Online video – who has the most to gain?

This article has been doing the rounds this week, it’s on Business Spectator and it’s around the decisions made by ex Fairfax CEO Fred Hilmer in the digital arena.

Here’s a rather large excerpt from the article (Alan don’t sue me) …

Seek and Carsales were classic examples of what McKinsey & Co once described as “atomisers” – new players who use new business models to extract value from incumbents frozen by their legacy positions. The attackers have nothing to lose and everything to gain; the incumbents have everything to lose and nothing to gain. “That was the position that Fairfax and other classified-dependent print media businesses found themselves in as their traditional and very lucrative dominance of classified categories came under challenge in the first few years of this decade. “Fairfax’s dominance of the old media environment meant that it could only lose as high-margin classifieds migrated into a lower-margin interactive online environment that was actually a better vehicle for classifieds than static print.”

When classifieds went online, the main players at the time were in trouble. All the momentum was going in the direction of a lower margin model … so they were kind of screwed either way they went.

One could say TV is right now in a similar space to where classifieds were 10+ years ago …

Online is possibly a better vehicle for some TV content in a user perspective, but a lower margin environment than traditional broadcast. So what do you do? Do you protect your turf or do you potentially sacrifice your position and revenue and follow what appears to be the momentum?

I don’t know. But what would please Fairfax and News and Telstra – 3 companies that have been hit pretty hard by the migration of classifieds from print to online – is that when it comes to moving pictures with sound, they don’t really have legacy positions to protect.

Dr. Jeffrey Cole did a presentation to a bunch of groupm clients a few years back, and he basically touched on the area that newspaper companies weren’t dead, and that the new 10-20+ years presented them with a huge opportunity. The opportunity was around them being able to, through the web, expand what their brands and products could offer. Ie … on the web a newspaper could be anything … forum, newsmakers, radio station or even TV broadcaster.

So … Fairfax, News and Telstra can go after the online video pile … and they can target TV ad spends as their first kill. Whereas ninemsn, Ten and Yahoo!7 can’t go after their own kind … so they need to find new avenues to attract revenue into their online video products.

This means FD, News and Telstra can aggressively price their products … below their competitors … because ultimately, they don’t have much to lose.

News and Telstra are in the best positions. Fairfax not so much.

To be honest, it’s unclear how Fairfax will source video content of the quality required to draw audience. Right now it runs pretty standard news bulletins that would probably be more at home as university media studies assignments than as broadcast quality bulletins. It’s doubtful a company like Fairfax could go to the US and UK content creators and cut deals around quality, in demand content … or, more to the point, cut deals that commercially made sense.

With that in mind, video for Fairfax is probably never going to be a huge revenue stream as it currently stands. And does it have the money to buy a company that can allow them to really play in this area?

News and Telstra are in different positions. News owns Fox for one. Fox is responsible for a huge amount of incredibly popular programming long form and short form – Telstra owns 50% of Foxtel as well as Bigpond plus various rights around AFL and NRL as well as V8 Supercars.

Telstra is actively talking about launching an IPTV service, and the mutterings are this service will contain exclusive AFL, NRL and V8 content when it launches.

Now, Ed Smith came out a few weeks back and said that 66% of Free To Air TV’s revenue would be wiped in 5 years and it would basically survive off sport and news.

“If you go forward five years to what [free-to-air] TV will look like, it will be live sport and news, that’s all/ Premium video content will be delivered by pay TV and [internet protocol] TV.”

I assume what he’s saying is that all the shows that aren’t news or sport will migrate to Pay TV – which would mean that shows like Home and Away, DWTS, Masterchef, Idol, So You Think You Can Dance, The Footy Show, House, Two and a Half Men, Simpsons etc will all migrate to Pay TV or be served via IPTV.

Is this feasible? Would the broadcast networks just let shows like this leave their networks?

Because that’s the only way it could happen – it’s not like people aren’t watching these shows. Most, if not all, are constantly in the top 5 shows on the nights they run (when you exclude news, sport, current affairs)

It sounds to be that Smith is selling something.  It has all the bluster of a salesman. A big comment not backed up by any rational data. Not that there’s anything wrong with that.

But what could he be selling?

Maybe he’s selling a possible  Newscorp/Telstra venture? A venture that tries to give online video and IPTV a real nudge.  A venture that merges Telstra’s infrastructure and sports rights with News’s content.

I’m just hypothesising, but it’s no more ridiculous than a claim that in 5 years FTA will lose 66% of revenue is it?

And like I mentioned earlier, Telstra and News have everything to gain in this space and not a whole lot to lose.


2 responses to “Online video – who has the most to gain?

  1. Ironically, the first siz programmes named as likely to ‘migrate’ to Subscrption TV are commissioned, made and paid for by the FTAs. I can’t see how such properties will be ‘migrating’ unless there is a huge back-end in it for the FTAs. Content is king and the challengers will need to get into long-form video creation to provide any major threat apart from the expected erosion.

  2. Oops … ‘six’ … and ‘Subscription’. Curse these rented fingers!

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