I've had the fortune of being able to pioneer a couple of media in the span of my career; first cable television and then the commercial Internet (didn't create it). I've learned a few things about content along the way. The first and most important--Content Is King. When given the choice of being in the content creation business or the distribution business, always pick content creation. Always.
And if you can control both, well you're just in the "A" position.
In cable television, we began with the most envious of positions, controlling high-demand content with a (then) cutting-edge technology to distribute the content. It didn't begin that way; lots of investments by cable companies into small upstarts like Turner and ESPN gave them capital required to make a go of the business so Turner could start CNN and ESPN could show something beside billiards in prime time. The investments proved to be wise, as cable networks launched product that was highly competitive. It's not that off-air television wasn't a substitute; it's just that once consumers got the cable coming in, they couldn't give it up. Many screamed "monopoly," but let's face it, cable television was hardly a utility and people could go back to antennas any time. But it was quite rewarding to have a spate of content that was exclusive to cable and so valuable as to be called a monopoly. That was key to cable's growth curve during the mid-late eighties. And when satellite television came along, they demanded to be able to carry the content that cable television companies had poured so much money into--and they were granted their wish. For a long time, however, the satellite providers couldn't get the local channels on and that was a barrier to entry. Again, for a good while, cable television enjoyed exclusivity of local off-air television on the cable system that created inertia for anyone with a notion to switch to satellite television. Then, all at once, satellite providers got the local channels and the gloves were off. Exclusivity for cable was gone.
I saw the day coming when the only exclusive product would be that which emanated from a cable provider's studio and I launched local news programming that was unique, fully local, and exclusive. Comcast, in their stupidity decided to shut it down after we merged our assets and I was gone, but for a good while, we owned the market. Few switched to satellite because of the popularity of television news in a market that was completely unserved. Our programming was exclusive. We provided other programming as well. Sports talk shows, even our own version of COPs--but with local police. I'm thinking Comcast would like to have a "do-over" on that decision, but they listened to idiots intent on enhancing short term gains in exchange for future growth. But I digress....
There is a point to the story.
Newspaper companies find themselves in the same position. Overnight, it seems the Internet has changed the game. It's far too simplistic to say that the Internet is killing newspapers. One of the biggest daggers in the heart of the newspaper industry is a loss of exclusivity of their content--perhaps it is the biggest. So much of what used to be a local franchise for newspapers is now available to anyone with an Internet connection. AP stories that were front page fare are now available online faster. Obits can be found on many sites; stock quotes are long gone from newspapers. Even the comics and puzzles can be found online. The editorial commentary that was syndicated to newspapers is now available online. And the real poison dart is Craig's list. An entire franchise that is newspapers' most profitable stream is now gone. It almost leaves one wondering, "what's left?" A large percentage of the newspaper's content has been incrementalized and compromised.
Every newsroom in America should be having the content exclusivity discussion quickly. The only exclusive content is that which comes out of a newsroom. It's not so much that newspapers put their own content online and that people can read it there. It's more the fact that someone else puts all the content online that is not the newspaper's anyway. One of the reasons the newspaper websites struggle is because they don't have rights to all the syndicated content either. If they did have exclusive rights to everything carried in the print edition, perhaps they'd be able to charge like the Financial Times and the Wall Street Journal. But they don't. To survive, they need to provide something unique and exclusive. Every strategic discussion should be about creation--how to ween the paper off syndicated, regurgitated fare that is available somewhere else. Otherwise, they're just in the distribution business.
Another industry that needs to learn from the travails of the newspaper industry is the broadcast industry. There is no example better to use than the broadcasters. They currently live every day at the edge of the abyss. What content is actually owned by the broadcaster? They have local news and... well, they have local news. They used to create programming. Local programming. Entertaining local programming. Maybe cable killed them. Local wrestling, kiddie shows with hosts where kids would celebrate birthdays on bleachers while cartoons were shown. Even the old "dialing for dollars" movies are long gone. Taking their place are a host of judge shows, talk shows, game shows, and network programming. Broadcasters are in danger of almost being exclusively non-exclusive. They are either syndicated or network. They are relying only on the FCC rules that preclude satellite carriers from offering cross-market network programming. If I don't like the fact that the Jerry Lewis Telethon is pre-empting the golf tournament at Pebble Beach, tough nuggies. I can't switch to the New York affiliate and watch. I'm betting that someday I can. It's one FCC decision and some public outcry away from changing.
The broadcasters are in a precarious position at best.
If I were a network, I'd call the satellite providers, the few cable operating companies that remain, and cut a distribution deal. I'd quit paying any network comp (not that there's much left), charge on a per sub basis like cable networks do, and keep the advertising revenue. The question is, what would stop them? The answer: nothing. So it really comes down to what is actually content owned by the broadcaster. Anyone who invests in a broadcast station is investing in a few names of local talent who are under contract (and could leave upon expiration), a network contract that could go away in an instant (and it's happened), some syndicated contracts that are negotiated on a mostly annual or bi-annual basis, and a big stick that is actually a distribution system. I find it interesting that mobile television distribution deals are between the cell phone services and the networks. The broadcaster isn't involved-and furthermore, has nothing in the network agreement permitting distribution of network content outside of the transmitter; in other words, no Internet, no mobile. I can see how this story is going to end.
The moral to the story: be in the content creation business. It's true for cable, newspapers, and most certainly, broadcasters. The trouble is that most saw a chance to add margin by switching to syndicated content and relying on whatever came on the network feed or news wires. It saved a few bucks and made them lazy. It will likely be their undoing.
As one who was there I can add my "Amen" to Neal's comments. Right now, the local television broadcaster is caught up in the technology rather than the creation of new programming. They are being required by the Government to invest a lot of cash in their distribution infrastructure that, other than making a pretty picture for thse who can recieve it, brings little or nothing to their bottom line. This is happening at a time when advertising revenues are down by over 30% in some cases. Every day you read about station laying off staff, some long time employees. More often than not, this is happening in their news department, the only source of local programming on the station. it's a catch 22 and someone is going to have to figure it out or the local broadcaster will cease to exist in less than 10 years... crushed by rising operating costs and too few viewers.
Posted by: Ben Cleary | June 13, 2009 at 10:48 AM