I think it's all intrusive," including promo bugs during shows. "That takes away from the viewing experience." But, he acknowledged, "for some reason the viewer doesn't seem to mind that." Original shows for new media will be series of six to 10 episodes of four to six minutes each, Rosenblum said. Image "quality is irrelevant" online, because viewers 16 to 25 are "multitasking" rather than watching closely, he said. "Hulu is finding not everybody is going full-screen, even though they can," Rosenblum said. The "creative talent" in movies consider themselves artists and are "much more picky" than TV people about viewing quality, he said. TV creators "don't give a ***, if it's making money." -- Louis Trager