Monday, October 26, 2009

Me Vs. Someone Smarter - Commenting on Antony Young's Thoughts on Hulu

Antony Young is a smart guy. He's the CEO of a smart agency, Optimedia, which does a lot smart work. But, just because Mr. Young is so smart doesn't mean that we all have to agree with everything he says. Last Friday, Advertising Age ran a piece he wrote that urges NBC, Disney and Fox to reconsider their relationship with Hulu, which is a joint venture between NBC and Fox. (You can read in it's entirety here. )

So, anyway here are my comments in italics after his.

'We have to do this, otherwise others will'
Wrong. "Others" don't have the desirable, premium content that these networks own. These days, it is the networks that have the technological and legal means to largely control where and how an episode such as "Lost" can be viewed. However, Hulu is training the viewer to time shift out of prime-time. And this is eating away at the very economics that support the investment in creative development and production. Advertising, subscription and home entertainment revenues are the only workable model I can see to fund the cost and quality of TV content, beyond public broadcasting.

While I do agree that ad revenues fund the cost production for these studios, I disagree that that "'others' don't have desirable, premium content that these networks own." Executives - especially executives in media buying - need to come to terms with the fact that illegal downloads are not going away. Plus, with the economy down and connectivity speeds increasing on a regular basis, I'll bet you these downloads will increase and possibly take big chunks of specific demographics that media buyers find very profitable out off of television.

'The consumers want it, therefore we better give it to them'
Consumers want a lot of things they can't have. I'd love to have free meals at Denny's every day, or zero delays in and out of JFK, or environmentally friendly gas. But it just doesn't make business or financial sense for companies to provide this. Consumers understand this and they aren't demanding anytime, anywhere access to premium TV at no cost, but if it was offered up then they'd be mugs not to take it. TV should learn its lesson from the publishing industry. Almost every major magazine raced to put their content online, without, in my view, a clear strategy other than, "We need to put our content up there because there's an audience waiting." That ill-informed logic has ripped the heart out of the print business, in which there seems to be no way back.

I think television industry needs to look at the music industry before they look at print. First off, their products share more similarities than with print media, including substantially higher costs of production. Second, the music industry was completely unwilling to update to technological developments that were coming down the pipeline, and despite making a product that has demand they are still reeling to figure out a business plan because they thought they could ignore the internet. With consumer electronics changing every day, ignoring consumers and their big expenditures seems like a bad move too.

'Hulu is helping to increase TV audiences'

As a person that follows the ratings fairly closely, I can see no data that conclusively supports this. CBS continues to be the strongest Nielsen-rated network without the assistance of Hulu. Many of the premium cable channels that limit their content online are showing solid audience gains. I can see the sense in supporting selected catch-up episodes for program series, but the breadth and next-day access to prime-time shows, quite frankly, seems to be an incentive for smaller audiences. There's no evidence that newspaper websites are doing anything but eroding newspaper print circulations.

Okay, I agree with that. But, once again, as technology improves the information gleaned from these "smaller audiences" may end up being profitable. However, we also know that Nielsen's television ratings system may soon be a thing of the past. Relying on Nielsen in an argument now may make you look as though you were defending phrenology in ten years.

So here's the rub.

As a media buyer, I have no vested interest in whether the broadcaster shareholders support Hulu or not. Our livelihood as an agency relies neither on supporting the status quo of traditional media nor blindly pushing the popular wisdom of digital everything. Optimedia as an agency has shifted decent budgets into Hulu this past year and we will continue to support this media company with advertising dollars as it grows audience and influence.

But in putting on my business-consultant hat for a moment, my advice to Jeff Zucker, Peter Rice and Bob Iger is: you need to reevaluate your Hulu strategy. Commercial TV still has plenty of life in it yet. So let it live. And turn off Hulu before it turns you off.

Okay, I understand your argument; but, it sounds like you're saying "the ship is sinking but it's more of a Lusitania than a Titanic so let's go sip champagne and play shuffle board while we wait for the rescue boat."

If the studios don't figure this out now, then they are going to have to invest more in smaller programming for smaller audiences. While I love shows like It's Always Sunny in Philadelphia and think the world would be a better place if more programming was akin to their style, the cost of producing that many shows could be much larger. From a media buying perspective, this super fragmentation of the audience would make life easier because audiences would be better defined and advertisers might actually pay more knowing that they can speak directly to a group without a disinterested halo forming.

Hulu is not perfect by any means. I actually prefer streaming video through Netflix. If Hulu were to raise their streaming quality to that of Netflix, then maybe people will pay for it. As for now, don't throw the baby out with the bath water and pull the plug on Hulu.

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