Monday, April 27, 2009

News v. Entertainment

Techdirt has a great piece on Newspapers, The Recording Industry And A Misplaced Sense Of Entitlement, which does a nice job of contrasting the various arguments surrounding the sense of doom looming over newspapers, but then spins off into trivial observations about how the old media might save itself. The comments section is also interesting.
What impels this post is the idea that without the internet, Susan Boyle (Britain's Got Talent phenom) would have remained an obscure (British) phenomenon instead of gaining a few hundred million hits, and that the news industry has something to learn from this.
This conflation of how entertainment content performs vs. how news performs online is upsetting, and is ultimately a misleading straw man.
Let's get things straight:
Susan Boyle is entertainment content that went global.
News is not entertainment, first and foremost. It's supposed to be a) new; b) informative at minimum, though actionable is better, and c) the first draft of history.
The idea that news can compete with entertainment content is silly, with a few notable exceptions, ala 60 Minutes.
On the broadcast front, news was cheap to produce, cheaper than entertainment, and often cheaper than soaps.
On the newspaper front, the idea was that it was good for local advertisers, and good for the local community to have a selection of the day's news (with entertainment content thrown in as well).
The national newspaper is a different model, and there's just a handful of those in the states -- or arguably one (NYT) now.
The issue is not that the old business model (ad vs. subscription supported) is broken. The issue is how local and regional stories of interest will be covered, and by whom, particularly when such news is of low hit-value but of long-term importance. Low hits mean low wages means anyone covering them will either be a) rich or of independent means; b) a part-timer, who may or may not be "professional" in the old sense of the word -- ie, has perspective, strives to omit bias and remain objective; or c) someone who does it for a while, then moves on, leaving a gap in coverage.

This atomizes local and regional coverage in a new way. There will be no central repository for stories, no archives, no continuity.

Also, I assert that newsrooms -- with experienced editors keeping their reporters sharp -- make for better journalism. It's the kind of thing that a community cannot do as efficiently.

Monday, April 20, 2009

How Much IS a Link Worth, Anyway?

One of my favorite venture capitalists, Fred Wilson of NYC-based Union Square Ventures, has initiated a fascinating discussion over the the value of links. Google may be the primary source of traffic for most websites, but how valuable is that traffic, versus say, links sent by email, Tweets, Diggs, etc. And how does a site (content or commerce) valuate links?

An even deeper question is how should sites derive user-intent?

I've been attacking this problem from a different angle in thinking about how news and entertainment content differentiate from one another. Entertainment will always get better traffic, because, hey, it's entertaining -- it is supposed to have mass appeal. News, while vital, will barely touch that. It's telling that when I worked during the start-up days, about a third of our traffic came from Letterman, a third from soaps, and a third from Survivor. So all the work we were doing with news made little to no impact.

That experience was echoed at the Red Herring, where we measured our success by traffic, and one great way to bump traffic up was to find hooks that would snare popular traffic. This was troublesome to journalists who were trying to figure out a way to shoehorn a Britney reference into a story about server farms. While that strategy did work effectively, I'm fairly sure we didn't win a lot of converts (ie, repeat visitors, or subscribers to the paper edition).

Fred's post (and the many awesome follow-up comments) addresses this difference as well, but takes a 30K foot view by looking at how social networks assist in conversion. It's a must read.

Saturday, April 04, 2009

Anyone seen a Hulu rate card?

Just curious.
Over the past three months, Hulu appears to be getting its act together.
Ad insertions are increasing in their programming. The advertisers are getting more respectable. House ads are falling off. And new networks are pondering joining the Hulu empire.
I have no idea what contract details NBC has inked with Hulu, what the revenue sharing arrangements are, or how much revenue is coming in the door.
But I think the grammar of online television is being formed, and it looks like this:
a) Sometimes an intro ad.
b) 8-12 minutes of programming.
c) 15-30 sec. ad spot.
d) Lather, rinse, repeat until program close.
e) Sometimes a follow-spot (which is silly, because who watches these, really?).

That's a pretty good value proposition for an audience that has been weaned on 3+ minutes of ads during high-value time slots. And lest we forget, the new audience is happening online, and this is their emerging expectation set for all internet/tv-style/video programming, as the Brits say, in future. What's all this mean? It means that the traditional TV audience now has a format they will like better (since they typically hate/resent/grudgingly tolerate ads, and use the adblocs of traditional (let's call it legacy) programming. The new audience develops the expectation that this is the format.

This last part is worth some exploration. We know that music companies were too late to the game to realize they would be flanked by the internet, P2P, streaming, iTunes, etc. in terms of distribution. And thus, the audience (by this we mean the eventual global population of individuals with some connectivity -- let's assume 60-70% of the planet, or between 4-4.7 billion) did come to expect free music, and the Pirate Bay flourished, and many sites in former Soviet states got way more Web traffic than anyone projected.

When the expectation forms in the marketplace, it's very difficult to dislodge that expectation. Oceans of RIAA lawsuits haven't changed a thing, other than put heads on (legal) pikes that the rest of the planet blithely ignores.

So Hulu is now a leader in forming future programming formats, ad rates, and related elements. They are defining the business.

So what about the free sites? As much as I love them, there are numerous points of vulnerability to their business models.

a) They can only monetize banner ads.
b) They have no insertion capability into the video asset.
c) They rely too heavily on too few hosting sites. If Megavideo, Tudou, Youku, and a handful of others go away, there is no guarantee that others will step to the plate. Hosting is not a high-margin business.

If ads work for these sites sufficiently well, or experience rising value, then they'll proliferate. But they're drawing from a well they do not own.

All I can say is that Hulu (regardless of who owns or invests in it) may be the one thing the Internet can't flank.

Providing they do the following things:
a) Archival content is a weak point. The idea of having entire television seasons in exchange for ads is very attractive. Hulu's bottleneck is its licensing. They need to go big, deep, and fast. Because archival content, especially full movies and full TV seasons will make the mass audience beat feet to their door.
b) Pre roll and post roll (especially the latter) will never be as big as interstitials. They should lose post roll immediately. A 30 sec. interstitial is barely enough time to wander away. It's about enough time to find a cigarette, or check your email.
c) To make up for this loss, they should offer a 2 minute ad window at about 30 minutes of programming for bathroom breaks. That should net about a fifth of the viewing audience and offer "impressions" of a sort to those wandering around the house within earshot of the speakers. It's a granular point, but one I believe is worth making.
d) Make whatever deals they have to, in order to get more CBS, and much more Time Warner and Viacom.

A final point, and one I'll get into later: I have never seen a study of how people watch DVDs. We already know that Tivo users fast forward through ads. But for linear programming, when are the popcorn/bathroom/gotta take a phone call breaks? I raise this point because the other big, big, big difference between Hulu and network is the pause button feature. I think some people use it. I think many do not, because of the prior "media training" induced by network programming. If the ad is short, interesting, or maybe just really short, people will sit through it by merit of prior conditioning.

There will also be the control mavens in the audience who know, and use the pause in a way that says "I am not immersed. At all." I suspect this group is smaller, but as avid as any audience. After all, they sought out the programming, which in a control freak, is a good thing.

Hulu needs to study how people respond to non-linear programming and know it better than anyone in the world if they want to succeed. Because then, they can be even more adroit in figuring out their ad breaks, what kind of ads to insert and when, and take more control of the audience heatmap.

My assertion: Hulu is attempting to define the grammar of online video programming. My conclusion? They're succeeding.