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Building a High Rise on the Foundation of a Colonial Home
When you’re building something from the ground up, it needs a good foundation. The Empire State building, for example, rests on a foundation that is 55 feet below the surface of the earth. The same applies to business, not just monetarily, but in the way ideas are executed. Rob Long wrote about Netflix’s disruptive influence on television. The question then follows: Is Netflix built on a solid foundation, or will it crumble under its own weight?
Entertainment media in The United States lays on a foundation dug and set between 1926 and 1927 by two men, David Sarnoff of the Radio Corporation of America and William S. Paley. When those two men established their radio networks — NBC and CBS, respectively — they decided that audiences would receive their product for free and that programming would be paid for by advertisers. The audience, of course, had to purchase their radio sets (a bonus for Sarnoff if you bought an RCA model), but that was it.
1950: After 15 years with Johnson’s Wax, Pet Milk steps in to keep a radio institution on the air. Radio sponsors bailed to television rather quickly.
This model would endure for the next half century. To be sure, there were modest modifications along the way. In the beginning, the networks merely sold time and didn’t do much programming; as such, radio became the medium of advertising agencies. They bought half- and whole-hours and filled them on behalf of their clients. They paid the stars, the writers, producers and directors. The whole ball of wax was theirs.
Jack Berry (Center) and “21” star contestant Charles Van Doren. Notice the prominence of the sponsor’s name on the podium.
That stood right through the early days of television. Then came the quiz show scandals. And when it was revealed that producer Dan Enright was rigging 21, NBC brass claimed that they were just as much the victim of fraud as the general public since they had no control over the content.
Congress held hearings and passed laws (Yes, Virginia, it was Congress that reacted, not the bureaucrats at the FCC) and the networks responded by taking greater control over programming. Full sponsorships gave way to the birth of spot advertising buys.
And so it was until the 1970s. Cable television is as old as TV itself. (Signal meet mountains; mountains meet miles and miles of coaxial cable.) Then, Charles Dolan introduced a little thing called Home Box Office and Ted Turner thought of something called a “superstation” and 24-hour news networks. Slowly, Americans warmed to the idea of paying for additional programming, both with and without commercials.
That success, however, was bought with a price. Reruns of off-network shows slowly migrated from local independent stations to cable networks. And so did the local sports they carried. A segment of society that used to get such programming for free found they were left behind when they could not pay.
Audiences began to scatter. Government responded by approving consolidation and relaxing ownership regulations for broadcasters. It was a temporary save at best. With the advent of the Internet, the fractionalization increased exponentially. The programming fees for cable soared, as did consumer bills. Cord-cutting began.
Now, we stand on the threshold of an on-demand world. Even the networks are there. CBS charges $5.99/month for next-day, on-demand access to all their new programs, along with live streaming from one’s local broadcaster.
But what are the audiences’ expectations? If they pay on-demand, are they still willing to accept advertising just as they have since 1927? Who will fund development costs? Who’s going to pay for the bandwidth and more infrastructure to carry it? At least in the heyday of broadcasting, the networks didn’t ask you to pay the bills on their transmitters.
“Disruption” is here. But are the foundations there for strength or are we building on rubble?
Published in Culture, Entertainment
But those 10 shows a year would cost not cost $35 per season if the networks didn’t exist to subsidize their development costs.
Amazon actually keeps plowing its earnings back into new ventures, so their lack of a formal profit is misleading.
Not my concern. It’s not like I’m buying a car and worrying that the dealer won’t be able to get parts in a year. It’s more like worrying that the local Kroger might shutter its doors and make me go down the road to Giant Eagle.
Now you’re just making me sad.
Again, not our concern. If they didn’t exist, we’d spend our entertainment dollars elsewhere.
I look forward to the Skipsul Network.
I ain’t arguing that a la carte can sustain the entire industry. I’m arguing that it’s a model that is better suited for some target audiences, and that without it the distributors would get less, or even zero revenue from many of those customers.
We only ever had basic cable as a kid. That means companies like HBO got no revenue from us. When I moved out on my own the cable company got no revenue from me because I exclusively watched over-the-air and DVDs (until a girlfriend demanded I got cable. I cut the cable again when I got rid of the girlfriend). HBO still got no revenue from me.
Today, however, I buy the HBO (and AMC, Showtime, plus a few network shows like The Simpsons and Gotham, etc.) shows directly, and I still don’t subscribe to cable. HBO gets more revenue, and nobody loses any revenue because I was never really one of their customers.
Do you think this could be an opening to break the leftist hold on popular culture? There is a market for away from that. I remember when The Bible series came out on the History Channel, the one Mark Burnett put out. The ratings were tremendous and I think that surprised a lot of people, and saw there was money to be made. Maybe that is why Hollywood put out Noah and the like but as usual missed the point and couldn’t keep their leftism out of a perfectly good story.
But isn’t Hollywood kind of in it’s death throes, nobody really cares about the Oscars anymore. “The agenda”is so on the nose with some of the content that they put out there it is offputting. We just want to watch a movie or a TV show without some kind of message. People are tired of that. TV and movies are supposed to be an escape from the politcal realm.
Heh. Don’t think that they will ever by that narrowly focussed.
My beloved and I are quite happy having separate apartments. We’ve been going strong for quite a few years…
… although you’d have to ask her exactly how many. ;-)
Hollywood has been in its “death throes” several times in the past.
They’ve always found a way to make money.
“Who wants to go to the movies when they can get Jack Benny for free at home?”
Maybe, maybe not. We’ll see…
My family cut the cord eight years ago, and then we re-attached to the networks because of Fox News for my wife and the Outdoor/Sportsmans Channel for myself. With the Outdoor Channel rolling out an app and Top Gear going to Amazon, the only thing that’s keeping us from ditching cable is Fox.
You want to disrupt cable TV? Create a center/right streaming news network that’s as good as, heck, let’s set the bar low… MSNBC, and put it on Apple/Tivo/Google for $9.99 a month.
Let’s do the math. Even if I need to pay $9/month for Netflix, $25 / month for baseball or a similar sport, $10/month for news and another $20 / month for other “channels” like another sport or other programming, I’m still WAY ahead of the game when it comes to my cable bill.
“Hollywood” as the centralized bureaucracy of American film and TV making is certainly floundering, but I would not write it off entirely. Without fixing itself, competition would happened anyway as the rest of the world figured out the processes, and did not have to work within the sclerotic union cost structure. Look at the Bollywood machine, for instance.
The overt politics, of course, are hastening the changes in that such films are neither entertaining nor enlightening. Even liberals tune out screeds and browbeating.
Even Fox couldn’t keep me as I cannot stand the TV news format, commercials, or Bill O’Reilly.
It’s notable how much of the content I watch online originates from outside Hollywood. Thanks to Netflix, iTunes (and, yes, occasionally, bittorrent), I’m watching all sorts of shows from around the anglosphere that I never would have known about before, except for the few examples that get picked up by Masterpiece Theatre.
I’ve developed quite a taste for many Australian, New Zealand, and Irish tv shows.
Heck, it’s not even just the anglosphere. Netflix has been picking up shows from Spain, Portugal, Norway, etc.
I started watching a show from Japan about a young woman who starts working at a fashion design label. I didn’t even know there were Japanese shows that didn’t feature giant robots fighting giant lizards! ;-)
My public school education reveals itself once again.
I’m a Communications Studies grad (stop laughing!). The ups and downs of Hollywood economics history is a key part of the film studies classes.
The last time that Hollywood was in its “death throes” was the 1970s. That period produced some of the most brilliant films by some of Hollywood’s most brilliant young directors (Copolla, De Palma, Spielberg, Scorcese, Friedkin, etc.)
Then Star Wars was released, changing the game. Hollywood started printing money again, but people also decried the “dumbing down” of the output after that point.
Today the story is similar, but different. Because Hollywood caters to the international markets now, people still complain about the “dumbing down” of the movies. You gotta keep the story and the dialogue simple when you’re catering to audiences who don’t speak English.
However, we also have the current “golden age” of television, thanks to cable and streaming. The brilliant young directors who would have made movies in the 1970s today work in television and online content.
You’ll note that I mentioned it was my wife who watched it. ;)
I don’t watch network news: Why would I sit and have someone read the internet to me?
The only shows on Fox I can stand is RedEye, The Five and the Greg Gutfeld show. Anything else on Fox is just one person yelling at the screen or two people yelling at each other. I got turned off of that sort of thing when Donahue was on the air, and I seen no reason to turn it back on again.
Very few industries are ever actually destroyed by innovation.
Changed? Disrupted? Consolidated? Sure. But rarely actually destroyed.
The go-to analogy for creative destruction is how the automobile “killed” the buggy whip industry.
However, it’s also been said (apologies that I don’t have an exact statistic) that in fact there are more horsewhips sold today than before the invention of the automobile, because recreational horse riding is so much more of a thing than it was pre-automobile, since way more people can afford it today.
Sure, there aren’t as many horsewhip manufacturers. Thanks to modern manufacturing there doesn’t need to be.
When it comes to media, I don’t really care if “Hollywood” makes less money if I’m seeing more content being produced. Thanks to low-cost HD cameras, digital editing and compositing, and online distribution, the cost of entry into the market is way, WAY lower than it was for those 70s directors.
Of course, the per-unit revenue for this content is also way lower. Apparently many of the people who have become famous making videos for Buzzfeed keep their day jobs as baristas.
But so what? If many of history’s greatest artists never made any money from their art, why should the people who make freaking Buzzfeed videos?
And don’t forget other *ahem* recreational activities that may or may not require horse whips.
Not public school – public school from the 1970s-present day.
I’m also the product of a public school education. I had to use Wiktionary to get the correct spelling of “throes”. Once again, the Internet demonstrates its superiority to traditional bureaucratic institutions created during the industrial revolution.
;-)
First of all, good TV 101! I always thought scatter plans were more of an audience reach evolution. If regs after the quiz show dust-up taught sponsors to hedge their bets, that was good timing.
Cord cutting is over-rated. The bandwidth infrastructure is overburdened. The more interesting problem is funding quality content.
Netflix follows the model of HBO, Showtime, and Starz, which also began by riding along mostly on other people’s content. Inevitably, to protect themselves, they get into originals. Without ads they feel more freedom and can take creative risks. They need to explore more content for the non-ad demos, in this geezer’s opinion. They’ve got a lot of creative leeway, but a weaker promotional platform for now. Subscriptions remain a much better value proposition than on-demand, unless someone comes up with a very sophisticated “penny plan” which customers understand and trust.
Netflix’s “foundation” is virtual. Like the information age, it’s built on sand. It’s auto-billing, customer loyalty. It’s the not very navigable, ever changing, ever measured library and the not so perfect AI about what each of us wants to watch, when, and how often. Deep underground it rests on other people’s broadband subscriptions. So their value better be in their e-FredSilvermans and Tartikoff Algorithms, otherwise some other, better programmer (Amazon, Google/YouTube, or whomever) will snatch their customers.
Customers — viewers — need to be listened to more carefully than ever. Too many niches stand unfilled, too many quarters and dimes are left on the ground. The idea of cultivating the middle and upper-middle brow taste of the viewer has been effectively abandoned, even though doing so made NBC millions in the last twenty years of the 20th century. Since then, you could argue TV has gone from middle brow to uni-brow.
Today, quality originals can get lost for lack of proper distribution, or wither in the constricted, non-commercial funnel at PBS. If selective viewers don’t receive or can’t find the quality of originals they deserve, they choose a much easier option than cord-cutting: reruns!
I marvel at how many reruns of the top highly repeatable content continue to pump cash into the distribution system decades after production.
I Love Lucy still reruns on broadcast TV, which it essentially birthed! Once a year they even colorize it, and run it in network prime time! All hail Lucy, her brilliantly innovative Desi, and their writers and cast. Personally I’d rather cue up on old Dick Van Dyke Show (e.g.“Coast to Coast Bigmouth“) but Lucy reigns in the Darwinian throne game of broadcast syndication. If Content is King, she is Queen.
Also consider Law & Order. A rookie relative to Lucy, but the earliest episodes are a quarter century old now. It fed NBC and Universal (and was a big part of their merger) while growing A&E, then TNT, and it’s now spread across the expanding everywhere of distribution, including spin-offs. And yes, ten mediocre later polemical years of episodes are still riding on the quality, reputation, and expectation built by the fine first ten years. That’s repeatable, standalone content, short scenes which advance the plot, the New York casting pool, good research, and disciplined writing based upon traditional genre conventions, and tabloid headlines.
Maybe the hardest thing about creating a new television program is competing with the standard set by all the old ones still available.
Another great EJ media post.
When I was a kid, movie theaters ran a five minute propaganda film called “Stop Pay TV!” with ugly cheap animation of a monstrous-looking coin box with a TV set in its clutches, demanding endless tribute. Pay TV would evidently cause all sorts of awful things to happen, including “bringing offensive programming into your home”. (Because if there’s one thing Hollywood doesn’t go for, it’s offensive programming, right?)
But they weren’t 100% wrong. The first ads that ran for HBO in New York City newspapers promised “uncut, uncensored sizzling action, hot, the way you like it! Plus special programs for women and kids.” Bet that phrasing wouldn’t get by today.
Survivor’s bias. The reason they’re still available is because they were the best examples of a great big ocean of dreck.
(The same goes for why people tend to think music was better “in the old days”.)
Some of my favourite shows are those that basically took an older show or movie that had a good concept but not-so-great delivery and repackages it with better writing and production values.
One of the best examples of this method is The X-Files, which was basically just a mashup of Kolchak The Night Stalker and Project U.F.O.
Those two shows are all but forgotten except among serious television nerds, but they helped to birth The X-Files which became a huge hit.
Trying to remake (or compete with) a classic is a fool’s game, but remaking a well-intentioned failure can often be a winning strategy.
Let’s not forget that there is a powerful taste for novelty among people, so fighting the old stuff is not that hard-
Not entirely true, and here the bandwidth issues are tied up more in antiquated utility regulations. Many would-be fiber providers are simply legally unable to get into certain geographic areas. The backbones still have plenty of bandwidth, it’s the last mile that is the chokepoint.
Same with cable before it, minus the AI.
As does cable. All of those myriads of channels survive only because of cross-subsidation – essentially socialized billing. You buy cable for whatever channels you do like, but are also paying for all the stuff you don’t ever watch. Everybody with cable pays for ESPN, whether they watch it or not. Looked at it from that angle, most cable channels are welfare queens.
Depends on what you mean by “subscriptions”. As Mis and I have been at pains to point out, for an increasing number of people, a cable subscription is a poor value. $1200 a year, or $800 a year is a lesser value for more cost.
It’s like being told that in order to purchase, say, Time Magazine, you have to buy a bulk magazine delivery of Newsweek, Sports Illustrated, Highlights for Children, People, Rod and Reel, American Rifleman, 3 local papers, Better Homes, O!, Martha Stewart, Hemmings, Maxim, National Review, New Republic, The Nation, and a motley of low buck tabloids. Sure, you can claim that your $80 a month is a great price for all of those (which, bought separately would be a lot more), but is that really the same as value? Not if you only wanted Time. Sure, you’ll enjoy the SI Swimsuit issue when it arrives, and you might skim through National Review since you are getting it anyway, and the tabloids provide some amusement / bathroom reading, but none of these are things you would actually buy.
“But without these bundled deals, all of those tabloids would go under!” Well, that’s their problem if they built their business model around that sort of delivery.
Not exactly. The cable industry built the broadband infrastructure. They own the pipe. Netflix and the other over-the-top streamers run on the cable industry foundation, or on the telcos and other ISPs.
On the surface, but actually not at all true. You pay for the channels you use. The others are free. Payments by the MSOs to the networks are negotiated wholesale prices.
The cost to you, the retail customer, is for “all the channels you want” from among a larger menu of offerings “you receive.” Allocate your monthly bill as you value each channel in the package, in your mind, if it makes you feel better. Because if you didn’t make up your mind to pay for the whole package, you wouldn’t buy it.
It’s none of your business what they’re paying the networks. You are buying either the whole package, or shopping elsewhere. There is no a la carte menu (except for pay channels and special tiers) in this restaurant, and no one should be able to make them sell it to you.