Deadline Hollywood recently had a thought-provoking post about whether studios and networks are ensuring their destruction by putting their TV shows online.
Brief background: for those who like their entertainment news served with a side of sauce, Nikki Finke’s Deadline Hollywood is the ultimate source. It has breaking industry stories combined with insider gossip and some pretty smarmy commentary from Ms. Finke, who regards herself highly but with good reason: she’s accurate and often provides dead-on and insightful analysis with her commentary. The blog became the go-to place during the WGA strike for the absolute latest developments, with Finke clearly siding with the writers and other creatives. Digital revenues were at the heart of the strike, and Finke has now added that topic to her inventory.
In her post she covers a Wall Street conference call that looked at a big-picture question: are studios destroying their ecosystem by racing to make so much of their programming available for free on sites like Hulu? The consensus was yes, they are, because their shows make significantly less in ad revenue when shown on the web (64% less for a broadcast show, 36% less for a cable show, according to reputable analyst Spencer Wang). They argue that such lower revenue can only lead to shrinking or negative profit margins. And this growing problem will eventually require studios to figure out a way to charge web viewers for content, most likely through some kind of subscription system, or to place more ads on the content.
Such conclusions continue to amaze me because of their implied assumptions:
