The Blip Blog • Always Act From a Position of Strength

Always Act From a Position of Strength

Mo proves himself to be a smart guy. Mo is currently a principal at Spark Capital. Prior to that he spent six years at IAC.

mokoyfman:

Nielsen and LRG released their latest media consumption reports yesterday, with some very encouraging results for the traditional media business.

The money stat from the Nielsen Q4 report:

The average American watches more than 151 hours of TV per month, an all-time high.

The key conclusion drawn in the LRG study:

The impact [of online viewing] on traditional TV viewing and multi-channel video subscriptions [cable and satellite] has been “negligible.”

Further, according to the LRG study:

Among all adults online, [only] 3% strongly agree that they would consider disconnecting their TV service to just watch video online – compared to 4% last year.

These results are certainly great news for an industry increasingly besieged by forces of change, perhaps still more ‘vocal’ than ‘real’ as confirmed by the latest research. And they are even more welcome as we face perhaps the worst economic downturn in our history.

I fear though that these results, as they often tend to do, may breed complacency in a media industry that should be bracing for change. Granted, with all the talk of convergence, the consumer is still not there. But mark my words he’s coming quicker than you realize.

Peeling back the onion on these two reports, a number of the secondary stats point to clearly shifting behavior:

74 million people watch time-shifted television vs. 54 million people in the fourth quarter of 2007, a 37% y-o-y jump.

31% of Internet activity occurs while consumers are also watching television.

Young viewers (18-24) watch video on the Internet and on a DVR at the same rate: about 5 hours per month.

Simultaneous web surfing and TV viewing, the increasing move to time shifting and the growth in online video consumption, especially amongst the younger generation, are harbingers of what is to come — a largely on-demand, networked, social, lean-back viewing experience. It’s simply a matter of time.

So how should the media industry, and specifically the cable companies (where most of the value in the chain is consolidated) respond?

It is precisely at these times that they should use their existing power with consumers to lead innovation, rather than stifle it. The cable industry should act from a position of strength, ensuring that they emerge in the wake of disruption as a powerful force rather than a regulated utility.

This will involve some tough decisions and some serious wrangling between content creators/owners and distributors. But in the end, it’ll likely require some variation of the following (with many specifics of course to be worked out):

Full embrace of the Internet as the platform for content delivery.

Charge consumers for tangible usage rather than opaque bundling.

Redesign content packaging to be useful for consumers rather than to protect sub-par programmers. Feed the good networks, kill the bad.

Embrace third-party innovators and new technologies, such as Boxee (a Spark portfolio company) and others, leading the charge on the consumer front.

A potential shrinking of overall revenue. To protect and grow margins in this new reality will require, in addition to the aforementioned ‘killing of bad networks,’ a reworking of the inflated content creation model and an end to inefficient uses of marketing dollars.

Admittedly this reality is a long way off, perhaps 10+ years before it comes to full fruition. But the time to act is now, and all parties will be better off when that day comes — cable companies, content creators, innovators and, most importantly, consumers.