Commentary: The Television Paradigm Shift
A lot has changed in the last few decades but, to our detriment, a lot has stayed the same. And that is the root of the problem.
The Priority Discrepancy
In several business scenarios, cash flow trails consumer behavior. This makes sense because in order for a corporation to invest in a new product or service, a justifiable consumer demand needs to exist. Furthermore, for a corporation to make significant investment into a business, a profitable economic model needs to be in place for the business to succeed. This is all pretty straightforward when you are talking about selling a widget directly to a customer. There might be middle-men, suppliers, distributors, and stores along the way that take their piece of the payment, but in the end, the consumer's payment makes its way back to the manufacturer.
An interesting twist for the entertainment industry, particularly for cable companies, is that consumer payments don’t filter directly back to the manufacturer (the producer). This concept is best described using a simple example: Consumer pays Comcast for cable service. Comcast pays ESPN for their TV channel. Advertisers pay ESPN to promote on the channel. ESPN pays rights holders, producers, and talent to create content.
In this example the consumer pays for a service, the service pays for a channel, the channel pays for the content, and the advertiser pays the channel. What is important to note is that the consumer is only a paying customer of the service. The service is the paying customer of the channel. The advertiser is also a paying customer of the channel. The channel is a paying customer of the content creators. This model worked for old media because everyone who needed to get paid got paid—sometimes twice—even though cash didn't flow directly from consumers to producers. Cable companies became extremely profitable by exploiting dual revenue streams: ad sales and affiliate sales.
This model worked in the old days when television was the sole platform, but it is not sustainable in the new multiplatform landscape. In a more up-to-date example: Consumer pays Comcast for cable, internet, and voice service. Comcast pays ESPN for their TV channel. Advertisers pay ESPN for promoting on TV and online, but mostly for TV. ESPN buys or builds content products.
As you can see, consumers pay for multiple services, but the flow of cash to programmers and producers is perceived as mostly for TV. There is not enough economic incentive for TV programmers or producers to invest a lot into multiplatform or new media content. This also holds true for non-television producers and programmers. Online advertising revenue alone does not create enough opportunities for high-quality content production. Some might argue that the price of production is dropping and distribution is easier than ever. While this is true, the drop in cost for producing new media content does not offset the drop in revenue, which leads to lower-quality content on non-television platforms.
The priority discrepancy between users and creators of content is clear when you look at the media ecosystem at a higher level. Consumers are willing to pay to be entertained. Producers create quality content when paid by those who commission it. If programmers don't have an economic incentive to invest in new platforms, content development and innovation will continue to lag behind consumer behavior. This will hold true until a successful business model emerges or a series of major disruptions occur in the marketplace.
The Current State of Content
Even though there is a priority discrepancy between consumers and programmers, we are seeing attempts at multiplatform content development. Whether these attempts are the works of visionaries or the result of a desire to generate incremental revenue is hard to tell. What we do see from some of the more successful multiplatform experiences is that the creative workflow of current media companies is not designed to handle multiple screens and viewing contexts. This makes sense, because the industry has spent the last 70 years optimizing the process to deliver quality television programming.