Time/Warner - ATT Deal and You

Posted October 27, 2016

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The possible (US Govt. Approval Pending) acqusition of Time'/Warner by ATT is indicative of what I would call the Third Generation of Television - the first being broadcast and the second cable.

The Third Generation is going to be online linear and digital.

This has a lot of ramifications, but perhaps the most intersting is in terms of revenue.  Without refvenue there is no content, there is no programming and there is no network.  

I was particularly taken by an almost throw-away line in the third paragraph of a story about the merger in today's NY Times.  

"Viewers, with new subscription options, could enjoy fewer interruptions and see ads for “the products you’re interested in, not the ones you don’t need to see,” Mr. Bewkes said. National advertisers would presumably pay more to reach them and have an alternative to spending on Google and Facebook."

Of course, we are all used to seeing online 'targeted' advertising. I do a search for a hotel in Paris, and for the next five days all I get are ads for hotels in Paris.  

But now, that capacity to drill down and focus advertising married to TV to each specific viewer becomes possible.  

That level of granulatiry made me thing that perhaps we have it backward. After all, there is a long and rather inglorious history of major media companies taking new technology and plugging it into old ways of working - and that is what this idea smells like.  We have had nearly 70 years of TV shows running ads, so why not just focus them- new bottle, old wine.

Instead, let's take a moment to listen to what the technology is really telling us:

Up until now, the standard architecture for television was that the network ran a show, and they essentially leased out 30 second swaths of it to advertisers so that those advertisers coudl piggy-back on the audience that the network had assembled.  

As cable began to focus on specifics, those audiences began to be aggregated by topic - that is, people interested in food would watch the Food Network and advertisers interested in food would buy ad spots there.  So far, so good.

But now, it is possible to by-pass the network entirely.

What do I mean by that?

Let me give you an example:  The World Series.

Right now, a network buys the rights for the World Series from Major League Baseball.  In this case, Fox owns the rights to air the World Series.  They paid for it. And, to make their money back, they will sell ad space to people like Nike, for example.

That is the way it has always worked.

But suppose Nike decided that they had had enough of buying ads from Fox. Suppose Nike decided that next year, THEY were going to buy the rights to the World Series. And now, if you wanted to watch the World Series, the only place you could do that would be at Nike.com?

Well, why not?

Do you think that a lot of people would go to Nike.com?  I bet they would.  

And you know what else, once you are on Nike.com, you can click and buy as many Nike items as your heart's desire, all the time, through all the games. 

Now, doesn't this make more sense than running an ad on Fox that is supposed to motivate you to get in your car and drive to the Nike store and buy a pair of sneakers (or trainers as we call them in the uK)?

I think so.

It makes the advertising as digital and non-linear as the programming.

This model is not just limited to Fox and Nike.  Why should Pfizer advertise onf Grey's Anatomy, when Pfizer could commssion Grey's Anatomy and run it on Pfizer.com?  Why should Lowes advertise on HGTV when Lowes could commission Love It Or List It and run it on Lowes.com?

You get the idea?

Today anyone can own and run a channel. 

Anyone.

Including those people who used to pay NBC for the priviledge.

In a digital world, in fact, who really needs NBC? What, after all, do they do?