A few weeks ago, I wrote that debates over the future of television tend to conflate three separate concepts: the content, the pipeline through which it is delivered, and the appliance on which it’s projected. It’s important to distinguish between them because their prognoses are not necessarily aligned. For now, let’s examine the outlook for television content, the ways that data are changing the makeup of content offerings, and the battle for attention from modern audiences.
It’s difficult to keep discussions about content from spinning off their axes because the landscape is both vast and diverse. The creative challenges to producing scripted entertainment are very different than those of other genres, such as news, sports, or competition shows, and the current spectrum of available programming is far too varied for traditional classifications.
Also, it’s tough to be objective when talking about creative product, to cast aside personal tastes, or biases that sometimes correlate “quality” with the size of the budget or pedigree of the producer. Financial leverage and storytelling experience can help to create great programming, but in the modern landscape, they’re not the definitive means to resonate with an audience. Big producers no longer have the market cornered on raw creativity, and a “side effect” of having so much spending power and a rich history of success is an aversion (or contractual inability) to adapt to change. The freedom to do things differently empowers upstart producers, and it’s a mistake to assume that a bankroll or a case full of Emmys will guarantee future success. Not surprisingly, it's new entrants that are leading the change.
Art is subjective, but the business of art is not. Content thrives when it can be produced sustainably, through a virtuous cycle between the supply (creators) and demand (audience). New product must first find its fans, and then actively engage them. Audience attention must be effectively monetized to support the creation of more product, and the process continues. The iterations breed fan loyalty and brand equity. This is how modern franchises are made. And the fuel that keeps this engine running is data.
The New Fragmentation
Fragmentation itself is nothing new. The advent of almost every major media technology has created some amount of distraction from those that preceded it. According to Nielsen, in 1955, a top 10 prime time program was watched by somewhere between 34% and 48% of the households with televisions. A look at data from June of this year suggests that now, it’s somewhere between 4% and 10% (the epic NBA finals led the pack and were still shy of 11%), and it’s been in constant decline for decades.
Unlike its predecessors, the Internet hasn’t just accelerated the dispersion of eyeballs, it’s changed the “physics” of the content landscape in profound ways. The availability of low-cost, high-quality production tools, and distribution mechanisms that are freely available have all but eliminated the barriers to entry to new producers. The old playbook for finding and retaining an audience has been thrown out, along with the traditional definition of a “hit.”
The content landscape is more varied than ever before.
Historically, even as new technologies expanded the available “shelf space” for content, the process by which it appeared on these various platforms remained relatively unchanged. Real costs of production and distribution served as natural barriers to entry for all but a small handful of well-funded creators, and what filled the pipelines was content that had passed muster with layers of corporate decision-makers. Today, the corporate choke point is gone. The result is not only a huge increase in the volume of new content, but also a serious dilution of the gatekeepers that have used their own intuition to direct popular culture for so many years. We can now observe varieties of programming that would have been unheard of in a world limited to linear, scheduled television.
Platforms are defined by software, rather than hardware.
It used to be that new media platforms manifested as hardware (VCR, DVD player, game console) with very specific use cases. If it made economic sense to the copyright holder, content would be ported to multiple platforms, and exploiting the same content across these different platforms unlocked significant financial upside.
Today’s emerging platforms aren’t defined by a new gadget or a plastic disc, but rather by software; code that defines a content service (think YouTube or Netflix) and algorithms (e.g., recommendation engines) that shape it. Access is no longer device-specific and no longer dictated by schedules, which can be liberating for content owners, but also eliminates many of the “inefficiencies” in distribution (e.g., narrow use cases, limited windows) that created incremental profit opportunities in the past.
Data doesn’t only help analyze audiences, it actually finds them.
By modern standards, old media had access to a limited amount of information on audience and used it in a reactive way. Panel-based reports provided ex-post data to linear networks on viewing behavior which were useful to scorecard programming, adjust marketing spends, and reconfigure a schedule at mid-season. This process of trial-and-error aimed to drive eyeballs to the programming schedule and keep them there as long as possible.
But when virtually everything is available on demand, content must use data to proactively seek out viewers rather than the other way around. Recommendation engines have replaced linear schedules, crunching massive amounts of metadata on programming characteristics, stream starts, play-through, clickstreams, demographics, and psychographics to create an optimized experience for each viewer.
On open, ad-supported platforms (e.g., YouTube), multichannel networks (MCNs) use data-driven tools to build audiences. Representing many thousands of individual creators, they refine strategies for the timing and frequency of content releases, cross promotion between creators, and targeted marketing of new content. Affiliating with a MCN will cost a creator a chunk of their economic upside, and won’t quite guarantee runaway viewership, but many have found that it’s more advantageous to tap their trove of information in finding fans.
What’s a bit ironic is that MCNs appear to be recreating much of the traditional Hollywood dynamic, only tuned up for the digital realm. MCN techniques leverage network effects by recommending and auto-playing content from their own stable of affiliated creators. Further, most MCNs are moving to own copyrights (through production or acquisition) to maximize their returns. It’s validation that unique content is still “king”, but it also puts a check on the notion of a future without gatekeepers. In fact, some of these prospective gatekeepers may be familiar; DreamWorks bought AwesomenessTV in 2013, and Disney acquired Maker Studios in 2014.
Vive le R.O.I.
A corollary to the notion of sustainable content is the need to manage risk in producing it. Even in the recent past, major studios could take big risks, spending millions per episode because there was predictable demand from a host of markets downstream from the initial network run (DVD box sets may be long over, but international licensing and syndication stuck around). But the migration of eyes away from linear TV and toward newer platforms has (and will continue to) depress this demand, making the traditional TV production model much more risky.
Sustainable production is less about aggregate profits than profitability (or Return On Investment). The ability to produce not only cheaply, but also quickly is a distinct advantage for the little guys. To be sure, audiences still appreciate things that cost big bucks, like top-shelf talent, car chases and exploding buildings. But the recent popularity of simple formats has illustrated that such production fineries aren’t always necessary to resonate with an audience.
Consider two hypothetical projects, both aimed at a similar demographic.
- HOLLYWOOD COMEDY: a major-studio, 13-episode, half-hour comedy with a $2m/episode budget and a major network commitment
- WEB SERIES: a collection of short-form (e.g., 5-7 minute) segments by an upstart creator that is shot and edited on consumer-grade equipment and distributed via YouTube
Let’s assume that both find reasonable success relative to their respective peer groups.
- The Hollywood comedy puts up ratings enough to justify the green-light of a second season, and in addition to its license fees from the primary network, also secures some additional distribution revenue from international channels, and digital transactional and subscription services so that it’s marginally in the black, maybe by a couple million dollars on the season.
- The web series creator forms a YouTube channel, signs up with a MCN and pulls in a few million views and 25,000 subscribers within a couple of months. This all nets the creator a few thousand dollars from YouTube’s ad engine. The promising response motivates more production, and new content becomes available almost immediately, as the creator is also now interacting with her newfound fans via a variety of social media mechanisms.
Aesthetically, the two projects are hardly comparable. One was produced with highly trained (and unionized) artisans on the highest-end equipment. The other one was created by a rookie with a consumer-grade camera and a little help from her friends. Each satisfies the consumer “appetite” for content differently. After all, there are times we want filet mignon and others where we crave a backyard burger (apologies to my vegetarian friends).
Yet these projects are competitive with one another because both are going after the same eyeball. As much as technology has allowed us to find more time in our 24-hour day to watch, listen, read and play, there’s still a limit to how much time anyone can spend staring at a screen before social, economic or biological realities will interrupt. The eyes that found their way to that YouTube show were, in a sense, substituting it for other comedic entertainment, such as the network series.
The web show generated only a pittance when compared to the distribution of a network series, but the future of both projects depends less on the nominal level of profit and more on the return on investment to that creator. The $50-60k per year generated by the web series makes for a full-time career for that young producer, whereas a couple million dollars in contribution might barely move the needle for a major studio, especially when we consider overhead costs and other expenses that don’t appear explicitly on a title P&L.
And it all came out of a bedroom, rather than a Boardroom.
What Will We Watch?
As audiences shun prime time for OTT subscription services, ad-supported web platforms, social media, and other diversions, are tastes fundamentally changing, or are we just seeking out the same aesthetics on different screens? It turns out that both are true. Once again, data and analytics have prompted the launch of groundbreaking programming in the past few years, but it’s also interesting to see that certain time-tested tropes resonate just as well on YouTube in 2015 as they did over the airwaves in the 1950s.
Data-Driven Drama
It’s widely acknowledged that HBO has produced some of the boldest television of the past 20 years, including Sex and the City, The Sopranos, True Blood, and Boardwalk Empire. As a subscription television service, HBO is able to take greater creative risk because its cash flows are based on monthly, recurring revenue, rather than spot ratings for advertising. The notion of Standards and Practices is also considerably more liberal on pay services, removing constraints on profanity, nudity or controversial themes. There is always some risk of subscriber churn, but HBO has consistently delivered a value proposition that kept its base (and its cash flows) relatively predictable.
More recently, Netflix has leveraged the creative freedom of a subscription model, and upped the ante with rich audience data. When it announced its intent to produce House of Cards, CEO Reed Hastings was not shy about drawing comparisons to HBO, and the show drew as much buzz for the way it was financed, as for the talent involved. Trusting its analysis of its subscribers’ preferences, it committed to two seasons at a cost of $100m. It turned out to be a pretty good bet – both creatively and business-wise – but it certainly wasn’t the first successful 13-episode political thriller with notable stars and costing $4-5m per episode; just the first one endorsed by algorithms.
In its wake, Netflix and competitors such as Amazon started to make bolder creative bets using similar techniques. Orange Is The New Black, a "dramedy" that chronicles life inside a women’s prison, and Transparent that takes a darkly comic look at a family whose patriarch is transgender are not shows that would have ever been bought by a traditional broadcast or cable network, and even HBO – which, until recently, had no direct-to-consumer business – couldn’t have analyzed these creative bets in the same way. So far, it looks as though these bets are paying off, as all have garnered critical acclaim, a wave of Emmy nominations, and buzz from fans.
The Wacky Web
We’ve acknowledged that the democratization of production and has spurred thousands of scrappy producers, some of which are succeeding at scales that rival the more traditional networks. But what’s more amazing is what this highly experimental landscape is actually producing.
Excluding music videos (which are not a new format, and consumed under more repetitious use cases), YouTube has spawned wholly original genres in massive numbers. The “Let’s Play” format, where a host provides voiceover atop a screencast of video game play, has propelled creator PewDiePie to amass more than 37m fans (YouTube offers free “subscriptions”). Jenna Marbles doles out beauty tips, advice, and comedic ramblings to a stationary camera for 15m subscribers. Ryan Higa’s irreverent sarcasm manifests in 5-10 minute segments that appear every couple of days in the feeds of more than 12m viewers. And there are thousands of much smaller creators that drive hundreds of millions of hours of consumption on a daily basis.
To be sure, much of this new material evokes memorable pieces from television’s past. TheFineBros “React” videos are a play on the old Kids Say The Darndest Things radio format pioneered by Art Linkletter in the 1940s (though the modern form exploits any and all demographic groups for humor). Pranks channels and “epic fail” videos are like the great-grandchildren of Allen Funt’s original Candid Camera from the same era, or America’s Funniest Home Videos that came along four decades later and still hangs around linear networks.
A data-driven media landscape is undoubtedly reshaping consumer tastes, but what should encourage all creators is that viewers are embracing the new even as they continue to cherish the original foundations of the art. For scripted entertainment, a strong story, vivid characters, even a good gag, will resonate, but the form it takes and the way it's consumed will continue to change. New storytelling techniques emerge all the time. Even Snapchat — a staple of millennial and post-millennial culture — is now a burgeoning platform for original content, despite its checkered history and ambiguous use cases.
As we’ll explore in future posts, the business of delivering television has its own peculiar mix of challenges and opportunities, and the TV appliance itself could use an overhaul, but the democratization of production and distribution is invigorating pop culture's "palate" in pretty amazing ways.
