Market Watch: Reinventing the Business

NEW YORK: Rod Perth, the president and CEO of NATPE||Content First, shares his thoughts about how this may be the most interesting time in the history of television, but also a time of tremendous challenges.

All of us who attend MIPCOM and NATPE understand that markets serve a critical function, allowing exhibitors and buyers to network and explore new opportunities that lead to business transactions. For almost 60 years, it was a simple, relatively predictable business. Shows were developed and licensed to a network, then marketed internationally or packaged in output deals. Hits offset deficits, and international revenue cushioned creative risks. Now, new digital platforms, on-demand viewing, and thousands of viewer choices anywhere/anytime have changed the narrative. The separation between traditional and new digital media no longer exists, but this is still a hit-driven business—even technology won’t change that. Our reinvention as a business depends on how we develop, distribute, and adapt 60-year-old models to new realities.

Historically, television has adapted and thrived in the wake of new technology. The remote control, the VCR, DVDs and the explosion of cable channels were all tech-driven advancements that actually opened vast new opportunities.

Technology’s impact is non-negotiable, and we must reach viewers even as they migrate away from traditional viewing platforms. The challenges are steep, and traditional business models steeped in legacy have no place in today’s digital ecosystem. We must be nimble, stay informed, and reinvent old assumptions, because technology will keep disrupting even as it creates amazing new possibilities.

This digital tsunami has demolished barriers to entry for video producers and distributors, and this year the walls between linear and digital programs finally collapsed. Viewers are changing how they watch, and in this golden age of quality drama and comedy, on-demand binge viewing has actually saved marginal shows that networks otherwise would have cancelled. This previously un-measured viewing that is now being counted provides massive incremental bumps in ratings. An incredible 5.9 million viewers tuned in to watch the first of the final episodes of AMC’s Breaking Bad, and most experts agree that making the earlier episodes available on Netflix in the U.S. enabled curious new viewers to get up to speed in the off-season, helping achieve record-breaking numbers for its return.

Online, video companies seek new ways to package original productions as quality programming real estate for advertisers. Advertisers and show creators are just beginning to realize the potential of social networks and second-screen engagement, which will provide important new sources of revenue. Web channels are attracting top writer/producers who create award-winning dramas and comedies. Though not advertiser supported, Netflix has proven that beautifully produced, award-worthy programming is no longer limited to broadcast and cable networks. Soon new original productions from Amazon, Apple, Hulu, XBox, Google and YouTube will join Netflix’s original shows—all available online and on-demand. 

But how do we quantify and monetize cross-platform content viewership and engagement?  Eventually new ratings systems will measure this traffic and micro-measure how consumers respond and purchase, encouraging marketers to reexamine how they reach consumers across every viewing device.

Leading the industry effort to understand the cross-platform viewing experience, NATPE is partnering with the Consumer Electronics Show on a ground-breaking study examining not only how viewers interact with a second-screen experience, but also how showrunners shape their content to exploit second-screen interaction. Study results will be released at both CES and NATPE, and we are confident that they will lend valuable clarity to this ever-evolving terrain.

While we’re in the south of France, it’s worth noting that the titanic shifts and business struggles playing out in the U.S. market—embodied by the Time Warner-CBS dispute over retransmission fees—offer important lessons for television producers and distributors. At press time this negotiation had not been resolved, but these battles illustrate the fundamental tug-of-war between content creators and the cable operators who control subscribers’ access to channels. In the worst case, the financial eco-system and co-dependency that exists between broadcasters and linear distribution could be in danger, and the fallout could threaten the very underpinnings of television economics. While these negotiations play out, new television delivery systems are becoming viable over-the-top viewing options for angry consumers. Google, Intel and Apple are each developing new, direct-to-consumer web-based receivers, with Apple reportedly offering a premium option that deletes commercials but compensates networks for lost revenue. The ripples of these technologies will continue to spread outward as networks and advertisers face the same conundrum—reaching the right audiences who have thousands of new options—with economics that make sense.

While its nature rapidly changes, the business is still driven by relationships and face-to-face interaction. And that’s why markets like MIPCOM and NATPE, which serve as major touch points in the deal process throughout the year, remain vitally important. These markets are a valuable nexus that bring scale to an engaged community. All of the moving parts fit together, deals can happen, and fundamental questions about our industry can be examined.

The reasons for all of us to be hopeful far outweigh the reasons for concern. Our industry can rise once again to the challenges posed by mold-breaking new technologies. Fifty years from now, they’ll tell stories about how we adapted to this brave—and slightly intimidating—new world.

I’m glad I get to be here and be a part of this story!