I don’t like to single out people for criticism. But Techdirt’s Mike Masnick is a high-profile tech blogger, he attracts a lot of traffic and he’s written a lot over the years about how content should be distributed online (For example, see here). So I feel I need to respond to some of his arguments, particular his contention that television programming should be distributed for free over the Internet. In this recent post, he writes, “It's really stunning to see people who obviously should know better continually insisting that content can't possibly be free to consumers.”
There’s a key point right there, because that’s not the argument. Obviously, someone can make content and give it away, whether it’s a video, a song, a novel, a comic strip, or whatever. Sometimes those people can give content away for free and still generate some income. What we’re talking about is scripted television, shot on sets, with union actors and crew, and actual production values. Not a Flash video you made on your laptop, not a talk show with two guys in chairs, not a kitten playing piano. I’m talking Lost, House, Burn Notice, The Pacific, Battlestar Galactica. (Although, even reality fare like Top Chef isn’t necessarily cheap to produce.) Analyst Dan Rayburn said, “Sorry, Video Content Can't Be Free.” Masnick then replied that Rayburn “appears to be wholly unfamiliar with network TV,” since “advertisers have always paid the freight” in that business. Again, we have to stop right there, because this is an important point. The history of broadcasting (first radio, then television) goes back almost a century. The business model was that the networks would sell advertising time, based on audience size. A popular show reaches a lot of people and becomes an efficient way for advertisers to reach customers. But back in the old days, from the Fifties up to the Eighties, the broadcast television networks were the only game in town. There was only CBS, NBC and ABC, plus the independents in some markets. Cable was able to build a business appealing to niche audiences, but it required a dual revenue stream, to offset the fact that any one cable network doesn’t generally attract as large an audience as a broadcast network might (Although on occasion, cable programs get broadcast-level ratings, such as here, here and here) . This business model has enabled cable to create quality programming that’s won both accolades and viewers (See this post from 2008).
When Masnick accuses the cable industry of “trying to turn the internet into cable TV with extra ads,” he’s ignoring the issue of the dual revenue stream. Or when he says, that TV Everywhere is designed “to keep you from cutting the cord from the cable company,” he’s failing to answer the question of how big television productions will recover their costs. If an Internet outlet – such as Hulu, YouTube or Revision3 – could attract the viewership of broadcast or cable television that might be a different story. For example, as per Variety, last week’s episode of The Office garnered 7.2 million viewers, while Grey's Anatomy got 11.4 million. What is the Internet content that hits these levels on a consistent basis? According to NewTeeVee, “Three million people used the March Madness On Demand video player to catch the first round of the NCAA Men’s College Basketball Championship online” on March 18. Variety reports that last Thursday’s televised “tournament coverage [had] 11.1 million viewers overall.”
Masnick clearly thinks that the old broadcast television model proves that you can give video away for free and make money. And he doesn’t understand why the programmers don’t just do it. As he recently tweeted: “basic economic: if by giving away the content, you can increase the pie and put in place a better biz model, why not do it?” So, let’s say that you could get those viewership levels online. Let’s also forget that giving away content for free, without realizing significant revenue from that distribution outlet, reduces the value of your other platforms. (Ask the newspaper industry about this strategy.)
As Mark Cuban recently argued (and I reported here), the Internet offers so many options you will incur significant marketing expenses in order to stand out. As he put it, “In an a la carte world, you’re one of zillions. Marketing is expensive.” Things will likely change over time. But I don’t think Masnick wins this argument right now.