Week of May 21, 2007

Hollywood Braces for Possible Writers' Strike

Friday, May 25, 2007

Hollywood producers have been moving up production schedule to bank programming in anticipation of a possible writer's strikes when the current contract expires at the end of October. The key issue, of course, is royalties for use of their work online. The Writer's Guild is looking for higher residuals for online use, as well as DVDs. According to the Washington Post, the producers, for their part, claim that formulas for residuals should be recalculated that kick in only when shows break even.

This brings us back to the constant argument about the value of online content. Is there are inherent value in the fruits of the creative process, or should it be based on the value of the online advertising rates that it generates?

ABC Goes It Alone

Thursday, May 24, 2007

ABC is taking a different approach in its online initiatives than the other networks. ABC is focusing most of its online distribution efforts on its own web site, not through joint ventures such as the one recently announced between NBC/Universal and News Corp.

ABC and parent Disney are trying to build a branded strategy based on a new definition of "network." ABC, like the other networks, has discovered that online viewers are willing to sit through a limited number of commercials in order to have content available online on demand.

ABC sees two advantages in its new strategy: 1) combining web and TV viewing increases the size of the available audience and 2) the online audience is significantly younger than the TV audience. The average age of the online viewer is 28 (and well educated), while the average TV viewer is 47.

Online Streaming Royalties...Divide & Conquer?

Wednesday, May 23, 2007

Sound Exchange, the arm of the RIAA charged with collecting music royalties for online broadcasts, has made an offer to "small" online broadcasters that would virtually reinstate the recently expired royalty rates, instead of the new, much higher rates dictated by the Copyright Royalty Board.

What's behind the change of heart? For one thing, pressure from Congress to enter into good faith negotiations. Secondly, a strategy aimed at splitting the little guys and the big online broadcasters may be the best way, public relations-wise, to keep Congress and the public at bay.

In the end, the fees imposed by the CRB will likely shut down the little guys, so anything Sound Exchange gets from them amounts to found money. The real money is to be made in getting the big online-only and radio players to pony up.

Newspapers Continue to Hemorrhage Readers & Jobs

Tuesday, May 22, 2007

The San Francisco Chronicle is the latest in a parade of major newspapers to announce drastic staff cutbacks. The Chronicle will cut approximately one quarter of its staff, leaving it with approximately 1/2 the number of employees that it had in 2000.

The problem, of course, is the continuing flight of readers and advertisers to the Internet. In fact, the Chronicle's own web site SFGate.com, continue to flourish, even as the parent paper continues to lose money for the parent Hearst Company.

While the newspaper business has never faced such a grave crisis, the news business as whole has never been stronger. The problem is that the migration from news type to the Internet is not a dollar for dollar proposition. Newspapers continue to get 80% of their revenue from print ads, 5% from on line ads and 15% from subscriptions and newsstand sales.

Microsoft Jumps Into Online Ads

Monday, May 21, 2007

Microsoft surprised no one buy jumping into the online ad business, but they did stun a lot of people with the price they paid to get in. Microsoft announced the other day that they would pay $6 billion to acquire AQuantive, almost a 70% premium above the price that AQuantive's stock was trading for. This bold move is meant to move Microsoft into position to challenge Google and Yahoo! in the online advertising space in one swift stroke.

This move also shows how the sweet spot online advertising is evolving, moving from paid search ads to delivering targeted ads on web sites. The rapidly growing online advertising business is on track to generate about $20 billion this year, easily the fastest-growing segment of all media.