Viewpoint: Beyond Disruption

LOS ANGELES: Rod Perth, the president and CEO of NATPE//Content First, shares his views on the ways in which technology is impacting the television business.

When NATPE 2013 convenes from January 28 to 30 to celebrate our 50th anniversary at the Fontainebleau hotel in Miami, it will be bigger, brighter, better and organized to maximize networking experiences. Our conference and market, the first must-attend event of the year for the global TV business, will provide all who attend a chance to not only look back at NATPE’s important role in the history of the television business, but forward to all of the exciting opportunities and serious challenges that lie ahead for our industry.

Perhaps no subject better illustrates the potential risks and rewards confronting the television business in the future than the concept of “disruption” caused by new technologies replacing old business models. It will be a central theme at our milestone conference next year.

Since I took the reins of NATPE in May, technological disruption has been a leading topic of my conversations with media leaders. No wonder. I can’t remember the last time I read a trade, The New York Times or The Wall Street Journal and didn’t see a headline about the latest big groundbreaking deal between a studio and Netflix, Amazon or Hulu; a retransmission consent battle; a groundbreaking new syndication model; a significant development in over-the-top technology; or so many other concepts designed to replace the revenue lost by changing viewing habits in a multiplatform universe.

Some see “disruption” in pejorative terms, fearing these new technologies will completely displace the TV business model in existence for more than a half century and destroy the costly, high-quality programming to which we have become accustomed to producing, distributing and watching. Even the most optimistic among us can’t help feel that way when we see our tech-savvy, “network-agnostic” kids shun TV viewing to watch their favorite shows on portable devices. But it’s not all gloom. Harvard Business School Professor Clayton M. Christensen rejects the “simplistic” common disruption hypothesis that established firms fail because they don’t keep up technologically. We already instinctively know this because, as the research indicates, it doesn’t mirror reality; there’s no comparison between the revenue the majors derive from traditional versus digital platforms. Disruptive technologies, Christensen notes, “rarely wipe older technologies off the face of the earth, or out of the business world altogether. But they do often wipe out particular firms.”

The obvious advantage traditional media companies have over the tech startups is the quality of the content they produce, and the fact that advertisers are still willing to pay a premium for it. Top digital content companies, however, are slowly eating away at this equation with higher-quality programming. Not too long ago, it was all about traditional ad dollars versus digital pennies. But the divide is narrowing, with today’s leading performers in that space fetching quarters from advertisers for every dollar they spend with traditional distributors. And, in some instances, we’re even seeing digital providers migrate some of their series from platforms like YouTube to TV to help close the revenue gap even further.

Studios and networks, in turn, must now routinely weigh whether their content deals are additive or corrosive as a host of content-hungry digital platforms emerge. Should they sell to them and risk massive back-end syndication profits and current licensing deals, or go for substantial yet far less digital dollars to boost profit ledgers and please shareholders? How to best craft the deals—exclusive or non-exclusive, short-term or long-term—and what about the windows, financial bubbles, new opportunities on mobile and other screens? So far, there’s no standard playbook. Everything is considered on a case-by-case basis.

With so many pressing disruption issues, it’s easy to get lost in the day-to-day minutiae and news of the moment, and lose sight of the notion that there is something beyond all of this. It is an uncertain and unsafe path ahead but one that we as an industry must navigate. Next January, NATPE will continue its commitment to position content as the centerpiece of this collective conversation, aspiring to be a dynamic catalyst for both connections and commerce among the entertainment, technology and advertising communities. The first part of this risk-taking process will involve examining new strategies and tactics designed to clarify the vision, reconstitute the business and brands in new, fresh ways. We will ask top industry executives to think about what they would do to reinvent themselves if they started with a clean sheet of paper today to achieve modernization models that are real rather than hopeful.

We want to set a forward-looking agenda that makes us relevant to all sectors of the TV business so our attendees’ investment in time and money provides them with a measureable return on investment.