MARAVEDIS

Ty Ahmad-Taylor is the founder and CEO of FanFeedr, a real-time personalized sports feed. Previously, he was SVP of Strategy and Product Development at Viacom (NYSE: VIA) and, before that, Comcast.

I worked at two large cable television networks, and both believed—and continue to believe—that they are in the television business.

That seems logical enough – problem is, it isn’t true. And it’s a problem throughout the media industry. Most firms believe that they are in the business of distributing content through discrete channels, and that mischaracterization often leads to poor strategy and execution. (Read on for some of the latest examples.)

If you make television shows, films or music, your business is actually the audience business. The same goes for books, magazines and newspapers. Michael J . Wolf, former President of MTV Networks, put it this way when I spoke with him. “Television companies are in the programming business and the brand business. When you look at a network like Syfy, or Cartoon Network, or Nickelodeon, they mean something.”

The television-media distribution business is the profitable province of those who distribute: cable, satellite and fiber companies. The audience business, by contrast, is built on the idea that a media company gets as many people as possible to watch its content, and then makes money off that audience either by charging for the shows or by charging to advertise around those shows.

In short, the television business is based on reach and frequency: How many people watch a show, and how many times do they watch it.

In retail, you place stores close to customers. Most media firms have pursued a similar, single-outlet strategy. The metaphor that I trot out is that at my former employers, we spent a lot of time building a single, gleaming temple to the brand in Poughkeepsie, N.Y., when most of our customers were on Fifth Avenue in Manhattan, Ginza in Tokyo, or Bond St. in London.

The core conceit was that we needed to own the customer, on “land” that we owned, as that is how we could control the customer experience. But when you are a content creator, as media companies are, the customer experience is the content the customers watch, not the access to that content.

Furthermore, the most valuable piece of real estate around that content isn’t the banner advertising in the environs around the video, but the pre-roll, post-roll and video overlays directly within the video player itself. What users watch is determined by a firm’s video player, the bit of code on a web page that grabs and plays back video. This player can easily play on third-party web sites.

One obvious way media companies can grow is by actively pursuing customers in the domains that those customers prefer (Where are the “5th Avenues” for digital content? Social networks, of course. Facebook, Twitter and MySpace have higher monthly, daily, and annual visits than any media site.)

Yet, of course, many firms are taking the opposite approach, enacting tolls where none existed, making it harder to get to their content, and generally creating barriers to consumption where few existed previously. Media companies of all stripes are guilty of this strategic miscalculation: The New York Times (NYSE: NYT) (also a former employer) is about to put a large portion of its site behind a pay wall; large swaths of cable network shows aren’t available online legally, but are available for pay via iTunes; movies are windowed; and Sony (NYSE: SNE) has that whole weird “digital locker” concept.

These are all bad ideas. Just this week, there was yet another example: Warner Bros.‘s decision to window its DVDs with Netflix will only shrink the audience for Warner Bros.‘s films once they leave the theater.

Hulu notwithstanding, it is a struggle to find any company that has actively pursued audience in the fashion I describe. The CW, one of the smallest broadcast networks, is another rare exception. In 2007-2008, the CW declined to make the final five episodes of its small hit “Gossip Girl” available on its website for viewing online. Instead, it was available only on iTunes. The result: The CW found that fewer people watched the broadcast, fewer people came to the website, and that its overall potential audience was diminished.

The CW was trying to force everyone to drive to Poughkeepsie. Now, it simulcasts Gossip Girl online when it is shown on-air, recognizing that its audience is interested in the show, not the distribution channel. Illegal viewing of Gossip Girl episodes increased 45% during the TV-only experiment.

Distributing across multiple channels in real-time—and cannibalizing existing lines of business—isn’t just the right thing to do. History will reflect that this is the only thing to do. Here’s the key fact for media companies to remember: The value of a customer who doesn’t watch a TV show or a movie is $0.

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• A Look At Netflix's Plan To Woo The Studios With Digital Distribution

Posted: 2010-01-08 15:53:05

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