The Crusaders Hit Cannes – MIPTV 2009 Summary

By Guy Gadney for The Project Factory

At the turn of the first millennium, Christians set off on Crusades. They left their families at home, dressed up in fancy gear to conquer exotic territories and came back with heroic stories of individual triumphs.

These days it’s called a business trip and there are few lands as exotic to conquer as Cannes on the French Riviera. The perfect setting for the battleground known as MIPTV – the conference where the gallant soldiers from the TV and digital industries who wear suits rather than chainmail, and carry cheque books instead of swords, get together and set the agenda for the rest of the year in the television industry.

Last year, I was here in the capacity of GM of Digital for Channel Nine and ACP Magazines. The discussions I had with broadcasters and production companies saw digital as a distant rumble. Something they “should probably look at”.

This year the mood has been very different.

Advertising revenue for free-to-air networks has halved in Australia, and this is not uncommon in other territories.

So why was it that the mood of the digital strands was so positive and realistically bullish?

The reason it seemed, was that the much maligned digital revenue models are starting to appear. Not only that, but they are starting to appear just as the revenue models for traditional media are starting to dry up.

The epiphany amongst progressive companies is that there is no one revenue stream – each project needs to have multiple sources. The concept of fragmented revenue streams was something I championed strongly at PBL Media, and was summed up neatly by Marie Jacobson, VP of Programming and Production from Sony who said that where she used to have one revenue line in her P&L for each project, she now has six.

This is natural for a medium where every other aspect is fragmented. Remember that the internet was built to decentralize itself to survive a nuclear attack. As it fragments, it grows stronger. Distribution of music and video content has split, branched out and blossomed. Audience behaviour is fragmented by the enormous proliferation of devices now used to watch a single TV show. It is natural that a fragmented business should work better than one which is mono-focused.

Hilmar Petursson is CEO of the online game EVE online. The game has 300,000 players who generate over $45m in revenue each year. The community of players create news, stories and professional-quality video marketing for the game. This passion is created by the structure of the content as well as its quality. “Content control is not the way to fix a broken business model. When you have a strong way to monetize your content, you do not need DRM. The strongest model is when you allow your intellectual property to flow freely.”

These distribution models attract new audiences exponentially as players recommend the content to their friends and contribute their own content. Catherine Warren from FanTrust Entertainment Strategies categorized these audiences into three segments: Transformers, who rif on their favourite content using mash-ups, Catalysts, who comment on and champion content and businesses, coaxing them into the community, and Creators, who finance and create amateur content themselves using techniques such as machinema. Unexpectedly, those who get creatively involved in the content remain in the minority. Of the users of Yahoo! video, 89% are pure viewers, 10% remix the content, and 1% create new content. While the numbers look disproportionate, this is a substantially more active community than exists with traditional media.

Faced with a dual set of challenges from the current economic climate and from audiences shifting to digital entertainment platforms, the television industry is now at an important junction where it can define its short and medium term strategy.

The view from this year’s MIPTV is that the most common reaction from traditional television companies has been to cut back. The media consultant Guillame de Posch talked about the six likely actions that television companies will take in the face of ongoing double-figure drops in advertising revenue. They are: to renegotiate the sports and movie rights deals, stop regional and niche ‘dead weight’ shows, increase the number of repeats that each show has, shift the genre mix to lower risk, lower spend shows that are broadly unscripted, to pay less by buying less rights, and reducing risks further by simply not commissioning new series but recommissioning old ones.

This approach describes a scenario where existing media businesses simply do not know where the business models are any more, and do not know what their next strategy is. As Jimmy Mulville from Hat Trick productions put it: “There will be a new order in television. You cannot have a change to a new order without chaos, and we are in the chaos period right now”. Hat Trick has embraced the chaos. As well as investing in digital capabilities internally, they signed online star Brony Matthewman which led to BBC Three commissioning the show Bryony Makes a Zombie Movie.Mulville and HatTrick are focused on riding the wave rather than trying to hold it back, and are experimenting with multiple models rather than applying a singular traditional model. “We do not live in an absolute world. We live a comparative world.”

The challenge to traditional media companies is that the absolute audience guarantee that a broadcast licence or newspaper franchise has been removed by the ability of audiences to have comparative choice via the internet, the world-wide web and mobiles. Michel Cassius from Dubit drew the analogy of the audiences as a flow of water: “The larger companies dam the water stream to create energy. This is their approach to creating audiences. Smaller companies look at the flow of the water and be where the water/audience is”.

The successful companies will be the ones that can be in multiple locations at the same time, and have the purest and most appropriate digital business model attached to each location. These multiple revenue streams are small in isolation but significant in aggregate. A stream of a few thousand dollars is acceptable when there many of them.

To survive the chaos, television companies need to partner with digitally-native companies to search out and find the new, multiple digital revenue streams and run with the changes, because not even swapping the suit for chainmail will protect the current revenue models to which television is still nervously clinging.

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