4GM: Nobody gets Rich, Everybody Gets Paid

I think it's worth pulling some of the comments out of the last post and using them to springboard forward. I'm still beating one last rewrite into the ground, so this essay'll be a bit rambling. Apologies in advance.

First off, let's not think that the digital storage TV is going to be an immediate replacement -- it'll be a long, loooong side-by-side evolution with whatever the hell else will occur in the medium. I mean, look, it was only this year that there are more DVD players than VCR players in American homes. Barely. Like you, when I saw that stat, I pulled a full-on Jon Stewart "WHAAAA?" And those are two techs that are -- from the consumer standpoint -- practically identical.

So much of this, of course, is personal perception. While I don't think that most people care about DRM, Doctor Memory and Kirk raise good points -- most people don't care about DRM until it bites them in the ass, and then they care a lot.

I would counter that a.) they don't seem to have cared enough to stop Apple from hitting one billion downloads and b.) I think you'll see DRM taking some heavy hits in the industry, as fewer jobs depend on defending old models. A fairly big part of the industry's change will come from the changing nature of the online entertainment execs in the studios as time passes. DRM that interferes with standard (and I say standard) consumer usage is inefficient, and as a good capitalist I believe in markets. The abandoned Microsoft "Play-for-Sure" example given as a mark against Microsoft success is actually, I believe, illustrative in the opposite direction. Even Microsoft couldn't cram cripplingly bad DRM into the entertainment system.

Chester, Impworks and Dan raise questions about who will pay for the new shows if broadcast networks die -- that is, without ad revenue, will everything be so low budget that our entertainment becomes all You-Tube-y?

Dan notes that television quality suffers from falling advertising revenue, but that's not quite true. Network advertising revenue has been slightly rising or flat for a while now. There was a recent, hinky embargo on announcing last year's Q4 revenues, but I'll assume things haven't catastrophically collapsed since September.

Not to hump the free market again, but I will assure you, if there's one industry that ain't going under anytime soon, it's advertising. The big advertising agencies, and the individual advertising departments of large corporations, are way, way ahead on the curve. There are a couple of New York ad agencies Who Shall Remain Nameless, who fly execs up to MIT every single month for updates and briefings on new media technology.

So regardless of whether the network middlemen stay in business, the advertising filth will still need to buy attention depending on whatever equation they're living-and-dying by this week. However they do it -- direct sponsorship or product placement or whatever model arises from stochastic tinkering -- there will still be humans paying money for eyeballs.

This is actually a good moment to break down how television actually works, as Dan's completely understandable misconception is quite common. Networks don't make shows. Networks buy shows. And they don't even buy the whole goddam thing.

Studios make shows. They usually, as I've noted before, deficit finance a show, where they pay the bulk of the production costs and the network pays a fraction of the per-episode expense. It is a symbiotic relationship -- the studio retains ownership, and so can reap the benefits of a popular show through (not so much now) syndication and (the only thing keeping Hollywood alive) DVD sales. The network got the advertising revenue, and could jack up those prices if a show was popular.

The laws changed a decade or so ago, allowing studios to own networks. This altered things in some hinky ways: NBC television, for example has a production arm, colloquially known as NBC-P, that should in theory make shows for NBC but at the same time it's really a part of the greater NBC Universal Television development in league with what was (and still is, technically) Universal studios. So their product can sell to any other network but in practice develops primarily for the NBC Universal family -- that is, not just NBC proper but SciFi, Sleuth, and USA. And vice versa, hence the flirtation with Galactica winding up on NBC this year, and the sudden appearance of Heroes on SciFi.

I have had a day with three meetings -- NBC network execs, NBC-P, and Universal -- and wound up in three different buildings. And let's just say the pecking order at any of these hybrids ...
NBC Universal/NBC
Disney/ABC
Fox News Corp(20th Century Fox, effectively)/Fox
Warner Bros. & CBS Corp/CW
.. is a bit unsettled, while only the CBS Corp/CBS chain of command is completely established. Les Moonves is chairman of CBS and president of CBS Corporation. He can also crush your head through the sheer power of his gaze.

Confused yet? Well, so are we. When your nominal buyer becomes your employee, things gets weird. We've already seen situations where a network's continued a doomed show up through 13 episodes so that the box set will recoup some expenses for the studio. Whedon's Angel very much died because the WB realized they were just advertising for 20th Century Fox's box sets. Although the network in theory has final say on what shows they pick up, there are stories in recent years about one network where the network execs weren't even allowed in the room while the studio suits did the fall schedule.

(Let's leave aside the fact that currently there are a limited number of broadcast entities and owners. There is no free market for American television, really. That's a different --and generally terrifying -- conversation.)

Networks dominated because of information asymmetry and branding. That is a.) we know who makes television, and we'll select the shows worthy of your attention and b.) when you come "here" every night, you'll see the types of shows you like. Both those ideas are deader than dead Mr. Deady Deaderson, winner of the County Dead All-Dead Dead-off. (ahhh, Blackadder. How I love you so.) The networks' financial claim to prominence was, simply, ratings which were a result of this asymmetry. If you wanted to get a bunch of eyeballs on your ads or show, you had to get on network television. However, the rise of cable television has flattened out this claim. I say "flattened" for a reason. According to the Cable TV Facts from the Cable Advertising Bureau, the "networks" pulled a 27 share in '05, and all other basic cable pulled a 54 share. To put this in perspective, looking at the Nielsens for last year -- once you're out of the top 10 shows, audience share hovers between 10 and 15%. for he rest of the top 50.

The network system depends on creating hits. It's like wildcatting, with on the average 3-6 million dollars spent on each of the hundred odd pilots made every year in the desperate hope that one will be a big enough hit to justify big ad revenues for the network and a good syndication sale for the studio. But with the flattening shares, how do you even define a "hit" anymore? No, that model's always been a creaky bastard that Hollywood just can't quite seem to quit despite its ferocious inefficiency. Something like peak oil, if you get my drift.

And let's add recent psychological shifts in viewerships. People don't tolerate reruns anymore, not with a flooded market. If they break viewership habit, it can be damn hard to get them back. I think Lost's problems are deeper than the awful two-up-three-down-one up-two down stagger season they had last year, but I'll cede that their 25% drop in viewership is not unrelated to the issue.

Yet, ironically, people WANT to be committed to a show while it's on. "Content is community" is finally coming true. My mom and her friends get positively giddy waiting for 24 to come back. I got her the damn Tivo, but she insists on watching it on the very Monday night. But this attention, this more personal relationship, comes with a price. People just don't have the time, attention, or habit of hanging about for the whole damn year anymore. I've argued for 6-13 episode seasons before, and the split-seasons that the networks are adopting are basically the baby steps; the networks backing into that structure while still dragging their old habits with them, chained about their ankles.

DVD sales are the financial engine of Hollywood now, but there are problems here, too. First, how do you sell a show without network exposure first? Second, what happens when a show is the type to encourage dedicated fans who will buy the boxed set but isn't widely appealing enough to generate ratings and hence stay on the network schedule? Whose standards of success will come to dominate, the network's or the studio's? Now, the difference between myself and certain people who wear ties to work is I believe that just because we don't know the answers to these questions doesn't mean these questions don't have answers. Again, stochastic tinkering. There's nothing inherently stable about the current network situation. Remember, television as it exists is the tail end of government-leased invisible space. Network television is executive welfare.

Further complications will involve the difference between the internet, the pipes that carry yoru net, and the FCC control of the now truly mythical "airwaves." That's even headier stuff, and frankly requires far more research than I'm capable of churning out right now. But my point is, the current networks as concepts are not crucial to the studios and advertisers finding ways to make entertainment and sell things through said entertainment.


All this to get back to my point -- this Xbox play may not be the end-point transformative moment. But it's monumental, perhaps even more so than when Apple started selling videos -- no, wait, I take that back, because getting people into the habit of paying per show/movie was a crucial bit of mental conditioning. Ahem. Where was -- oh, yes. I'm one of those people who strongly believes viewers link to an "entertainment space" in their lives. People are already in the habit of having video games in their entertainment space. They're in the habit of having cable boxes in their entertainment space. They are not in the habit, yet, of setting up wireless routers to stream product into their entertainment space.

In retrospect, even the download's not all that interesting -- it's the promise of VOD. Now, download's nice, but VOD is where it's at. That's where the pipe overlords reign, and seeing that Comcast just cut a deal with Tivo is very interesting indeed. How many people just watch a show once, but want what is essentially limitless time-shifting? Why store shows or movies on your hard-drive when you have access to them in your entertainment space anyway?

So the Xbox IPTV concept alone is not transformative. But how it links several crucial elements in reshaping our perception of access to entertainment, that's the score right there.

Rough pencil sketch of the future. The major generic networks fade as old people who just want something on in the background die off. Branding restructures along two paths, with a.) occurring before b.), but then running parallel.

a.) networks become even more genre or style defined. SciFi, Sleuth ... even now, look at USA with its genial detectives, or FX with its gritty dramas. Some of the networks remain, but specifically as distribution arms, and not particularly effective ones. That is, CBS may still be around for decades, but the name "CBS" will have limited marketing value, if any.

Competing youth networks arise. There will be a brief problem with monopsomy behaviour -- companies like Disney control X number of channels on your cable box, and therefore control access to that market share and can deny intransigent producers broadcast opportunities. You could argue monopoly, too, but that'll change, I think. As we swing to the internet rather than cable "channel" systems, this force will self-correct. The internationalization of media will help there too, as will lowered production costs through technology. But seeing as cable is currently at twice market penetration as broadband, we'l be dealing with broadcast "artifacts" for a while.

b.) new sources of information assessment will emerge. This is right out of my ass, but as new communities form, prevalent media personalities of today and the near future will become more important as "guides" for that community.

Let's take Warren Ellis, for example. Assume Warren's dark heart improbably beats on, allowing him decades to build his awful ideological army. There will come a day when Warren will say "behold, people, this thing is good, and not at all testicle or piercing oriented. If you pay a dollar for a download of it, you will not be disappointed." Granted, the profit margins will be small, but that's the direction we're heading in anyway. The massive scores off network hits were inflated, a brief, beautiful Golden Age of Filthy Money which I doubt will naturally recur. In the future, nobody gets rich, but everybody gets paid.

Yes, I basically just said that Oprah is a neo-network. Go ahead, argue with me. Is Dick Wolf a network? JJ Abrams? Is Kiefer Sutherland? Who do you trust to entertain you?

Take this one step further. Several humans of like intellect or taste -- Warren, say Joss Whedon, maybe Charlie Stross, toss Cory Doctorow in there -- they might cut deals with producers. (Are Tarantino and Rodriguez now a "network"? Hell, how are they not?) New "networks" -- which will rarely, ever again be separate from linked production entities -- new networks will evolve in the free market. The natural aggregation points will be branded creative entities, individual creators or otherwise, who engender personal loyalty. We may well see "schools" of like-minded entertainers evolving in television, the way we had in art, or even in film in the 60's and 70's. Different (and probably unpredictable) models will evolve, but those will be the seeds.

There'll be no more consensus media, which some people even now mourn. But again -- the last fifty years were a unique moment in history. What we're looking at now is a correction. It's famously said said that one in ten Britons who could read, read Dickens when he was alive.

The most popular writer in the history of the English language ... had a ten share.