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Tech Needs TV

“Free Internet TV” Will Hurt Consumers

Posted by Doug Garnett November - 21 - 2010 - Sunday

Claims of “FREE!” drive purchases of cheesy TV products from Shamwow’s to those (supposedly) Amish heaters. But somehow, it escapes notice of the tech press that equally cheesy claims of “free” run deep amid marketing of the internet.

Free music, free newspaper articles, free magazines, and now supposedly free television. Everybody offers free. And it’s no surprise that consumers go for it.

In fact, this idea of making millions by giving things away was found in many of the irrational “business plans” that dotcom’s claimed would make their investors rich. It didn’t work then, but maybe things have changed.

How is “free” going for Wikipedia”? Wikipedia is the poster child for internet “free”. Except they are deep in the midst of a campaign attempting to raise $16M in donations just to keep their doors open. It’s a campaign that pitches quite hard. Makes me think that even for a donated content online Encyclopedia, “free” isn’t quite as powerful a business plan as we thought.

How is “free” working out for newspaper and magazine content? Bob Garfield wrote an AdAge blog entry recently about the incredible dark side of “free” print on the web.

He notes that print on the web is driven by sites that “aggregate” (bring together) content. Where do aggregators get good content? From newspapers or magazines. Except aggregator sites deliver content to you for free.

In a fit of business insanity, internet copyright anarchists imply that revenue from the hated banner ads on the site of the aggregator somehow trickles back to pay for the hard work it took to create that content. (Hard work is required to make well written, well researched, well fact checked, and well published content.)

Well, the revenue doesn’t trickle back. Garfield notes how “free” access has undercut the economic model that created good content in the US. But he also notes that even those aggregator sites are struggling to keep in business. Guess this model is so flawed that you can’t make money even when giving away content you didn’t make.

How would “free” go for TV content? Don’t expect too much. And note that it’s a double “free” idea that is being used to entice consumers to internet TV – payment free and advertising free. (Secondarily, there’s the idea that they can watch anything they want, anywhere they want, and on any device they want. But while consumers will pay for DVR’s, there’s no evidence of willingness to pay for it online.)

Double “free” is publicized with massive money from manufacturers of internet TV sets, creators of internet TV sites, the venture capitalists behind them, and the tech research agencies paid by the venture capitalists – all drooling at the idea of tapping TV’s big old vein of pure financial gold.

And, frustration with out-of-control cable TV costs means there’s very high consumer interest in cost savings. But do consumers really want what double free TV would mean? I don’t think so.

Double “free” TV over internet will kill content. The existing economic model supports an incredibly well developed, sophisticated, sometimes dysfunctional, but essentially effective eco-system – an eco-system that creates good TV, offers the single advertising medium which delivers the best economic impact and delivers most of what consumers want.

The net results for consumers would be the death of programming. Google claims they’ll stitch together YouTube content to make programming (of course, selling their own advertising time within that content). Don’t expect much. The existing ecosystem turns out everything from niche to mass hits – 30-Rock, The Daily Show, Survivor, Amazing Race, NFL Football, Antiques Roadshow, and CSI Miami on a big screen (I just can’t include “Darth Vader, Night Clerk” in that list). But it costs millions to deliver those shows – often over $1M per episode.

There’s some good news for TV. As Mark Cuban has pointed out, TV is different from print and music. Networks ARE aggregators. That means TV networks have been fighting this type of battle all along. They also seem to have learned from print and are being quite stubborn about protecting their right to get money in return for all the money they invest. Consider

- Hulu (funded by networks) started “free”, but is beginning to use subscriptions.
- The networks fight regularly with cable operators to maintain a viable economic model – even if that means people don’t get to see the World Series. We have to assume they’ll use all means to fight against a double free idea that hurts their business.
- An example of this seems to be that while networks work with Apple, they don’t work with GoogleTV. Maybe they know Apple wants to create viable media business models. But it seems the only reason to create GoogleTV is to try to steal advertising revenue that currently goes to the networks – revenue that pays to for programming.
- Now Hulu (funded by networks) has made it so that you can’t watch their programs on GoogleTV’s.
- Network testing seems to indicate that consumers are willing to watch online TV with traditional advertising breaks. In other words, the double free idea doesn’t even seem necessary for internet TV to work.

Internet TV should have a tremendous future and it will be stronger if the industry stops the promise of double “free”. Internet TV’s future comes with the truly exciting opportunity: integrating programming with interactive features that make the programming more valuable.

But sadly, companies aren’t talking about delivering more value. They’re getting wrapped up in dead ends – like removing advertising when there doesn’t appear to be monetized market power created by doing so.

So next time you hear someone talk about how great it is to get free programming on the internet, know that they’re really talking about a future of really bad programming. You may not like programming today (it’s fun to complain). But just imagine what it would be like in that free future.

Copyright 2010 – Doug Garnett


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Doug Garnett, DRTV and Technology Industry Expert

Doug Garnett is founder and CEO of DRTV agency Atomic Direct and a leading expert on innovative uses of DRTV, infomercials and other in-depth TV and non-TV messages to build brand and drive sales.

Doug has been working in and around the technology field for 27 years. After starting in aerospace, he spent 5 years selling and marketing supercomputers. Since shifting to advertising, his clients have included AT&T, IBM, Apple, Disney Mobile, Ugobe, Presto, and Netpliance.

Doug sits on the editorial board of Response Magazine, is an adjunct professor of general advertising at Portland State University, and is a member of the Jordan-Whitney Greensheet Panel.

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