Over the last few years there has been a wealth of debate over how rapid change in consumer electronics and digital technology is re-shaping global media. And this is a good thing. It's an important discussion for any artist trying to make a living in these times and it is absolutely compulsory for those of us who serve in talent union leadership positions. But misinformation or conjecture based on unreliable metrics is worse than not valuable, it is actually harmful. At a recent New Technologies meeting we discussed the need for those of us who are actively researching current market conditions to help spread the facts, so that our membership will be well informed and our staff can be prepared for whatever future action may be required. So, in that spirit, I'd like to describe some of the issues we are facing and have been discussing. I will provide a partial source list for this material at the end of this article.
Production and distribution of narrative and commercial content has certainly evolved of late - our industry is witnessing:
- the proliferation of webisodic content and new distribution platforms like the iPad.
- targeted online advertising that employs complex algorithms to let the advertiser know which sites we have been viewing and thus where and when to place an ad tailored specifically to our needs of the moment - in fractions of a second.
- the use of web cannons to distribute new content links to huge batches of sites simultaneously creating unprecedented promotion and exposure.
- consumer electronics manufacturing that has become increasingly geared towards developing devices that can play many different types of content from many different sources.
- indications that the worlds of advertising and entertainment may not stay narratively separate in the near future - spokespeople from major advertising agencies have stated in interviews that it makes the most sense for them to rebrand themselves as full service entertainment shops. (Given this last assertion and that I am somewhat clumsily predicting the future here with a fairly wide lens, this article will not clearly distinguish commercial issues from TV/theatrical issues. However, it must be noted that we currently have different contracts for these types of content for good reasons and they are possessed of entirely separate obstacles).
Perhaps the most important trend to note is that audiences and media consumers are now much more agreeable towards consuming content from other sources besides traditional broadcast. Netflix has become a growth machine; it took them four years to get their subscriber base up to 1 million people. However with initiatives in streaming video and the addition of multiple connected devices they were able to grab 1 million new subscribers in the last quarter of 2009 alone. Further the CW recently ran some tests that show a very high audience retention during forced commercials online. Some have drawn the conclusion that if other networks and content providers follow suit, the number of ads placed during online content could eventually be about the same as on traditional tv. Subscription based content services are also being tested online right now and even if they prove successful, that doesn't necessarily mean they will be ad free. There is a precedent with the success of cable television that people will pay a modest fee for entertainment that still runs forced commercials.
Globally, over 200 million new tvs were purchased in 2009 and the overwhelming majority of them were manufactured to be internet capable. If that market continues to grow as evidence suggests, it is only a matter of time before many more millions of households in this country will be blurring the lines regarding where the media they are consuming is coming from. Further, as we know from experience, if it's a pleasing interface and a good product - they won't care.
Now I'd like to walk through a couple of specific examples of recent developments in online monetization that indicate some areas we'll need to watch very closely. This spring, CBS made $37 Million in online ad revenue for March Madness. This is up 20% from the year before. Granted, there were significantly more viewers on television than online (upwards of 7 million online vs upwards of 130 million for television), but the noteworthy aspect of this example is that the television ad revenue numbers for this event aren't growing whereas the online numbers are - a lot. In 2006 they grabbed just $4 Million in online ad revenue, which constitutes an almost 900% increase in 4 years.
This next example was complied by another member of the New Technology committee and the math looks pretty interesting. A recent Wall Street journal blog covered the ad impressions for ABC's iPad app launch. The article states, "... 650,000 television episodes using the app, generating several million ad impressions according to an ABC spokesman, although the precise number is still being calculated... Like the video player on ABC’s Web site, the app allows viewers to watch most of the network’s shows free, with five 30-second ads per hour." In a somewhat contradictory stance the article claims that the network doesn't know exactly how many ads were viewed, even though they track the number of shows that were downloaded and they know how many ads were embedded in each show. For arguments sake let's say that people only watched one half hour show or stopped watching an hourlong show because they didn't like it. With only 3 30-second ads per viewing that is close to 2 million impressions IN THE FIRST TEN DAYS. And the iPad is brand new; these numbers were generated on just over 200,000 devices. It appears that ABC had a successful first outing. The truth is they probably know exactly how many impressions they got because you can't skip these ads; content providers like ABC will be tracking the content and therefore tracking the ads because it provides a far better return on investment (ROI) than without that data. That is precisely what advertisers want, a better accounting of their advertising and marketing dollars.
The next item comes from the Associated Press. The story is about a case in which Comcast won against the FCC - and the FCC's policy of net neutrality. The FCC told Comcast it could not limit how much people downloaded (this is called "throttling bandwidth"), but the courts just told the FCC it has no power to do that. That means Comcast is free to determine for itself how much you can download, and can charge you more for the amount you download - or "throttle bandwidth" and turn off your connection. This would be the same as Comcast telling you how much cable TV you were allowed to watch. This is essentially creating a delivery system that they control, price and own - with the FCC having no power to enforce any restrictions or protections.
If you step back and observe all this activity, you get the impression that there are groups of very smart, well-funded and well-researched companies and individuals that are very quietly moving chess pieces around the board. However, it is important to note that real value is to some extent determined by perceived value in this business. As mainstream acceptance of non-traditional media increases, content providers, content creators and advertisers will all publicly recognize and even promote an increase in value. This recognition will obviously make it easier for us to declare our own proportional value in this equation.
As noted earlier, the intent of this article was to inform, but also to hopefully initate discussion by disseminating facts as they have been reported by reliable sources. But all this analysis doesn't really mean anything if you cannot create proposals and recommendations that will address the changes we face. So the real question is: how do we take all this data and construct a payment model that is fair and acceptable to us and our employers? How do we make ourselves compensated appropriately for incredible amounts of exposure while still making it easier than ever to hire union talent, i.e., preserve our historic values while still keeping ourselves relevant? Answering this is the task of committees charged with monitoring the changing media landscape, but truthfully it needs to be on our collective radar. I would encourage you to keep open lines of communication with your agents, representatives and union leadership and staff. The more information we share with one another about current practices and trends of new media monetization, the better prepared we will be for the next couple rounds of negotiation with our employers.
On a personal note, I presented this information accompanied by my own opinions to help inform the collective about the challenges we are facing because I feel like there are some things we simply need to get right in the next round of negotiations. If we don't, we run the risk of establishing precedents we cannot afford. Not only is it apparent that the new distribution systems will eventually replace the old, but more importantly it has the potential to happen fairly quickly. This is a sector that moves at a developmental pace never before seen in any industry. The very nature of this field: smaller, faster, better - dictates an operational tempo that does not wait for large, slow-moving organizations to keep up. With this type of formidable challenge, the rapid adaptation of entrenched compensation structures, we all need to be working together with great efficiency - now more than ever.
As a new board member I have to admit to a certain naievete about the political conflict that has often gotten the lion's share of attention in the press. What doesn't get said enough is that every single one of the individuals who have been serving this Guild in leadership positions for the last several years, regardless of their political affiliation, do so as volunteers at enormous personal expense and with great conviction. They all deserve our gratitude and respect.
I believe in leveraging your gifts even if they are embedded in the problems you face. While the challenge is great, it also presents us with a super-ordinate goal. It is an opportunity, if you will, to come together with great stability, strength and solidarity. Again, I haven't been on the board for very long, but I have seen nothing in the past year to indicate that cannot happen. Going forward, we must maintain payment structures that adhere in some capacity to compensation that is tied to exposure and value. And we must also maintain our relevance; to adapt to new market conditions. I believe we can and will do both, together.
New York Division Board Member and National New Technologies Committee member
Here is a short list of links that provided some of the specific examples mentioned in this article.