The Day TV Died - Winners and Losers (Comcast, Disney, CBS)
Remember when almost everyone read a daily newspaper?
Newspaper readership peaked around 2000. Since then printed media has declined, as readers shifted on-line. Magazines have folded, and newspapers have disappeared, quit printing, dramatically cut page numbers and even more dramatically cut staff.
Amazingly, almost no major print publisher prepared for this, even though the trend was becoming clear in the late 1990s.
Newspapers are no longer a viable business. While industry revenue grew for almost 2 centuries, it collapsed in a mere decade.
Chart Source: BusinessInsider.com
This market shift created clear winners, and losers. On-line news sites like Marketwatch and HuffingtonPost were clear winners. Losers were traditional newspaper companies such as Tribune Corporation, Gannett, McClatchey, Dow Jones and even the New York Times Company. And investors in these companies either saw their values soar, or practically disintegrate.
In 2012 it is equally clear that television is on the brink of a major transition. Fewer people are content to have their entertainment programmed for them when they can program it themselves on-line. Even though the number of television channels has exploded with pervasive cable access, the time spent watching television is not growing. While simultaneously the amount of time people spend looking at mobile internet displays (tablets, smartphones and laptops) is growing at double digit rates.
Chart Source: Silicone Alley Insider Chart of the Day 12/5/12
So, now is the time to prepare. And change your business to align with impending new realities.
Losers, and winners, will be varied - and not entirely obvious. Firstly, a look at those trying to maintain the status quo, and likely to lose the most.
Giant consumer goods and retail companies benefitted from the domination of television. Only huge companies like P&G, Kraft, GM and Target could afford to lay out billions of dollars for television ads to build, and defend, a brand. But what advantage will they have when TV budgets no longer control brand building? They will become extremely vulnerable to more innovative companies that have better products and move on fast lifecycles. Their size, hierarchy and arcane business practices will lead to huge problems. Imagine a raft of new Hostess Brands experiences.
Even as the trends have started changing these companies have continued pumping billions into the traditional TV networks as they spend to defend their brand position. This has driven up the value of companies like CBS, Comcast (owns NBC) and Disney (owns ABC) over the last 3 years substantially. But don't expect that to last forever. Or even a few more years.
Just like newspaper ad spending fell off a cliff when it was clear the eyeballs were no longer there, expect the same for television ad spending. As giant advertisers find the cost of television harder and harder to justify their outlays will eventually take the kind of cliff dive observed in the chart (above) for newspaper advertising. Already some consumer goods and ad agency executives are alluding to the fact that the rate of return on traditional TV is becoming sketchy.
So far, we've seen little at the companies which own TV networks to demonstrate they are prepared for the floor to fall out of their revenue stream. While some have positions in a few internet production and delivery companies, most are clearly still doing their best to defend & extend the old business - just like newspaper owners did. Just as newspapers never found a way to replace the print ad dollars, these television companies look very much like businesses that have no apparent solution for future growth. I would not want my 401K invested in any major network company.
And there will be winners.
For smaller businesses, there has never been a better time to compete. A company as small as Tesla or Fisker can now create a brand on-line at a fraction of the old cost. And that brand can be as powerful as Ford, and potentially a lot more trendy. There are very low entry barriers for on-line brand building using not only ad words and web page display ads, but also using social media to build loyal followers who use and promote a brand. What was once considered a niche can become well known almost overnight simply by applying the new dynamics of reaching customers on-line, and increasingly via mobile. Look at the success of Toms Shoes.
Zappos and Amazon have shown that with almost no television ads they can create powerhouse retail brands. The new retailers do not compete just on price, but are able to offer selection, availability and customer service at levels unachievable by traditional brick-and-mortar retailers. They can suggest products and prices of things you're likely to need, even before you realize you need them. They can educate better, and faster, than most retail store employees. And they can offer great prices due to less overhead, along with the convenience of shipping the product right into your home.
And as people quit watching preprogrammed TV, where will they go for content? Anybody streaming will have an advantage - so think Netflix (which recently contracted for all the Disney content,) Amazon, Pandora, Spotify and even AOL. But, this will also benefit those companies providing content access such as Apple TV, Google TV, YouTube (owned by Google) to offer content channels and the increasingly omnipresent Facebook will deliver up not only friends, but content -- and ads.
As for content creation, the deep pockets of traditional TV production companies will likely disappear along with their ability to control distribution. That means fewer big-budget productions as risk goes up without revenue assurances.
But that means even more ability for newer, smaller companies to create competitive content seeking audiences. Where once a very clever, hard working Seth McFarlane (creator of Family Guy) had to hardscrabble with networks to achieve distribution, and live in fear of a single person controlling his destiny, in the future these creative people will be able to own their content and capture the value directly as they build a direct audience. A phenomenon like George Lucas will be more achievable than ever before as what might look like chaos during transition will migrate to a much more competitive world where audiences, rather than network executives, will decide what content wins - and loses.
So, with due respects to Don McLean, will today be the day TV Died? We will only know in historical context. Nobody predicted newspapers had peaked in 2000, but it was clear the internet was changing news consumption behavior. And we don't know if TV viewership will begin its rapid decline in 2013, or in a couple more years. But the inevitable change is clear - we just don't know exactly when.
So it would be foolish to not think that the industry is going to change dramatically. And the impact on advertising will be even more profound, much more profound, than it was in print. And that will have an even more profound impact on American society - and how business is done.
What are you doing to prepare?