Give It To Me Stright
Often the most painful experience a business will face is when they neglect to spot an opportunity to pivot for success or to prevent failure. Critics always wonder how such smart well-paid people could make such mistakes, like when Blockbuster turned down a cheap opportunity to purchase Netflix and instead built more stores.
As a business strategist, I’ve come to realize two simple truths. First, when executives look upward from their company silo they only see the weather that’s directly above. Second, it’s only during the rough periods that companies ask the question “why”. Why is our business model working, or why would our model fail? In this Lab we will take a deep look at the business model of outdoor (hunting & fishing) TV and how maybe the networks should have asked “why” sooner.
Heads up, the following scenario of a producer buying time from a TV network is going to sting for some of you…
Imagine for a moment I’m a TV network that is asking you to give me $50,000 – $150,000 for content distribution to an audience I can’t guarantee will even see your material. First off, you should know my tracking is statistical fuzzy numbers at best, that’s assuming you can pry the data from my cold dead hands. Now, I know you are the creative type but it’s your sole responsibility to get paying sponsors, which by the way must fit within my rules/guidelines. Oh, and I should mention that my professional sales team will be calling on the same brands as you but offering other programs and commercial spots for less money, sorry about that.
OMG, I almost forgot to mention two more things… Although you paid us and we don’t technically own your material we can’t allow you to show your content anywhere else for at least a year, including online, because our syndication affiliates pay us to air your content. They think this material is exclusive or owned by the network in some fashion, shhh don’t say anything please because we make a lot of money from them. To be honest, I’m not worried If you don’t comply because I’ll just bankrupt your business by cutting your time slot for the content you filmed a year in advance, thus you’ll have no value to offer sponsors who now won’t help you pay the bills accumulated during production.
Also, we need the rights to sell your content in foreign markets too, you don’t mind if we make a little more money do you? Look pal, if you go bankrupt it’s not our fault. Clearly, you didn’t do enough to market our network and drive viewership, or you didn’t try hard enough to create compelling content… Didn’t you realize you had to promote yourself to get the distribution you paid for?
Before you sign the check, I’ll give you one bit of advice. You will have to pay to take almost all your sponsors on a hunting or fishing trip, and they will pay you less next year for the same or more services. Remember, there are 100+ similar shows out there offering those sponsors more for less… so be sure to give it all up on the first date. Good luck slick, be sure to pay no attention to those large brands in the industry that are cutting TV ad budgets, they just don’t see how valuable we are.
3 Takeaways on Killing Outdoor TV:
#3 The Unsustainable Model:
Although it may be easy to point a finger at industry TV networks it’s not all their fault. Sure, maybe their revenue model is a bit voracious, but you have to appreciate anyone who can convince a whole industry that producers, syndication affiliates, and advertisers all have to pay them. That said, there is more to the story. If we study the business model from all sides what other factors make it unsustainable?
First, the perceived sponsor value of outdoor TV has been depreciating since almost day one. For example, brands are always going to want the same results/value or greater next year because they themselves are seeking growth. A typical TV network addresses this issue by growing households and primarily focusing on show ratings, but in a time buy model the producer faces most of the issues raised by sponsors. So, when a producer has stiff competition willing to offer more for less, a mound of debt to cover, and poor negotiating skills they almost always find a way to give a sponsor more exposure/value. Eventually, you get TV shows that all look like infomercials.
The model is broken because time-buy networks can’t fully protect the value (CPM) of their content to viewers or advertisers. The network can be in 50 million households and put restrictions on producers, but they can’t fully control every aspect of the content when producers must be successful with sponsors. The cycle of competition and providing sponsors greater value has procured an unstainable model. In short, the network can’t control ratings as much as a separate network that doesn’t prescribe to time buys.
But what if someone produces a super high-quality show that runs during prime-time slots? Generally speaking, all that means is that they spent more on production and purchased a more expensive time slot. They are still using the same set of offerings to provide a sponsor value, and even with increased viewership the sponsor’s cost per thousand impressions (CPM) isn’t likely any lower. Chances are they are providing the same CPM value as a lesser expensive show, but with this show larger sponsors are needed. Keep in mind there are few brands that write big checks, so it is likely that more sponsors are needed at lower price points which again turns any great production into an infomercial.
Another factor that is slowly contributing to the demise of the model is the cost of production. Besides paying for distribution a TV producer must also pay for things like closed captioning, hosting commercial files, and the content must be a specific length (21 minutes). On the other hand, producing content for the web has very few requirements and the content can be much shorter. Producers have the flexibility to create content how they see fit to meet sponsor requirements. Finally, producers can own and grow their own audience which over time decreases their costs for paid distribution.
#2 Death by No-Man’s-Land:
Growing up my father always reminded me of the golden rule… He with the gold makes all the rules.
In the outdoor TV industry sponsors are the ones that ultimately write the checks and make the rules. In 2016 and 2017 almost all major brands started pushing time-buy producers to offer a quality online solution or otherwise forfeit funds.
During this same period, some TV networks added legal language to their time-buy agreements to trick/restrict producers from publishing their content online except through a platform owned by the network. Besides being overly restrictive the network’s web platform does little to solve for sponsor requirements placed upon producers. This new restriction was a defensive move by some networks to protect against online-only video platforms and to keep syndication affiliates happy. However, all actions have consequences and this particular move only thrust producers into a no-man’s-land where they stand to lose sponsors if no web solution is offered or if they do solve for sponsor needs they will lose their time-buy spot.
Additionally, this situation breeds even more market competition for the producer as independent creators focus only on web productions and sponsor needs. These producers are buying online distribution at a decent CPM and acquiring organic growth every day. They not only match the syndication value of TV shows but also offer additional value such as consumer data collection and real-time content posting.
In summation, every action has an equal and opposite reaction. By increasing restrictions and not solving for market demands the networks are only expediting the need for an alternative solution.
#1 The Value Proposition:
Businesses must change when the value proposition they provide the market changes. A simple undeniable fact is that people consume content differently now than they did yesterday. Second, brands have greater analytics and consumer targeting capabilities due to advancements being made online every day. Third, when a brand or a producer pays for content distribution they now expect to build their own list of fans. Distributing content through traditional TV doesn’t allow a fan to Subscribe, Like, or Follow. Finally, there is a real value associated with content that never sunsets, allows comments, and enables the consumer to share it with his or her friends.
In closing, content creators still have to pay for distribution online if they want to be successful. However, with TV you can’t add more funds to one episode and/or subtract from another in accordance with real-time performance data, nor can you create new content based how people reacted last week.
Disclaimer: Frontier Media has a long history of supporting video producers and brands with online content syndication strategies.