CHAPTER
TWELVE
Is “Old” Media
Drowning?
(2008)
On a sunny July afternoon in Sun Valley, three
friends who had competed and cooperated for a quarter
century—Robert Iger, the CEO of Disney; Les Moonves, the CEO of
CBS; and Peter Chernin, the COO of News Corporation—gathered for
sodas. They sat beside a tranquil pond, but their world was not
serene. By the summer of 2008, the economy had started its swoon.
The shrinking of the audience for their broadcast networks and TV
stations had accelerated. Their stock prices were getting mauled.
“At least we’ve had a good run,” Chernin said, half
joking.
“Yeah,” Iger replied
with a laugh, “but I feel like we’ve gotten to the orgy and all the
women have left!”
“We sound like three
old men sitting in Miami Beach with blankets over our legs!”
Moonves cracked.
The network and
station business was once much easier. “The era when I worked at
ABC was fantastic,” recalled Michael Eisner, who was a program
executive at the network before leaving to become CEO of Disney in
the early eighties. “There were three networks, and all I had to
worry about was ‘Did we have a good show?’ Even if we had a bad
show, we did OK.”
What does it feel
like to be a media executive navigating these swiftly churning
waters? Before he became CEO of Sony, Sir Howard Stringer spent
much of his life in traditional media, starting as a researcher for
CBS News and becoming an award-winning news producer, president of
CBS News, and president of CBS Broadcasting. Today, seated in the
Sony dining room in New York, he said, “If you read every piece in
every newspaper and magazine about new technology, you would walk
into the East River! There are so many options out there,
simultaneously, that it’s a dizzying experience. For every time you
see an opportunity, you also see a threat. Every time you see a
threat, you see an opportunity. Or if you see a threat, you’re
afraid you’re missing an opportunity. That’s the one-two punch of
the technological marathon we’re all in. You worry about missing a
trend. You worry about not spotting a trend. You worry about a
trend passing you by. You worry about a trend taking you into a
cul-de-sac. It means that any CEO or senior executives of a company
have to induce themselves to have a calm they don’t feel, in order
to be rational in the face of this onslaught.”
Sony, like others,
had reason to fret about missed trends. Before Stringer was CEO,
the company that in 1979 had introduced the Sony Walkman was being
challenged in 2001 by a stylish upstart, Apple’s iPod. By 2003
Apple’s iTunes offered singles that could be downloaded simply and
for just ninety-nine cents, hampering the sale of albums by record
companies like Sony. Although the Walkman was still the dominant
portable music player in 2003, the iPod was gaining. I asked then
CEO Nobuyuki Idei, are you worried about the iPod?
No, he replied,
dismissing the question like a man brushing lint off his jacket.
Sony and Dell know manufacturing. Apple does
not. Within a couple of years, Apple will be out of the music
business.
Probably no other
traditional media business has been so disrupted by the digital
wave as has music. And none was slower to respond to the challenge.
Music companies like Sony gave an incentive to digital pirates by
insisting that their customers buy entire albums rather than
allowing them to purchase individual songs. The music companies
failed to understand that technology awarded power to consumers to
mix and choose their own music, failed to strike an accommodation
with Napster and other music download sites, failed to create a
digital jukebox like iTunes, failed to enter the lucrative concert
business for their artists, failed to start a TV platform like MTV
Edgar M. Bronfman, Jr., the CEO of the Warner Music Group, said,
“It’s fair to say we didn’t get it”—meaning the digital revolution.
“But I’m not sure what we could have done.” He added, “The record
business is in trouble. The music business is not.” He believes the
music companies were murdered by technological forces beyond their
control. In fact, they committed suicide by neglect.
A glance at the
record company business suggests the depth of its travails. Into
the nineties, best selling albums sold at least 15 million copies,
said Jeffrey Cole of the Annenberg School’s Center for the Digital
Future at the University of Southern California. In 2007, the
top-selling album registered only 3.7 million sales. People are
listening to more music, but paying much less. Some performers,
such as Madonna, bypass traditional music companies altogether.
Following the predigital model of the Grateful Dead, who built
their audience by encouraging fans to tape their performances, acts
like Coldplay made single songs available for free over the
Internet. (When released, Coldplay’s album Death and All His Friends shot to number one.) In
2007, worldwide digital music sales rose to 15 percent of all music
sold, up from less than 1 percent in 2003. Yet this rise could not
compensate for the decline of more expensive compact disc sales,
which fell 10 percent that year. Music companies were in the
business of selling albums, and since their sales peak in 2000 of
nearly 800 million, album sales in 2007 plunged to just over 500
million. This helps explain why music company revenues have dropped
significantly from $14.2 billion in 2000 and will dive to $9
billion by 2012, according to Forrester Research.
In one sense,
newspapers share this dilemma. Most newspapers enjoy healthier
profit margins than music companies, but these are shrinking.
Investors punish their stocks because, compared with a Google or
Apple, newspapers have dismal growth prospects. The speed with
which the world of newspapering has changed was captured in
interviews conducted by the Los Angeles Times
Magazine with six former editors of the Los Angeles Times newspaper. William F. Thomas, the
editor from 1971 to 1989, suggested that the so-called good old
days were akin to what was commonplace at Google: “I never
experienced any real restraints on anything we wanted to do for
budget reasons.... The only limit I recall was when they started
enforcing a no-first-class rule.” By the time John S. Carroll took
the helm in 2000, the newspaper’s corporate owners were seen as
predators, people who understood math but not journalism, and
Carroll, like his two successors, chose to quit in 2005 rather than
obey directives from Chicago. With the benefit of hindsight, this
fine editor blamed not just his former bosses, but himself as well.
Carroll told the magazine that, like most editors, he was
preoccupied with the fireman’s part of his job, answering news
alarms, covering and editing daily stories. “If I had it to do over
again, I might have taken some time off and tried to figure out
where the Web was going and tried to do something about it.” This
mistake—not to treat the arrival of the Internet with urgency, not
to pour resources into a vibrant online newspaper—was one that most
of his peers made as well.
In 2007, newspaper
advertising, which accounts for about 80 percent of most U.S.
newspaper revenue, fell 9.4 percent, according to the Newspaper
Association of America. Adjusted for inflation, ad revenues were 20
percent lower than in their peak year, 2000. Circulation had
dropped about 2 percent each year after 2003, and some papers,
including the Los Angeles Times and the
Boston Globe, lost about a third of
their circulation in those years. The falloff in both advertising
and newspaper sales would accelerate as more readers went online to
sites like Google, Yahoo News, the Huffington Post, or Gawker.
The flight of
advertisers from magazines was usually not nearly as severe, in
part because advertisers believed they got more value from glossy,
picture-filled pages. But even before the 2008 recession leveled
magazines, many had slipped. Business magazines, said Time Inc.
editor in chief John Huey, were battered by a severe drop in auto
and tech advertising. Conde Nast would feel compelled to close
Portfolio magazine in early 2009 and
just months later Business Week was put
up for sale. And the weekly news magazines, whose pages age rapidly
in a time of instant news, were so bereft of advertising as to
appear anorexic. U.S. News 
World Report at first announced that it would
switch from a weekly to a biweekly publication schedule, then
within months retreated further, saying it would only publish
monthly.
World Report at first announced that it would
switch from a weekly to a biweekly publication schedule, then
within months retreated further, saying it would only publish
monthly.It is true that if we
add Web site visitors, newspapers and magazines had a net increase
in readers. Twenty million unique visitors came each month in early
2008 to the largest newspaper Web site, the New York Times. The rub is that because the online
audience pays less attention to ads and spends less time with an
online newspaper, advertisers only pay 5 to 10 percent of what they
do for the same ad in a newspaper. According to Jim Kennedy, vice
president and director of strategic planning for the Associated
Press, newspaper revenues in 2007 totaled sixty billion dollars,
with online revenues accounting for only four billion of this
total. Theoretically, a newspaper that abandoned print to publish
online could save 60 to 80 percent of its overall costs, having
done away with the expense of paper, printing, and distribution. To
date, however, with the exception of the Wall
Street Journal and the Financial
Times, few if any daily newspapers have succeeded by
charging for online subscriptions. With online newspapers
generating minute advertising and zero circulation revenues—and
with younger readers migrating online and exhibiting less loyalty
to a particular news brand—newspapers that attempted to publish
only online would undoubtably subtract more revenue than they would
add.
Hemmed in, the print
press in 2008 engaged in a blizzard of cost cutting. Newsweek shed two hundred jobs, Time Inc. six
hundred; the San Jose Mercury News
cleaved two hundred newsroom employees. The headcount at the
world’s best newspaper, the New York
Times, dropped almost 4 percent in a single year, and the
McClatchy chain, which historically prided itself on its no-layoff
policy, began laying off employees in September and by the spring
of 2009 had reduced its workforce by 25 percent. After years of
patching and pasting to get by, newspapers seemed to be in free
fall. The Tribune Company cut five hundred weekly news pages in its
papers and laid off employees, then filed for bankruptcy. The
Philadelphia Inquirer and the
Philadelphia Daily News would soon
follow, as would others. The New York Times Company, with a bulge
of debt payments due in the spring of 2009, sought a second
mortgage on its headquarters building and accepted a $250 million
loan at an inflated interest rate of 14 percent from Mexican
billionaire Carlos Slim. The Christian Science
Monitor shut down its daily print edition and went online,
as would the Seattle
Post-Intelligencer. Gannett, the nation’s largest newspaper
publisher with eighty-five dailies, watched its stock price drop 87
percent in a twelve-month period.
Not everyone in the
news businesses was on a starvation diet. Three wire services—the
AP, Reuters, and Bloomberg—defied the industry trend. There were
several reasons for this. The bleak economic climate for
newspapers, ironically, benefited the wire services. As newspapers
contracted, they outsourced more of their news gathering to the
wire services. (“The cold our customers caught,” said Thomson
Reuters CEO, Thomas Glocer, “has been good for Reuters—unless the
patient dies! That would be bad for Reuters.”) And unlike most
newspapers, the wire services moved early to tap new sources of
revenue. The AP, according to its CEO, Tom Curley, “gets about 20
percent of our revenues from digital sources.” The AP’s 2008
revenues totaled $750 million, which means digital sources—Google
News and Yahoo and advertising from newspaper and broadcast links
and other customers—generated about $150 million. And broadcasting
revenues were even larger. More than half the AP’s worldwide
revenues now came not from the fees newspapers paid but from its
broadcast and online operations.
Bloomberg and
Reuters, for their part, were sitting on data-generating gold
mines. Bloomberg, like Reuters long before it merged with Thomson,
started as a collector and provider of financial data; essentially,
it was in the service business, not the news business. The value of
this business is demonstrated by contrasting two business
transactions. In 2007, when Rupert Murdoch acquired Dow Jones,
parent of the Wall Street Journal (and
former owner of Telerate, a data business it failed to invest in
and eventually sold), he paid five billion dollars. In 2008, when
Merrill Lynch sold its 20 percent ownership in Bloomberg, the
company was valued at a whopping twenty-two billion dollars. Both
Bloomberg and Thomson Reuters tapped a rich revenue source from the
terminals they rented to companies, and with readers hungry for
business information from around the world, they expanded into
news. According to Thomas Glocer, by 2008, Reuters had 2,600
reporters, and six hundred broadcast outlets as customers for its
video news service; its profit margins topped 20 percent. Unlike
newspapers, the three wire services were publishers who did not
have the expense of paper, printing presses, or
distribution.
On stage at the Dow
JoneslJournal’s annual All Things
Digital Conference in San Diego in May 2008, Murdoch noted that
newspapers had lost 10 to 30 percent of their revenues and almost
all were engaged in a frenzy of cost cutting. He said he saw this
as an opportunity, and would pour more resources into the
Journal, aiming to siphon general and
business readers from the Times and the
Financial Times. The jury was out as to
whether by going after general readers of the Times he would over
the long run chase business readers from the Journal, but to date his strategy has been a modest
success. Comparing the Journal’s
circulation in the six months ending March 2009 versus the same
period ending in March 2008, the Audit Bureau of Circulations
reported that the Journal was the only
one of the top twenty-five newspapers to gain (just under 1
percent) circulation.
Murdoch was well
aware of the newspaper industry’s plight. Some newspapers, he said,
“will disappear.” As more news is aggregated online, it weakens the
value of a newspaper brand. “What really is going on underneath
this news aggregation,” said Tad Smith, CEO of Reed Business
Information, “is that for journalism the return on investment for
going out and hiring other journalists is negative. What that means
is that Google has created an environment where the way to make
money in the media world is with OPC: other people’s content.”
Smith experienced firsthand the plight of print publications when
his parent company put his division up for sale in 2008 and was
unable to find a buyer to pay what it considered a fair price. They
took Smith’s division off the market.
Eric Schmidt bridled
at the suggestion that Google was somehow the fall guy for an
Internet that had inevitably changed the rules of the game. “There
is a systematic change going on in how people spend their time,” he
said. “I think it’s important that Google understand that we are
one of the companies that is making that happen. It’s very
important that we be polite about it, and not be arrogant or
obnoxious, because there is real damage being done. But also, our
rationale is that it’s the end users who are choosing this. This is
not a concerted effort by us to do anything other than adapt to the
way end users behave. If looked at that way, we have a shared
problem. We need newspapers’ content. And it’s critically important
that they continue.” When users do a Google search or come to
Google News and click on a newspaper story, he said, they are taken
to that paper’s Web site, which increases its traffic and its
ability to sell more online ads. Schmidt and newspaper proprietors
have no illusions that Google can magically restore the economic
vitality of newspapers. Google rubbed salt in the wound, however,
when after seven years of being ad free, Google News in 2009 for
the first time started accepting small text ads, triggering renewed
newspaper complaints that Google was enriching itself on their
content.
Book publishing “is
in so much better shape than the music industry or certainly the
newspaper or magazine industry,” said Authors Guild executive
director Paul Aiken. He thinks the physical format of a book—and
therefore the publishing business model—is not as easily altered.
Nor is book publishing dependent on fickle advertisers, as are
newspapers and magazines. But when asked if he was an optimist
about the future of books, Aiken paused before candidly responding,
“Sometimes.”
The reasons to be
wary are many. Book sales were relatively flat in 2007, reaching
$3.13 billion in the United States, a rise of less than 1 percent
from the previous year. And according to a 2007 study by the
National Endowment for the Arts (NEA), when adjusted for inflation,
money spent to purchase books “has fallen dramatically.” Publishers
rarely say aloud what this study suggested: books are losing
younger readers. “Nearly half of all Americans ages 18 to 24 read
no books for pleasure,” the study found, and the percentage of
those 18 to 44 who read books was sliding. It is true that the
following year, 2008, the NEA reported a modest increase in
reading. But if one asked publishers, or educators, whether they
had high hopes for the expansion of book reading, few would say
yes. Publishers also fretted about whether Google Books would bring
them the same piracy woes that bedevil music and movies; about the
disappearance of independent bookstores and the squeeze on their
profits from big distributors like Amazon and Barnes & Noble;
about publishing houses’ increasing dependence on blockbusters,
making it harder for them to justify publishing so-called midlist
books that often make editors proud but lose money; about the folks
who sign their checks but who often treat publishing as just
another business and not an endeavor that can replenish the
culture. That one day books would be printed on demand or that
online book sellers could reach into the long tail and resuscitate
books that were no longer in print was a distant shore to most book
publishers in late 2008, when they imposed layoffs akin to those at
newspapers. One publisher, Houghton Mifflin Harcourt, followed its
round of layoffs by announcing that it would temporarily suspend
the acquisition of new books.
Broadcast radio, with
the notable exceptions of sports and talk radio, was also losing
altitude in 2008; revenues began a steady decline in 2006, which
has since accelerated. Les Moonves announced in July 2008 that he
was selling fifty of his Infinity Broadcasting’s smaller-market
stations. With his CBS stock hammered by investors who saw no
growth prospects in the saturated radio market, he said he would
sell his entire station group for the proper price, which he cannot
get. Similar maladies afflicted satellite radio. Even with nearly
twenty million customers and a merger between the two satellite
services, Karmazin’s Sirius XM Radio, burdened by huge programming
and satellite and debt costs—and by the emergence of new digital
competitors that allowed consumers to program playlists for
themselves—teetered near insolvency. All of radio is besieged by
too many ads and too many choices—from Internet radio to podcasts
to iPods to MP3 players—that siphon off listeners because they
empower them to become their own disc jockeys.
Traditional
advertising companies were growing, but only because they were no
longer focused exclusively on creating advertising and selling it.
They had merged and morphed into four worldwide marketing
conglomerates—the WPP Group, the Omnicom Group, the Interpublic
Group, and Publicis—with public relations and marketing and direct
mail and polling and research and lobbying and political consulting
divisions. Ad spending in the United States grew an average of
about 5 percent from 1963 to 2007, peaking at $162.1 billion in
2008, according to Gotlieb’s GroupM. This was about 36 percent of
the estimated $445 billion spent globally on advertising. Yet ad
spending was less than half of what was spent on what is
euphemistically now called “marketing.” A media campaign no longer
consisted of buying ads on the three networks and a few other
places; now a campaign might combine ads on TV and in magazines, a
viral effort online, search ads, in-store sales promotions,
telemarketing, polling, public relations—all of which was more
expensive. The increased expense, and spending, spurred media
buying agencies to merge into su peragencies, such as Irwin
Gotlieb’s Group M. These media buyers now had enormous clout, which
they exercised over traditional media companies that relied on
advertising.
While advertising in
most traditional media was declining or growing incrementally,
online advertising was soaring. The advantage enjoyed by digital
media is transparency. The client (advertiser) knows more about the
audience, more about who actually responds to the advertisement.
Marketing thus becomes less opaque, robbing ad agencies and sellers
of their ability to sell what Mel Karmazin called “the sizzle.”
This is a primary reason online advertising jumped 30 percent each
year, topping twenty-three billion dollars in 2008. This
transparency and the additional supply of media outlets, as well as
a suspicion that advertising and media agencies had not
sufficiently adjusted their fees downward, shifted leverage to the
true buyer, the client.
Seeking to surf the
Internet wave, companies like WPP bid aggressively to acquire
digital advertising and marketing companies. They and others
invested in digital advertising exchanges like Spot Runner, which
creates an online dashboard of local media platforms on which small
businesses advertise, and offers a roster of prefab commercials
that can be cheaply customized. Want to buy a thirty-second TV spot
in Santa Barbara? Nick Grouf, the CEO of Spot Runner, said he can
reach into “the long tail” of local media and purchase it for a
mere twelve dollars. This makes television advertising accessible
to small business—pizza parlors, pet stores, hair salons—that would
previously have found it unimaginable. “We told local businesses
this and their jaws dropped,” said Grouf. “We’re democratizing the
business, opening it up to small business.” By selling ad space
once seen as undesirable, the digital technologies that allow
advertising exchanges, such as Google’s AdWords and AdSense, shake
the advertising business to its core.
Technology was the
frenemy of all traditional media businesses. According to an
Annenberg Center study, the average American family classified as
poor spent $180 per month on media services—mobile, broadband,
digital TV, satellite TV, iTunes, and the like—that did not exist a
generation ago, and the average American household spends $260 per
month. (Irwin Gotlieb’s GroupM data pegged the number at $270.) By
providing consumers with all these choices, new technology
inevitably disrupted traditional habits. The audience that had once
belonged to broadcast television moved to cable, to video on
demand, to DVDs, to YouTube and Facebook and Guitar Hero. TiVo and
DVRs allowed viewers to become their own programmers. This was
great for viewers but not so great for the television business. It
meant that viewers were often skipping the ads broadcasters relied
on for revenue, and programs being watched were not being counted
in the Nielsen ratings, weakening ad rates. And networks are soon
to be slammed by another disruption: surveys show that those
between ages fourteen to twenty-five (called millennials) are
watching less television and spending more time on the Internet and
with video games. Television executives like to argue that this is
really good news for the broadcast networks. Yes, they will say,
the live viewing audience for ABC, Fox, CBS, and NBC plunged 10
percent in the year 2008. But, they boast, their ad revenues
continued to inch up, because in an age of niche media and
fragmented viewership, no other medium delivers a mass audience. If
they took a truth serum, though, they would admit that one day
their advertisers will also fragment. They would also admit that
their investment in local broadcast stations, which once yielded
profit margins of 40 to 60 percent, were now a drag on their
growth.
The U.S. movie
business was growing overseas, but was under attack everywhere
else—from Internet piracy to DVD and video sales and rentals that
were declining in the face of competition from movie downloads.
Equally worrisome, personal video recorders empowered viewers to
ignore ads promoting new movies. “We’re not like a car or
prescription medicine company where you can build a brand over a
long term,” said Michael Lynton, Chairman and CEO of Sony Pictures
Entertainment. “You have to build a brand in five weeks. If they
skip over your ads, you’re in trouble.” Flat screen TVs, DVDs, and
movie downloads drained customers from movie theaters. Video games
were stealing the attention of teenagers. And that burgeoning
business—now taking in twenty-one billion dollars a year worldwide
and expected to double by 2012—was expanding from action games for
teens to mass-market Wii games for adults to play with their kids,
or with one another. Telephone companies watched their lucrative
landline phone business rapidly lose customers to Skype Internet
calls and mobile and new cable phone services. Yahoo and Microsoft
were tossed in the digital storm. With better search and
advertising technology, Google’s search widened its lead. With the
promise of cloud computing and free software applications, Google
menaced Microsoft’s packaged software business. Everywhere they
turned, new technologies were disrupting businesses faster than
they could respond.
MORE THAN A QUARTER
CENTURY AGO, as the age of cable TV materialized, the three
television networks were slow to recognize the seismic shift that
cable heralded, missing their chance to own rather than compete
with cable networks. They were not alone in disdaining the new.
When Robert Pittman cofounded MTV in 1981, Coca-Cola and McDonald’s
refused to buy advertising, saying they would not advertise on a
television network that did not reach at least 55 percent of the
nation. Pittman did persuade Pepsi to place some ads, and for the
next several years Pepsi had a de facto exclusive advertising
platform that greatly boosted its market share. It took Coca-Cola
and McDonald’s four or five years, Pittman recalled, to change
their minds. Likewise, most traditional media companies in the
Google era concentrated more on defending their turf rather than
extending it. Belatedly, most have begun to dip their toes, and in
some cases entire feet, into new media efforts, hoping that
technology could also be their friend.
In the summer of
2008, CBS became the first full-scale traditional media company to
open a Silicon Valley office in Menlo Park. Quincy Smith, who had
been promoted to CEO of CBS Interactive, supervised the office and
averaged two days a week there. Under his prodding, CBS made a
number of digital acquisitions. The biggest was the $1.8 billion
CBS spent to acquire CNET, whose online networks generated revenues
of $400 million. It was a pricey acquisition—three times what
Murdoch spent for MySpace in 2005—but CEO Moonves said he hoped the
digital acquisition would add “at least two percentage points” to
CBS profits and growth rates. CBS had also become one of YouTube’s
biggest suppliers, uploading eight hundred one- and two-minute
clips per day from CBS programs. It was also among the first
traditional media companies to strike a deal with YouTube to treat
pirated video, as Brian Stelter reported in the New York Times, “as an advertising opportunity.”
Instead of ordering YouTube to remove the content illegally
uploaded by citizens, CBS and a few others granted YouTube
permission to sell ads off these and to split the revenues. Smith
said CBS had about two hundred partners, and was selling digital
copies of its shows on Yahoo, iTunes, and Amazon. Smith’s digital
group now had 3,300 employees in its various ventures, and Moonves
predicted that the group would generate revenues of $600 million
for CBS in 2008, with $90 million to $100 million of that as
profit.
Almost daily in 2008,
old media announced new media efforts. Seeking to extend its
programming to other platforms, NBC said in January 2008 that it
would customize shorter content that it called promo-tainment and
sell ads on nine other platforms, including screens in gyms,
subways, and the backseats of taxicabs, on gas pumps, and at
supermarket checkout counters. In its competition with YouTube, NBC
and News Corporation’s Hulu video site had, by October 2008, signed
up Sony and Paramount and other studios. Hulu offered a choice of
about a thousand network shows, and reached an estimated 2.6
percent of the online video market—far below You Tube—but in a
promising ad-friendly environment that would soon make it the
second ranked video site. CBS, which declined to join Hulu, later
established its own site, TVcom, to serve as an online platform for
its present and past programs and for those of other content
creators. Disney sold ABC programs and movies to iTunes, defending
Apple’s then policy of a single price for programs, movies, or
music on the grounds that it was simple and clear and better served
consumers. In April 2009, Disney’s ABC gave a boost to Hulu by
joining NBC and Fox as an equity partner. By mid 2009, Hulu—like
You Tube—was still not profitable.
Local stations
scrambled to create Web sites for their news and weather and to
lower their ad rates in order to sell inventory to small
businesses. A consortium of the six largest cable operators started
Canoe Ventures, an effort to forge a single national digital cable
platform to sell and target ads and collect the kind of user data
Google gathers. HBO experimented by offering some of its programs
for free online. Viacom joined with MGM and Lions Gate to create
Epix, a premium cable channel with a Web site to stream their
library of movies. All the movie studios sought to improve picture
quality by offering films shot in high definition and by replacing
costly reels of film they sent movie theaters with digital copies.
Trying to demonstrate that it was not “a dumb pipe company,”
Verizon rolled out its cable video service, called FIOS, and
announced plans to spend twenty billion dollars by 2010 to ensure
its success; by the summer of 2008, FIOS was available in one
million homes. AT&T promised to offer video services for mobile
phones. Spurred by the success of Apple’s iPhone, mobile phone
companies moved to transform their devices into PDAs that were
really powerful minicomputers. People who had grown up in the
television business, such as Disney’s former CEO, Michael Eisner,
or MTV’s Albie Hecht, and Jason Hirschhorn and Herb Scannell,
switched careers to become Internet programmers.
And yet all of these
efforts failed to answer two lingering questions: would these
efforts make money? And would storytelling change on the Web?
Eisner said he believed it would not, that though there are many
more platforms to display stories, stories need space to be told.
He didn’t believe attention spans had shrunk, that multitasking
diverted attention, or that interactivity would reshape
storytelling. “If the story is really good, they’ll stay with it,”
Eisner said. “I don’t think a lot of the rules for storytelling are
unique for the Internet.” I think Jason Hirschhorn was closer to
the truth when he said that the way storytelling will change is
that the audience—as Google’s YouTube demonstrates daily—will “do a
lot of snacking.” Everything will speed up, probably including the
decline of old media.