Content Revenues: Hits are generating much more, Losers are generating lots less
Jorge Espinel / February 26, 2008
In this morning’s earning call, CBS announced that they plan to make $21M dollars in online ad revenues from March Madness (See here: CBS: March Madness To Net $21M Online) CBS indicated that these revenues would be incremental to the ad revenues generated by the CBS TV network and stations. While this statement may have been made to appease the stations, if it is true this would go corroborate the idea that the digital revolution enables “hit” content to generate more revenues given that new audiences, in this case people at work, are able to access it. This means that media companies are likely to extract greater value from their hit franchises - thing about shows such as Lost and 24 that have developed new revenue streams thanks to digital formats (DVD and downloads) while still generating meaningful numbers during regular TV broadcasts.
There is, however, a less positive implication to this phenomenon for media companies. Non-hit (also known as B) products will generate much less revenues. As consumers devote greater time to hit content, they will have less time or be less inclined to consume/purchase B products. This means that unless revenues from “hits” offset the decline in revenues from B product, major content producers will struggle to avoid a decline in revenues. The music industry has already shown this to be the case (though piracy is likely to play a smaller role in video/TV content).
This is another example of the Web removing existing inefficiencies in the marketplace.
Filed in: Content, Media Companies.
Curious… perhaps another way to characterize this phenomenon is that the Web acts as a new outlet for media/content, much as new media innovations like the VCR/DVD, TV syndication, etc. Throughout the history of media companies, most technological innovations have had an additive impact on the value created by the industry. The Web, as this would suggest, is no different. Yet, content owners have approached this new medium with trepidation - yet again.
Some of the inefficiencies in media and its ‘hit driven’ nature stem from limited “shelf space” — e.g., promotional space in retail outlets, prime time TV slot, Top Box Office lists, etc. With the Web, those inefficiencies are presumed to enable more content to surface outside of the “top hits”. However, if we are to believe that this is not the case at this point in time, then does it suggest that there are “virtual shelf spaces” on the Web as well. Some of the obvious ones include the top search results slots of a Google Web search result page, the top or most viewed lists on YouTube, the top applications list on Facebook, etc. In essence, I would posit that people who don’t know what they want gravitate towards what is popular. Hence, the Web makes the “hit driven” nature of the content business more pronounced because it makes it even easier for users and marketers to drive distribution, i.e., “spread the word” (e.g. Digg, YouTube ratings, Facebook news, email blasts, etc.).
Does this mean that there is no “fat belly” (or “mid-tail”)? Is it a world of either “hits” or “duds” (i.e. long-tail)? Tech news bloggers like Om Malik and Michael Arrington may disagree. I would argue that as long as popularity continues to be a primary criteria for people to engage with content, then the Web would seem to enhance the “hit driven” nature of the content business. This topic is certainly worth further exploration - there are certainly more angles to approach this but I’ll stop here.
February 27, 2008 @ 1:51 am
Mid-tail content will thrive on the Web. However, large media companies will not necessarily benefit from that unless they position to participate in the mid-tail. Post focus was more on companies ability on an environment in which they no longer can package hit and non-hit products together.
February 27, 2008 @ 8:01 am