Wednesday, July 19, 2006

Convergence 2.0 - The networks

I posted last week about the theme of "Content is King" that was all over the place at Convergence 2.0. The other major takeaway I took from the conference was that the networks are still thinking in old models. While the networks were all speaking of the shift in power back to content in tones of glee, there were a couple of points that I think they missed.

1. For a lot of their content, they are not the ultimate producer.
2. Professional quality content is hard, but for some types of content, it's not as necessary.

The Context of the Content
During one of the breaks, I had a chance to speak to an IP attorney at one of the networks. We chatted about one of the networks clips that had found it's way onto YouTube, and the resulting explosion of attention generated by that leak (okay, it was an NBC lawyer, and the clip was "Lazy Sunday"). I asked why the network didn't just view such activities as free advertising. Her answer was that while the network doesn't have a problem giving the clips away for free, they want it to be only available on their site.

I didn't understand why it was so important that it be on their site, until I recently wanted to show a friend the Lazy Sunday clip. Before, I had simply pulled up the clip on YouTube, shown it, and gone about my business. This time however, once I found it on NBC's site, it was listed with several other SNL digital shorts. After we watched the first clip about 5 times in a row ("You can call me Aaron Burr, the way I'm dropping Hamiltons" - Genius!) we proceeded to check out the other digital shorts.

Needless to say, none of them were nearly as good - but the point is that we actually watched them. As a media consumer, there is a signal in proximity (on tv it is temporal, while on a site, it is more spatial). We naturally assume that things near each other will be similar in some important measure. Coupled with inertia that keeps us in the same area, this can be a powerful effect. The networks have used that for years, as they leverage "lead-in" from one show to boost the ratings of another, weaker show (think of all the one-season wonders that followed Seinfeld).

Microchunking blows that proposition out of the water. It means that each piece of content has to stand alone and win popularity on its own merits. Already, this is hurting the music industry, as they can no longer bundle 2 good songs with 14 poor ones on an album - we just buy the single off of iTunes. Similarly, if each show is spread on it's own through numerous channels, there's no audience to leverage, and the weak content will not survive on its own. That's why they want to control the context of the content - to allow them to piggyback weaker content on the stronger.

Capitalism of Content
Now, if I was a content producer with a hit, why would I want to allow someone else to create value based on my work? If the power in negotiations is shifting from the distributors (Cable and RBOCs) to content (proxied by the networks), why wouldn't that shift continue, and ultimately end up with the primary producers of the content? After all, if TV is no longer the only way to distribute content, all of a sudden, Fox need American Idol more than American Idol needs Fox, right? When each piece of content exists on its own, the value of top content will rise exponentially, while that of lower quality will actually drop.

I asked this very question during the conference, and the answer was that content aggregators would still be necessary, to enjoy economies of scale in promoting the content. The rule of thumb I heard was that if promotion expenses ever passed production expenses, you are in trouble, and that can only be avoided by aggregating content. However, if you stop leaning on the promotion of content, and allow each distribution channel to compete for the best content, it should naturally rise to the top anyway. Therefore, I see the networks having a harder time signing top content once the alternative distribution methods become more mainstream.

The Digg Network
The final point where I disagreed with some of the network representatives was in the area of user generated content. Over and over, it was dismissed as a distraction, with the mantra of "Professional quality content is HARD - not everyone can do it". I agree with this to a point - it is unlikely that user generated sitcoms will become a big competitor. Any form of content that requires serial quality for an extended period of time will probably stay the province of professionals.

However, for content types where each piece stands on its own, the story is completely different. While professionals might maintain the highest average quality, amateurs can meet or exceed that quality for individual items. Taking a print analogy, there are very few bloggers that can consistently write at the quality of a Washington Post, or New Yorker, or Fortune (and most of those tend to write in both types of media). However, the best posts of the day on Digg are often as good or better than anything you will from those professionals. As content spreads to new channels, the new aggregators that succeed will be the ones that bring the best of both types of content to us. Consumers will judge aggregators on their ability to find and organize the best content, but since content will be available to each aggregator, there won't be any room for weak content that simply piggybacks.