AR&D - Audience Research and Development

Terry Heaton's PoMo Blog    

04/13/2006 Entry: "Network affiliates in an on-demand world"

I was just interviewed by the Christian Science Monitor for a story on what happens to local affiliates in the wake of on-demand programming offered by networks directly to viewers. This is a very touchy subject and one about which most local affiliate people remain silent. I'll tell you this, though. There are a LOT of nervous people out there, and I think they have reason to be concerned (NOTE to non-management readers: this applies to you, too!).

That's because the supply/demand scale has shifted in favor of the networks. As I told the reporter, follow the trendline as the networks have been cutting back compensation to affiliates for carrying their programming. We're headed to more of a syndication model for broadcasting, where compensation is reversed. You want Lost? You bid for it.

Attempts by stations -- most notably WRAL-TV -- to stream their signal, including network programming, are extremely cool, but the strategy is questionable in an increasingly on-demand culture. All this does is shift the broadcast model to the web, and that, folks, isn't what the disruption is all about.

Those in the industry who think that anything about their business model or brand will carry them into tomorrow are sadly mistaken. Local broadcasters are so far behind the curve on new media technology (except for podcasts, but that's not really new media) that it will likely be too late when the rug is pulled out from underneath them. I'm amazed, for example, at the number of local station websites that aren't written in XML, the language of unbundled media.

When I do my dog-n-pony show, companies easily "get" the idea of unbundling their content and distributing it (with commercials) via aggregators of every kind, but the light bulbs above their heads often go out when I start talking about building new business models that don't necessarily involve their content. Yet, this is exactly where the money (and especially the future money) can be found. The smart aggregator business in every market is wide open for the taking, but few are headed there, mostly because they just can't, don't or won't see it.

To paraphrase Umair Haque, when your core competency is crumbling, look to build edge competencies. For an industry accustomed to exploiting artificial scarcity, that means understanding the value chain where abundance exists. Smart aggregators help people sort and filter (themselves) in the midst of that abundance, and that's where local media companies are missing the boat.

That means moving from the supply side of the on-demand world to the demand side. Counterintuitive? Yes, but that describes just about everything in the media 2.0 paradigm.

So if you're an affiliate, and you're thinking that sharing download and ad revenues with your network is the road to profitability, ask yourself this. Can I make more money as a pure content provider or as a company that helps people sort, filter and use all that content? Think about it.

BONUS LINK: Disney boss Robert Iger told an AG Edwards roundtable discussion Tuesday that despite affiliate complaints, ABC will continue to aggressively pursue new media options for content distribution. He told the Hollywood Reporter that he doesn't believe that such plans have a "cannibalizing" effect (on the affiliates), and that one way of combating piracy is to offer more content legitimately over the Internet.