How TV Broadcasters Can Avoid Digital Doom
TV is the King of Media. Nobody has the scale, the advertiser loyalty or the massive coverage of TV stations. Consequently, nobody has as much to lose as TV. However, they seem powerless to stop the onward digital march. Most successful TV players seem to shrink from the digital challenge. There have been initiatives, but few successes.
The fact is that even top TV companies are ill equipped to deal with the web. Amazingly, they don’t seem to realize this and plunge headlong into digital initiatives that play to their broadcasting strengths but not to their digital opportunities.
Challenges that TV Broadcasters Must Overcome
Poor understanding of content: Most broadcasters produce very little of their own content (except thematic channels). They are more like trading companies, predicting the price they pay for programming will be less than the ad inventory the programming produces.
Lack of familiarity with audiences: Because they don’t produce much programming, but also because their audiences are massive, broadcasters don’t have much opportunity to get to know their audiences very well.
Failure to scale the business to the opportunity: TV is a big business and Digital is a crucial issue for them. Consequently, they are ready to go to great lengths and spend big money to succeed. Unfortunately, this approach almost guarantees failure. Successful web businesses usually start small. (See Building Effective Web Product Strategy).
The failure to produce in Digital is a major problem for TV companies. Convergence between TV and Digital will move faster and farther than any other media. TV stations are already distributing content and selling TV ads on the web, others will to.
Moreover, the ability to control frequency on the web could enable a new TV renaissance, yet it still isn’t clear if legacy broadcasters will participate fully.
Strategies for Achieving TV Success on the Web
Acquisition: Two good examples are ITI Group in Poland and Time Warner in the US. Both made major digital acquisitions. ITI’s Onet.pl seems to benefit from ITI’s broadcasting and content production expertise and their TVN brands seem to benefit from Onet’s digital expertise.
Admittedly, Time Warner screwed themselves on price with AOL (we can blame the bankers for that), in the long term it might still pay off. CNN, as an example, is an outstanding site with some of the best functionality and usability on the web.
Time Warner also integrates very effectively. They seem comfortable combining TV, Magazine and Digital content and do it almost seamlessly. Their Warner Brothers division is very progressive in marketing movies in the digital sphere. Could they have attained the digital competency they have now if they hadn’t acquired AOL? Maybe, but I doubt it. Despite digital schadenfreude, Time Warner made $46 billion in 2008.
However, companies like ITI and Time Warner seem to be the exception rather than the rule.
Partnership: ACP in Australia teamed up their Channel 9 with MSN and also formed a partnership with eBay (which, unfortunately, they sold for pennies). Both ACP and MSN seem to have benefitted.
VC Approach: With the digital superhighway littered with TV roadkill, one wonders why TV companies don’t adopt the approach of venture capital investors. VC’s typically expect about half of their investments to be duds, a few to do okay and a few more to be runaway successes. Microsoft seems to have taken this approach and has made many investments in minority stakes of early and mid stage companies.
Mark Andreessen, who made the first conspicuous digital fortune, has invested in scores of web initiatives but has had very few winners (Two of them were Digg and Twitter and his most recent venture Ning.com is a fantastic concept that is gathering steam). If even successful web veterans are wrong more than they are right, why do TV companies think they can pick winners in Digital?
Who Will Survive?
TV Broadcasters have tremendous assets and a lot of expertise. They understand how to package and optimize electronic inventory, they have a lot of great, creative people and built in marketing heft.
What they need to grasp is that Digital Media is not only a new business but a disruptive threat. Disruptive threats require a drastic change in fundamental strategy and process. (See Disruptive Innovation).
It is not surprising that TV companies with programming expertise seem to do a bit better in the Digital World (e.g. Time Warner, Viacom). Businesses that depend on creative output tend to work more effectively integrating small groups of talented people, collaborating with partners and spreading their bets.
Pure broadcasters, however, will have a much tougher time. The age of sanctioned monopoly through broadcast licenses is gone and will never come back. They will need to scrap their grand plans, change their internal culture and process and learn how to partner more effectively.
It will be an excruciating process. Some will make it, most won’t.