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TV’s bloody disruptions

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Last night, Zeitgeist eagerly devoured the first episode of the new season of Netflix‘s House of Cards, a series that has received lavish praise  – not least from us – both for its content and its position as vanguard of a new wave of television distribution, production and consumption. The series lead, Frank Underwood, takes on his competition with a ruthless lack of morality that is unlikely to jar with those in the cutthroat television industry. The New York Times recently featured an excellent piece on the series, focusing on the showrunner Beau Willimon, the unique nature of doing such a show with Netflix, which among other things guaranteed 26 shows upfront, and the new mood of “post-hope” politics. Is traditional linear TV entering its own post-hope state?

Such talk of impending doom makes for nice editorial (which Zeitgeist is not averse to), but how true is it? To some extent, such new forms of consumption are being hampered by externalities as the platforms make the switch from early adopters to the everyday consumer. Indeed, Netflix’s sheer popularity is proving to be a thorn in its side. In November last year, Sandvine reported that the content Netflix provides now accounts for almost a third of internet traffic in the US. This staggering figure no doubt accounts for at least part of why internet speeds take such a distinct hit during primetime viewing hours (see chart below). As Quartz has the insight to point out, such issues are less to do with intentional throttling and more to do with peering agreements between ISPs and content providers.

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Download speeds happen to take a significant hit right around the time people are looking to kick back with some Netflix

Such issues are likely to be ever more prevalent as the notion of net neutrality continues to come under attack. At the end of last month, a federal appeals court overturned the Federal Communication Commission’s Open Internet Order, which had stipulated that ISPs could not prejudice one type of internet traffic over another. The fear of any such policy being overturned has always been one of the creation of a two-tier internet, where people who can afford faster internet get preferential access, and companies are free to charge distributors differing amounts based on the type or amount of content they are delivering. Such consternation was also felt in government, where five US senators called on the FCC chairman to “act with expediency” to preserve the open internet. The news immediately caused concern for Netflix, as shareholders fretted that ISPs might start to charge the company for the traffic it takes up. CEO Reed Hastings responded categorically,

“Were this draconian scenario to unfold with some ISP, we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver.”

Consolidation and the narrowing of choice took a further hit on Wednesday this week when Comcast announced it would buy all of Time Warner Cable for $44.2bn. The choice on cable landscape is already limited for the US, so it will be interesting to see what regulators make the deal. Chad Gutstein, former COO of Ovation, an independent arts-focused cable channel, penned an article in Variety saying that any concerns over the deal should be restricted to the possibility of abuse of a dominant position, rather than simply market share.Columbia Law School professor Tim Wu, writing in The New Yorker, rightly points out that the FCC should be approving such mergers only if they serve the public interest. He sees no such possibility in this instance, where the most pressing need for cable customers is lower prices. Last year, he writes, Comcast collected about $156 a month on average, per customer. For cable. Professor Wu contends that the merger would put Comcast in a position that would make it easier to raise prices further. This, despite the fact that conditions created via the merger would technically put the company in a position where it could create savings, both through economies of scale and more advantageous negotiating positions with programmers like ESPN and Viacom. Of course, Comcast is probably keen on preserving if not extending margins as it faces increasing competition from players like Netflix and Amazon. Cord cutting may be in vogue now, but Comcast will try to combat this by creating what is called ‘lock-in’. Craig Aaron, president of Free Press, a consumer advocacy group, is quoted in the New York Times; “Comcast and the new, giant Comcast are going to do as much as they can to stop you from unbundling. In order for you to get content you like, you’re going to be pushed to pay the cable bill, too”. Such tactics will test the limits of customer inertia, but only if they have somewhere else to go as a viable alternative.

The switch to online viewing is also raising issues of policy change in the UK. Public service broadcaster the BBC has long left it unclear as to at what point requiring a TV licence is mandatory, leaving citizens to infer that simply owning a television set is reason enough. Recently though, the broadcaster finally clarified that owners can use their TV, with no fee, to play games, watch DVDs, basically do anything that doesn’t involve watching live television. For the moment, this also includes their IPTV offering, iPlayer. In an article earlier this month, The Economist said the fee was “becoming ever harder to justify”. Antonella Mei-Pochtler of the Boston Consulting Group, quoted in the article, believes the increasing trend of young people to timeshift their viewing is likely to become ingrained. Coupled with the growth of internet-connected TVs, this is bound to accelerate a shift away from traditional linear consumption. The BBC is soon to begin developing premium content for its iPlayer service in order to seek additional revenue streams that may offset a decline in fees paid. But as The Economist points out,

“[T]hat would suggest, dangerously, that the BBC is like any other optional subscription service. Folding on-demand services into the licence fee could also amplify calls for the BBC to share its cash with other broadcasters, not least because such consumption may be precisely measured.”

When we look at the market for television sets and set top boxes, the news isn’t that superb either. The curved TVs debuted at CES in January are surely little more than a distraction. Last week, Business Insider reported that Sony is to finally spin off its TV operations into a separate unit, amongst news of $1.1bn in losses and 5,000 job cuts. But while we’ve talked of consolidation and narrowing choice, we also need to recognise this is also a period of unprecedented choice for consumers. As a recent article on GigaOm points out, there are millions of channels on YouTube alone. There are growing pains. As consumption of such content moves “to the living room”, the article details various sub rosa negotiationsby retailers like Walmart with their own video market, or players like Netflix willing to pay top dollar to put branded buttons on remote controls. What is clear, with all the issues described in this post, is that consumer choice needs to be preserved in an open market with plenty of competition. Such an environment will always foster innovation. This may breed disruption, but that doesn’t have to mean devastation. The age of linear TV viewing may be at the beginning of its end, but that doesn’t mean there’s still a lot to fight for, even if it’s a scrap. Frank Underwood wouldn’t have it any other way.

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Netflix has similar revenues but lower earnings than HBO, for now.

UPDATE (22/02/14): The New York Times published an interesting article comparing Netflix and HBO recently, showing how the two companies are faring financially (see image above), as well as their approaches to developing content, which started off as opposing ideologies but are slowly starting to meet in the middle as they borrow from each other’s playbook. The article quotes Ted Sarandos, Netflix’s chief content officer: “The goal is to become HBO faster than HBO can become us.”

UPDATE (22/02/14): Of course, commercial network television in general is also going through a period of consternation, slowly building since the day TiVo started shipping. At the end of last year, the Financial Times reported that share of advertising spend on television is set to end after three decades. This is partly due to a proliferation of new devices and platforms – not least of which is Netflix – but also partly due to the amount of people time-shifting their viewing and skipping through the ads along the way. Thinkbox, a lobbying arm for the television industry, recently published a blog article with accompanying chart. It illustrated how many people time-shifted a particular programme depending on the genre. For example, fewer people time-shifted the news than drama shows. But one of the key points made in the article is “that there is no significant difference in the amount of commercial TV which is recorded and played back compared with BBC equivalents. To put it another way: TV is not time-shifted in an attempt to avoid ads”. This is specious reasoning at best. While it may be true that, yes, people do not discriminate between whether they time-shift a BBC show or an ITV show, it would be totally wrong to infer that those viewers are not avoiding ads when they do appear. The article’s author is guilty of confirmation bias, not to mention grasping at straws.

The New News – Monetising journalism today

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“What the Internet has done is made a million sources of information available. It’s only a click away… The Internet has disrupted many industries. The newspaper business has been destroyed. It’s beginning to happen, arguably, to television. Consumer behaviour is changing!”

- Henry Blodget, editor-in-chief, Business Insider

Great minds may think alike, but they’re now consuming media on a plethora of different devices. Legacy media companies have been struggling in recent years to protect old revenue streams as the onslaught of digital disruption has rendered previous business models less than adequate. Recently, though, there have been signs of hope.

In television, Hulu and Netflix are increasingly showing themselves to be lifesavers of the long-format viewing, in an era where we are being increasingly distracted with short-term fixes, evinced by the success of social gaming product from companies like King. Hulu added 1 million paying subscribers in Q1 of this year and streamed over a billion videos. Netflix, after bravely investing in producing its own content with House of Cards, recently reported it has already recouped the sizeable $100m investment it made in the first season. It’s interesting, reassuring and quite logical to note the news that when Netflix enters a new market, piracy in the region drops. Let’s hope that legacy media companies are finally recognising the oblique connection here (and ponder less the millions of dollars lost over the years to pirated content at the expense of no legitimate alternatives). Though Borders has disappeared and Barnes & Noble may be in trouble, the book business is doing well, with 2012 being a “record year” for the industry. Digital downloads were up 66%, with physical purchases down only 1%. In music, the industry is slowly embracing a future (now very much a present) that has been staring them in the face since the start of the century with Napster and its myrmidons; digital sales rose 9% last year, helping overall sales to rise for the first time in a decade (see The Economist’s chart below). In South Korea, a region traditionally awash with pirated content, startup KKBox has come up with innovative ways to get people to pay for music again. They emphasise a sense of community – much like the one users felt they belonged to on Napster – bringing subscribers “closer to the regional music scene… Users can listen in real time as music celebrities make playlists of their favourite songs. There is also a KKBox print magazine and an annual awards show and concert, and it sponsors regional music festivals”. In other words, the offering goes beyond simply providing product to be streamed; it creates a cohesive world around the product.

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In 2012, music industry sales held steady for the first time in years. Digital sales continued to grow.

This cohesive world is in vogue at the moment; it represents most business justifications for investment in social media, and on a granular level again for investing in multiple networks, be they Facebook, Twitter, Pinterest, etc. This cohesiveness also allows for the exploitation of new revenue streams, something we’ve written about before. It’s a point that’s recognised by those in the newspaper industry. David Carey, head of the Hearst Magazines empire, has stated unequivocally that today “you need five or six revenue streams to make the business really successful”. It’s why companies like Monocle, which produces a high-end cultural magazine, has started a radio service that has been “profitable from the start, since normal commercial radio stations never deliver the kinds of listeners its high-end advertisers want”. And as advertising revenue dips below subscriber revenue, as it did recently at The New York Times and will do if it has not done so already at the Financial Times (FT), these new business models need to be set up and utilised, fast.

These discussions and others were up for debate at an event two weeks ago, hosted by the Media Society at the offices of the FT, examining the effects and implications of digital disruption. On a macro level, the problem has been with trying to get people to value content that is no longer physical. From the looks of it – not least from the evidence above -this is broadly starting to be achieved in the music, book and television industries. The problem, according to Laurie Benson, formerly of Bloomberg, was that the newspaper and magazine publishers took the genie out of the bottle, and “panicked”. For, unlike television content producers that seemingly buried their hand in the sand, those in the newspaper business immediately shoved all their content online, for free, in an effort / vain hope that advertising would continue to provide. Nic Newman, who spearheaded the BBC iPlayer initiative, said companies were still fundamentally struggling with mobile, which is especially important now it is considered “the first screen”. Moreover, social media, as well as providing an opportunity to construct a cohesive environment for the product being sold, has also, said Nic, hugely changed the way we find and discover news. The irony of his statement, given at the headquarters of the Financial Times, a paper with arguably the most opaque paywall in the industry – and with a zero-sum Facebook strategy – was not lost on Zeitgeist. On that note, Rob Grimshaw, managing director of FT.com, spoke up, saying he was “very comfortable” with the paywall as it currently was. He admitted he was “worried” about what Twitter would do to their model (the tense should perhaps be what it is doing). Rob mentioned Forbes, which is now allowing direct outside contribution. This obviously makes the platform somewhat more exciting, and certainly more accessible. But what does Forbes mean now as a publication; what is their editorial position, asked Rob. Though many interesting questions were posed, answers were few and far between at the conference, and few initiatives were proposed.

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On a more granular level, what are businesses doing now to try and maximise revenue in print? We’ve discussed recommendations for print media before. Unsurprisingly, some of the more innovative – and perhaps controversial – models are coming from those publications outside the mainstream. Business Insider, and Vice, are two such examples. Insights into both publications (although defining these companies as only publications perhaps limits the perception of their offering) were covered in the same issue of The New Yorker last month.

Ken Auletta’s article about Business Insider, and its “disgraced Wall Street analyst”-turned editor, Henry Blodget, states that the blog “draws twenty-four million unique monthly users, more than CNBC”. Overhead is one clearly one of the main areas that such companies have over their legacy rivals, whose roots are in ink and paper; Business Insider could never hope to, nor would they wish to have 1,700 full-time staff, as the WSJ does. One of the innovative, intriguing and controversial things about the editorial of BI is it’s blending of hard news – “7 signs household finances are getting stronger” – with more off-the-wall, attention-grabbing, low-brow content – “3 teeth-whitening products that actually work”, “Here’s what NBA players looked like before they had stylists” and “The porn industry has already dreamed up some awesome ideas for Google Glass“. Blodget, who continues to write many stories himself, is seemingly as comfortable writing about budget-cliff negotiations with an accompanying eighteen charts, as he is writing about the experience of flying home economy class from Davos. Andrew Leonard, on Salon, called the latter “the stupidest article to be posted to the Internet in the year 2013 – and possibly the entire century”. The content may have indeed been questionable, but it’s part of an interesting strategy to cater to multiple mindsets of the same audience; Blodget says he wants to “put the fun back into business“. The New Yorker article describes how BI produces original content through research, including how Goldman Sachs lost the chance to be the lead under-writer in Facebook’s IPO, and questioning whether previously undisclosed emails showed that Zuckerberg really had stolen the idea for Facebook from the Winklevoss twins. A lot of the time though, BI links to reported news “and then adds its own commentary, as well as reactions from others”, what Blodget calls “halfways between broadcast and print… it’s conversational”. It’s also unquestionably lazy, but provocative, which is what – along with many slideshows, with each slide on a different page – earn the blog so many clicks. 85% of BI revenue comes from advertising, a dangerous ploy in a time when rates and interest in online platforms are either slipping or more generally failing to account for costs. Most of the rest of the pie comes from paid conferences, something that other publications – incumbent or otherwise – should take note of. People pay with their time, and sometimes money, for your expertise and opinion, so expanding this engagement into other adjacent opportunities is a wise move. To this point, the company has also hired analysts to create research reports on telco trends. The New Yorker comments, “The result is something like a private magazine that several thousand individuals and businesses receive, for $299 a year”. Other companies are experimenting with various monetisation methods. Andrew Sullivan’s publication The Dish is soon to be made subscriber-only, with no ads, as $20 a year. The good news is that people are starting to willingly pay for other digital content, such as books, music and film. But aside from BI’s small subscriber-based research section of the site – an exception on blogs – the greater worry is what the type of engagement we have with content online means for the type of content that is produced in order to cater for those tastes. Are we reaching the end of an era of nuance? The New Yorker again,

“Lengthy investigative pieces are rare on all-digital platforms. They are expensive to produce and, given a readership that has an average of four minutes to spare, not likely to attract a large audience. As economically beleaguered newspapers invest less in long-form reporting, digital publications are unlikely to invest more.”

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Journalism for Vice means creating content to be reported on, rather than simply reacting to developing news

Lizzie Widdicombe’s article on Vice magazine shows there is far more innovation to be developed in the publishing industry, as long as one is willing to stop thinking of oneself as publisher. Vice is by no-means an upstart, at least in the magazine world, but recently found itself on the global stage after having the sheer tenacity to organise Dennis Rodman to go to North Korea for an exhibition basketball game, sitting alongside the Dear Leader himself Kim Jong Un. The story ran with the headline, “North Korea has a friend in Dennis Rodman and Vice”. Immediately we see the lines between reportage and editorial, between analysing events and creating them, begin to blur considerably. The headline looked particularly careless when shortly after the ‘basketball diplomacy’, North Korea “scrapped its 1953 armistice with South Korea and threatened preemptive nuclear attack on the United States”. The Vice article detailed the “epic feast” they were treated to, which again seemed callous given the generational malnutrition that has led to stunted growth in the North Korean population. Journalism stalwart Dan Rather called the whole episode “more Jackass than journalism”. This is a very different type of journalism indeed. The company has 35 offices in 18 countries, with websites, book and film divisions as well as an in-house ad agency. Since 2002 it has operated a record label with albums from the likes of Bloc Party. The New Yorker article says “these ventures are united by Vice’s ambitions to becomes a kind of global MTV on steroids, [but] unlike MTV – which broadcasts a monolithic American vision of youth culture – [the international aim is] to ‘localise’ their sensibility”. According to Shane Smith, Vice’s CEO, ‘The overall aim, the overall goal is to be the largest network for young people in the world… to make content that young people actually give a shit about'”. Vice employees sometimes refer to the brand as “the Time Warner of the streets”.

It has made significant forays into video, with a channel on YouTube that attracts more than a million subscribers. Like Business Insider, Vice also blends the highbrow with the lowbrow in terms of content. On YouTube, the New Yorker reports, videos range from ‘In Saddam’s Shadow: 10 Years After the Invasion’, to ‘Donkey Sex: The Most Bizarre Tradition’. The company’s revenues are estimated at $175m for 2012. In 2011, Vice was valued at $200m, “and last year Forbes speculated that the company might someday be worth as much as a billion dollars“. Its newest venture is a show on HBO (owned by Time Warner), with the tagline ‘News from the edge’. The show “takes on subjects from political assassinations in the Philippines to India’s nuclear standoff with Pakistan”. It engages in what it calls ‘immersionism’, where Vice employees are sent out to these locations and more or less told to engage in practices of varying degrees of danger. The New Yorker says this type of reporting harkens back to that of Hunter S. Thompson, who pioneered “participatory journalism… Vice claims to have a similar objective. Introductions to the HBO series announce that it’s out to examine ‘the absurdity of the human condition'”. One of the reasons companies like Time Warner, News Corp (see image below) and Conde Nast have all made the pilgrimage to Vice’s offices in Brooklyn is that they are all terribly envious of the way the company has managed to engage and monetise their audience. As well as the HBO show, Vice also create supplementary material fro HBO.com that shows how the show was made. Its Internet presence is diverse, and this is where the multiple revenue streams and advertising opportunities come in, as The New Yorker elaborates,

“Web sites, including Vice.com; an ad network; and its YouTube channel… Vice makes more than 85% of its revenue online, much of it through sponsored content… Besides selling banner displays and short ads that play before its videos, Vice offers it advertisers the option of funding an entire project in exchange for being listed as co-creator and having editorial input. Advertisers can pay for a single video, or, for a higher price – $1-5m for twelve episodes… – they can pay for an entire series, on a topic that dovetails with the company’s image… At the highest end of the sponsorship spectrum are [content] verticals, in which companies can sponsor entire websites.”

North Face, for example, partnered with Vice to sponsor ‘Far Out’, where Vice employees visited “the most remote places on Earth”. CNN is attempting similar feats, in an effort to legitimise the partnership – for example with Jaeger Le Coultre – by producing content that has a connection with company’s brand values. Some of Vice’s content verticals are softer than others, so that they can be more advertiser-friendly. It is seen by some at Vice of returning to the original soap opera days, when P&G would sponsor a serial show. This has led to some longtime fans declaring the publication has become too safe – gone are the early magazine covers featuring lines of cocaine, for example. The New Yorker comments the result “can feel like a strange beast, neither advertising nor regular content but something in between”. Vice also have a Creators Project, “devoted to the intersection of art and technology”. They partnered with Intel, and content has included an article on a cinema hackathon, as well as an event where a non-profit and VFX company partnered with techies to develop new forms of “interactive storytelling”. Intel sponsored the event, the video of the event, the blog post and the entire Creators Project website. Over three years, the company has paid Vice “tens of millions of dollars annually… to fund and publicise similar projects”. It is part of Intel’s attempt to have itself perceived as more of an experience brand, a la Disney and Apple. Said the CMO, “We want to see Intel coverage in Vanity Fair and Rolling Stone“. The video of the event is also put in YouTube, a company that is “crucial to Vice’s ability to expand” and which two years ago began paying Vice to make shows as part of a broader strategy to upend traditional TV – seen elsewhere in their recent Comedy Week. Such efforts from Vice form a feedback loop of good news that encourages investment from other individuals (such as former media mogul Tom Freston) and companies (such as Raine Group and advertising conglomerate WPP, a former employer of Zeitgeist). Vice is also planning a global, 24-hour news channel. Smith told The New Yorker, “Let’s say, hypothetically, you become the default source for news on YouTube. You get billions of video views, WPP monetises it. Then you are the next CNN“. This would be a dramatic shift in the way it makes its money now, from those sponsorships mentioned earlier. Quixotic efforts such as the North Korea trip, as well a recent bungling of a story on John McAfee, on the run from police, where Vice inadvertently gave his location away, would have to be curtailed. “If Vice does become a global news network, it might have to rethink some aspects of its prankster approach to reporting”.

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Murdoch and other CEOs have much to learn from Vice’s business model

It’s becoming abundantly clear then that what news publishers need to do to survive is embrace a diversity of platforms. This will be a long road for legacy incumbents. The FT now produces a great deal of video content, but it is still largely lost on the app and on the website. There is no hub where videos are categorised in any way. Few if any publications allow someone, upon purchasing a hard copy of the newspaper / magazine, to have access to that same content online, if only temporarily. These are simple but fundamental things that companies like this must do if they want to present their audience with a cohesive experience. That’s about operations and user experience. From a content perspective, journalism also faces new challenges. Fareed Zakaria, who Zeitgeist has been an avid reader of since the reporter’s days writing for Newsweek International, says Vice’s TV show for HBO has “loosened the format” of television reporting, as it tries “to get a news audience interested in the world”.

What are the implications of such a loosening? Vice CEO Shane Smith defended the company’s North Korea trip to The New Yorker, going on to say, “Is it journalism? It depends on what the definition of journalism is”. Um, well, yes, quite. If we’re to maintain any distinction between content that is supported and promoted by advertising, editorial that has a particular bent, and unbiased news rather than sensationalist reportage, we need to start having a serious conversation about what journalism is. In particular we need to discuss what the balance is between the desire to entertain and the task of informing the populace. If the onus is truly on the latter, then it becomes a genuine public good that must, at worst, be subsidised by public money. The issue The New Yorker raises in its article on Business Insider crystallises the dilemma; the medium in which people consume news has changed, thus so have their habits. They are now less likely to dedicate time to reading long articles; so writing these kind of articles is increasingly an unprofitable exercise. An end to thorough investigative journalism would surely have dire consequences. While fears over the death of journalism have been greatly exaggerated, a dramatic shift is underway, and perhaps for the worse. And that’s true no matter what your definition of journalism is.

Is the price right? Battling consumer perceptions in the arts

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“Wine is valued by its price, not by its flavour”

- Anthony Trollope

It would be difficult to argue today that attendance and appreciation of Shakespeare’s plays are not, for the most part, restricted to the large niche of the middle classes. This is a pity, and interesting, given that his works are ridden with ribald language, iconoclastic storylines and slapstick humour. In his time, the plays were attended and enjoyed by the masses, ageless and classless. Such reach is the envy of productions performed today. High ticket prices charged by theatres – in a quest to secure enough funding every season to recoup the cost of production – must bear some of the blame. But does price, apart from acting as an immediate barrier to entry for some customers, also act as its own signifier of what the event entails, and the audience it is appropriate for?

In 2009, BBC’s Question Time hosted writer Bonnie Greer and, among others, Nick Griffin, chairman of the radical BNP. The ordeal was such that Greer was inspired to write an opera chronicling the evening’s events. Performed at the end of 2011, Greer hoped Yes would make an effective contribution to the UK debate on both immigration and racism. Such substantive content is what media like opera need in order to maintain relevance.”It’s relatively recently that opera has been seen as an entertainment for the elite”, Greer commented. “It used to be a populist medium – I’d like to play some role in reinstating that status”. This runs counter to other contemporary productions, such as Stockhausen’s operatic sci-fi saga Licht, recently performed in Birmingham. At one point, a string orchestra ascends into the air in helicopters, while later a cellist performs lying on the floor. It would be remiss not to mention the climax of the production, which, Alex Ross, writing for The New Yorker, fails to describe: “Space does not permit a description of the scene in which [a] camel defecates seven planets”. It is hard to imagine such fare being everyone’s cup of tea. Indeed, it is this sort of seemingly self-interested, arcane and intellectually challenging art that is likely to turn people off an entire medium. Some institutions recognise this. Earlier this month the Royal Opera House hosted what they called the “first in a new series of live-streamed events to feature debate, performance, and audience questions”, around the question ‘Are opera and ballet elitist?‘.

In the past though, the Royal Opera House and other institutions have been too focused on short term gimmicks, with a focus on price, to get people through the door. The thinking is broadly logical: Why don’t more people come to the opera? / The opera is expensive / Lowering prices will attract more people to the opera. These three thoughts have plausible connections, but in reality little in common. Like ‘vulgar Marxism’, such an approach reduces the problem to its most simplistic attributes. It is a fallacy. Despite this, The Sun newspaper has in the past partnered with the ROH to offer tickets from GBP5-20. The scheme was a lottery system, guaranteeing few winners. It provides little opportunity for conversion into a regular customer. Meanwhile, both The Sun and the ROH achieve their aims of shifting brand perceptions. But there is far more that could be accomplished. The BBC reported positive reactions from those that took up the offer, “What The Sun is doing is fantastic – opening the opera up to people who wouldn’t normally be able to come”. This despite the fact that opera tickets are consistently available for GBP10 at the ROH, every season. Away from price, the English National Opera tried their own tactic in October last year, inviting people to enjoy the opera in “jeans and trainers”.  But does the problem of democratising opera really have its answer in allowing people to wear denim? It seems absurd to think that a one-off event of such a nature could really attract new, long-term audiences. Indeed, The Telegraph reported on the affair, saying the ENO was missing the point, that in fact it was the “alluring glamour” of the medium that was what attracted audiences the world over; “It turns opera into an everyday thing, rather than something exceptional and magical”, wrote Rupert Christiansen. He elaborates on the problem,

“[Opera] can make for an atmosphere that outsiders and newcomers find exclusive and intimidating: it’s as though there’s a set of rules that nobody is going to explain or even admit the existence of. This… rubs up the wrong way against the Arts Council’s understandable insistence that the granting of subsidy via taxpayers’ money should mean open access at reasonable prices. Squaring this circle is a formula that nobody has yet managed to crack.”

The outgoing director of the ROH, Tony Hall – on his way to assume a new post at the BBC – wrote diary entries published last weekend in the FT. He wrote about the recent partnership established with the Theatro Municpal in Rio. Like the ROH, they are also looking to attract new audiences: “An idea I particularly like is where every seat in the house for a day a year is sold on the day for a real (about 33p)”. On the face of it this sounds noble and effective. Who wouldn’t want to see any form of entertainment, let alone an extravagantly produced opera, for a mere 33p? But let’s think about it. Doing this one day a year is miserly. It hardly encourages upselling, or long-term commitment. What it most assuredly encourages is that one day a year the opera house attracts plenty of press coverage as people line the streets queueing for such cheap tickets. Cheap tickets for one day a year is an act that smacks of condescension. And what of the price itself? Zeitgeist has written before about the power of behavioural economics. McKinsey have an interesting article on the study. To wit, for most people, consciously or otherwise, price is an overriding symbol of value. Price is used often, especially by premium brands, as a means of framing the product versus its peers. We often make irrational purchases on big-ticket items (a car being chief among these). Conversely, when something is cheap, especially when perceived as ‘too’ cheap, the consumer questions why it is at such a price, acting with suspicion. At its simplest, pricing tickets to the opera at 33p implies that it might not be something you would enjoy. The first reaction – often the most powerful – instilled in the consumer is one of trepidation.

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The Globe theatre has a simple, long-term strategy for attracting new audiences

Just as with the current government’s wrangling over minimum pricing policies for alcohol, the approach from the arts to occasionally allow the unwashed masses into their buildings misses the point. In the case of alcohol, the scheme was mainly invented to curb youth drinking, especially among the ‘working class’. But, as The Economist points out, “People on the lowest incomes, who are most price-sensitive, are surprisingly abstemious anyway; those in rich parts of the country, such as the south-east, consume copiously”. Shakespeare’s Globe does a good job of making the Bard’s plays accessible, with standing tickets for GBP5, something that Zeitgeist has taken advantage of several times over the years. It is one of the few artistic houses to have preserved this manner of watching a performance. It upholds tradition while at the same time ensuring the plays have access to a broader public. The Royal Court Theatre in London’s Sloane Square offers a few standing tickets for every performance for a mere 10p. It’s a great idea to have this option as a constant as, apart from anything else, it increases the likelihood of having returning customers who can be upsold to – or cross-sold to in the bar downstairs. Zeitgeist imagines however that the theatre could easily get away with charging ten times the amount for a standing ticket, with zero depreciable effect.

There is no doubt that a certain amount of price elasticity indeed exists with items like tickets to the opera. But occasionally releasing cheap tickets is not the whole answer. There are larger questions here on arts funding and the absence of dedicated, large-scale philanthropy in the UK that have not been discussed here, but will be important in encouraging accessibility to the arts. Earlier we mentioned the recent debate the ROH hosted asking whether people thought opera and ballet to be elitist. The problem with such a question is it immediately consigns the word ‘elitist’ to a pejorative category. One of the greatest points Jon Stewart ever made – now some years back – on The Daily Show, was that the word ‘elite’ should in some contexts be a good thing, something to be embraced. That some people excel in a certain discipline is something to be celebrated. That some art transcends others, is beautiful, challenging, creative and stimulating is something to be cherished. Instead the word and concept have become uniformly demonised. Though one could easily question ‘canon’ texts in any medium, there should be no need to mask something that is perceived as being ‘high art’, rather attention should only be paid to debunking any preconceptions about its exclusivity. Quick price gouges are most certainly not the answer to improving access to these forms of art. It takes time, relevance and above all a security in the knowledge that not everyone has to enjoy every type of entertainment. Just provide them with opportunities to be sufficiently exposed to it, without making it seem like you’re deigning to include them.

Netflix: House of Cards and Castles in the Air

February 8, 2013 2 comments

house-of-cards

“If you have built castles in the air, your work need not be lost; that is where they should be. Now put foundations under them.”

- Henry David Thoreau

Though the brouhaha over the series House of Cards has been building steadily since its announcement almost two years ago, through rumours of budget battles between director and studio, it was upon the release of the series this week that the media meta-echo chamber really went into overdrive. The first season, with a budget far north of $100m, debuted to ebullient praise from critics. But what does it signify for the trail-blazing company’s future?

Aside from the mostly positive reviews, the series piqued the media industry’s interest for other reasons too. It is the first to be created and screened exclusively by Netflix, a company previously known for striking deals with studios to distribute and stream their content. Not satisfied solely with such (sometimes pricey) deals, the company also saw an opportunity for greater brand visibility and a separate revenue stream – assuming it eventually licenses the show regular TV networks – in fully-fledged independent production. What is also interesting is that the entire first season was made available for instant viewing, all 12 hours. By doing this the company recognised and capitalised on a trend that has been accelerating for almost a decade; people like to watch multiple episodes at once. This has never not been the case, but the weekly episodic installments of shows on network television have allowed the audience little say in the matter, and thus no room for such a habit to develop. This changed dramatically with the arrival of the DVD, specifically with affordable boxsets, as those that had missed the zeitgeists of West Wing, The Sopranos and 24 were able to quickly catch up with their obsessed brethren. Critics have often noted how the viewing of multiple episodes at once – which is how such reviews are often conducted as they usually receive a disc with several shows to consider – particularly for shows like Lost, improves the structure and narrative flow. With the arrival of boxsets, such opportunities were available to all. Indeed, marketers leveraged this enthusiasm for consecutive viewing, creating events around it. Netflix saw this with absolute clarity and allowed viewers to watch as much or little as they desired. Many, it seemed, chose to devour the whole first season in one weekend, which entertainment trade Variety covered with humourous repercussions to the viewer’s psyche, across now fewer than six stages of grief. Zeitgeist has written before about the increasing popularity of streaming, and the complementary preference that audiences have for the type of films (action, romcom, broad comedy) they like to watch when choosing such a distribution method. It is interesting to consider then just how much the viewing experience differs between a 12-hour marathon over two days, and a one-hour slice over a period of three months. As the article in Variety half-jokingly posits, “Is tantric TV viewing a thing? If it’s not, should it be?”.

Of course, Netflix aren’t alone in seeing an opportunity to delve into developing complementary products and assets. Microsoft are using the functionality of Kinect to pair with their own content development, letting children “join in” with Sesame Street, for example, and are in the process of setting up a dedicated studio for production, in Los Angeles. Amazon, which owns the streaming service LoveFilm, is also getting into the game, recently setting up Amazon Studios for original content production. At the end of last year, The Hollywood Reporter announced Amazon would be greenlighting twenty pilots, all of which were “either submitted through the studio’s website or optioned for development”. YouTube recently launched twenty professional channels on its UK website, Hulu is following suit… It really is quite startling to see such fundamental disruption and turmoil in environments where incumbent stalwarts (such as 20th Century Fox in film and Walmart in retail,) have long been accustomed to calling the shots. Could the model become completely inverted, such that the Fox network and HBO become the “dumb pipes” of the TV world, showcasing the best in internet-produced television? Maybe so, and this is not necessarily a bad thing. The Economist this week argue that one of the most important factors in Liberty Global’s recent purchase of Virgin Media was the avoidance of paying corporate tax for “years” to come. If content is still king though, a problem remains for those incumbents. The New Yorker astutely points out,

“An Internet firm like Netflix producing first-rate content takes us across a psychological line. If Netflix succeeds as a producer, other companies will follow and start taking market share… When that happens, the baton passes, and empire falls—and we will see the first fundamental change in the home-entertainment paradigm in decades.”

Netflix must tread carefully. Crucially, what seems like competitive differentiation and all-quadrant coverage now can quickly shift. Amazon’s ventures into content production will be backed up with a sizeable and perpetual stream of revenue that it derives from its e-commerce platform, which isn’t going away anytime soon. The BBC are publicly welcoming new entrants, and is devising its own tactics, such as making episodes available on iPlayer before they screen, if at all, on television. Interesting but hardly earth-shattering, and likely to make little difference to viewer preference. Netflix will have to do better than that if it wants long-term dominance of this market. It will have to be increasingly careful with its partners, too. Recent, though long-running, rumblings of discord with partners like Time Warner Cable, though seemingly innocuous, tend to be indicative of a larger battle ensuing between corporate titans. Moreover, though the act of providing a deluge of content seems new and sexy now, what about when everyone starts doing it? Chief content officer for Netflix Ted Sarantos told The Economist last week, “Right now our major differentiation is that consumers can watch what they want, when they want it, but that will be the norm with television over time. We’re getting a head start”. Fine, but about when that is the norm, what is the strategy for differentiation then? Netflix have made some lofty, daring, innovative moves here, exploiting consumer trends and noticing a gap in the competitive environment. But they will need firm foundations to support this move into an adjacent business area, of which they know relatively little, in the years to come. As President Bartlet of West Wing was often heard to say, “What’s next?”.

Olympic Winners and Losers – Empty Seats and Byzantine Ticketing

What a fantastic ad from Channel 4 advertising their showcasing of the Paralympic Games, beginning soon. Meanwhile, what of the Olympics? Though there have been tales of Tube and travel chaos, Zeitgeist has not personally experienced problems with public transport, either for commuting or for travelling to the Games themselves. And while our mayor may have been left dangling like a pinata the other day, he certainly seems not to have left London in the lurch in its preparedness for the Games.

LOCOG, however, have had to face two severe lines of questioning since the Games opened last Friday. The first, which became immediately apparent to anyone watching the first few days of events, was that thousands of seats were unoccupied, including for events LOCOG had deemed sold out. The fault, it seemed, lay mainly with the Olympic Family, who weren’t turning up to events. Seb Coe tried to shrug off the incident, saying it was normal for the few first events of an Olympic Games. It must be particularly galling for him though after the same thing happened in the 2008 Games in Beijing and he pledged to avoid such an occurrence in London. It is unfortunate then for all concerned then that, despite releasing more tickets, the problem is still not resolved as of today.

Moreover, this brings us to the second big problem. The selling of tickets. The whole balloting system originally set up was pretty arcane and inefficient to begin with. But now with tickets being released on a rolling basis throughout the day, the chaos is all the more apparent. Yesterday, eConsultancy published an excellent article with a blow-by-blow account of just why “the Olympic ticketing website is so bad”. Worst, for Zeitgeist, was firstly not having a mobile version / mobile-optimised site. Secondly it was not having anything informing users of when certain tickets became available. Thankfully, as in any well-functioning democratic society, where there is a market failure, substitute products or competitors will come in to correct the situation. Such was the case at the weekend, when the completely unofficial @2012TicketAlert account was launched on Twitter, which used automated tweets to alert followers when any Olympic tickets became available. It was a fantastic idea, and seemed much in keeping with the ‘hack’ trend we see nowadays, when companies like Microsoft and Transport for London open up their APIs for users to develop their own programs. Such examples clearly had not occurred to LOCOG though, and earlier this evening, after amassing over 8,000 followers, LOCOG denied the @2012TicketAlert account further access. As the administrator of the account, Adam, wrote,

“[I]t seems someone at LOCOG has taken exception to our idea (or the publicity it is getting) and instead of reaching out to us or addressing the lack of a notification system, they have simply blocked our access to their server. This means we are unable to check or post any new ticket alerts… we would point out that the alert was not against the Terms of Use of the http://www.london2012.com website, nor have these terms been updated to make it so.”

It seems a poor PR move on LOCOG’s part, and more importantly a poor operational move because it makes it that much harder again to check for newly available tickets. Taking into account the immense budget that must have been allocated to the ticketing website, the result is severely lacking, and many thousands of people have been put off the Olympic experience because of it. Ticketmaster, which has branding on the website, has also come under fire. These acts, as we predicted in an earlier article, may well be the undoing of those involved, for, once lost, a good reputation is hard to recover.

An Olympic Reputation

OlympicringsLondon2012

Dost thou know what reputation is?

I ’ll tell thee,—to small purpose, since the instruction

Comes now too late.

Upon a time Reputation, Love, and Death,

Would travel o’er the world; and it was concluded

That they should part, and take three several ways.

Death told them, they should find him in great battles,

Or cities plagu’d with plagues: Love gives them counsel

To inquire for him ’mongst unambitious shepherds,

Where dowries were not talk’d of, and sometimes

’Mongst quiet kindred that had nothing left

By their dead parents: “Stay,’ quoth Reputation,

‘Do not forsake me; for it is my nature,

If once I part from any man I meet,

I am never found again.’

- Duchess of Malfi, III, ii

Zeitgeist went to see Duchess of Malfi at the Old Vic last month, a brilliant production, and was reminded of this fantastic quotation when thinking of the upcoming Olympic Games soon to descend on London. Though arguably less ephemeral than the brand of today’s salubrious celebrities – written about recently in Vanity Fair – the Games can hardly be said to provide any quantifiable burgeoning of brand to host countries of the past (except perhaps for Barcelona). As The Economist adroitly put it the other week, “When asked why the United States is a fine place, few would instinctively mention its hosting of the 1996 Olympics in Atlanta.”

Are Britain’s current economic woes related to anything that might be solved by hosting an Olympics? Probably not. Will the Games, much like the bloody affairs of ancient Rome, serve to please and distract the hordes? More likely. The Games themselves will have to be good enough to overcome the pre-event controversies of massive over-spending, Zil lanes, anti-missile protests and Olympic torches on eBay. Otherwise, as the above quotation describes, the reputation of many will be lost forever.

One big Hitch

While the rest of the world quickly comes to grips with the passing of Kim Jong-Il, master of North Korea, Zeitgeist is still pausing for thought over the death of Christopher Hitchens, master of the painfully incisive, devastating epithet. Zeitgeist has had the pleasure of reading several of Hitchens’ essays over the years, mostly from Vanity Fair. Christopher Buckley, writing in The New Yorker, delivered an excellent obituary on the man. As well as managing to anger pretty much anyone, no matter what their political or religious creed, Hitchens also had some thoughts on his own oeuvre. Writing more than ten years ago in his book No one left to lie to, Hitchens wrote of Drudge (of Drudge Report infamy),

“Drudge… openly says that he’ll print anything and let the customers decide if it’s kosher. This form of pretend ‘consumer sovereignty’ is fraudulent in the same way its analogues are. (It means, for one thing, you have no right to claim you were correct, or truthful, or brave. All you did was pass it on, like a leaker or some other kind of conduit. The death of any intelligent or principled journalism is foreshadowed by such promiscuity).”

Something for anyone who writes a blog to bear in mind. It certainly points to a larger trend, which, ten years on, is still a problem for those writing online, that of a lack of regulation. Not that any such regulation has prevented widespread abuse of power in ‘legitimate’ journalism, either. The problem with tougher rules and sanctions – ex ante or ex post – is the worry that such pressure will negatively impact on the quality of stories journalists deliver. It was the press, after all, who broke the story of the phone-hacking scandals. The dilemma will not be an easy one to solve, especially at a time when most newspapers continue to experience financial losses and a resultant brain drain of staff to more stable and lucrative lines of work. The loss of luminaries like Christopher Hitchens will not help matters.

Serving up a good online experience

As with every summer, the tennis season kicks into high gear with the French Open (aka Roland Garros) in Paris in May, and the Championships at the All England Club (aka Wimbledon) just two weeks later. Brand Republic today published their list of the 10 Best Tennis ads. The sport’s popularity pales in comparison to other pursuits in the UK, and questions always abound at this time of the year as to the country’s woeful showing at the majors. It’s an especially sore point when one looks at recent successes in golf.

Demand for tickets however at the four annual Grand Slams has never been higher. Getting a seat at such events then is a tough ask. Recently, the French Open began making tickets available online for direct purchase. This included being able to select specific days, courts and seats. Of course, having such an easy route meant that there were one or two people who had the same idea as Zeitgeist. Even accessing the website on the stroke of the hour the tickets became available put him behind 3,560 other eager tennis fans (see picture at end of article). Prima facie then this democratisation of ticket availability – rather than having a lottery and corporate hoardings – is a good thing. From a practical perspective however, does it make sense to do it this way? Can or should there be priorities given, based not just on how much people are willing to pay for tickets? Why not give those who actually play the sport more of a priority, or using Foursquare, see how many other tennis tournaments people have attended and judge their passion for tennis based on that. Can they have ticket giveaways to those who “like” Nadal, Federer, etc. on Facebook? It’s a thorny issue; perhaps the route the French Open has taken is the least worst option.

All the slams provide diverting iPhone apps too. However, if you’re going to the effort of providing a service, better make sure it works. Zeitgeist was presented with the below image on their phone while sitting on Court 1 at Wimbledon on Monday, June 20th.

tennis french open wimbledon online

How imaginary crocodiles could have saved Nokia

February 10, 2011 Leave a comment

Why dominance means nothing if you stop delivering.

Zeitgeist reported recently on the number of high street names issuing profits warnings after an icy December kept shoppers away from their tills.

While these companies hang on hoping that things will improve (they won’t have liked the news this morning), other retailers have already bitten the dust.

The encroachment from online retailers onto traditional bricks and mortar stores is only going to increase as once dominant names slowly diminish into also rans, punished by their failure to adapt to progress.

While such a destiny is unfortunate for a lumbering organisation with a physical and costly infrastructure to maintain, for what should be a cutting edge technology company it is unforgivable.

A mere ten years ago, Finnish communications company Nokia dominated the mobile phone market. This rather quaint BBC story from from a decade ago reports that Nokia has strengthened its grip on the world’s mobile phone handset market’ and that ‘for the first time, Nokia has a market share more than double that of its nearest competitor’.

Back when Nokia dominated everyone

The major competitors back then were Motorola, Ericsson and Siemens and mobile phones were for calling, texting and maybe even playing Snake.

The report concludes with a prediction from Forrester who anticipated that ‘five dominant players would control Europe’s networks by 2015′.

While that prediction may come true, it is questionable whether any of the dominant manufacturers from yesteryear will be among them.

This week’s  ‘leaked’ memo from Nokia’s CEO Stephen Elop claimed that the company was ‘standing on a burning platform’ and surrounded by a ‘blazing fire’.

This is not a pleasant place to be. As mobile phones became smartphones an ever increasing importance was placed upon a phones operating system, both in terms of functionality and usability.

Just as the old high street stores threw up websites that weren’t quite as good as the dedicated online retailers Nokia produced Symbian, an operating system that failed to impress anywhere near as much as the ones you’d find on an Apple, Blackberry or Android phone.

The smartphones of today

Elop’s acknowledgement of the problem has opened the door for a radical change in strategy to try and rescue the problem.

Rumours abound of a partnership with an existing platform.

“It could either be a very bad marriage or a marriage of two players that have not been very effective alone.” commented Magnus Rehle of Greenwich Consulting.

The two likely candidates are Android, which would essentially relegate Nokia to a manufacturer in competition with other Android handset makers, or Microsoft who have also struggled to ship as many copies of their Window Phone 7 operating system as had been hoped.

The former would be a rather bitter pill for a once dominant giant.

The latter, and arguably preferable option, would bring together two massive organisations who have struggled to assert their dominance in the category.

Neither party would comment though it has been reported that Elop had been in discussions with both Microsoft CEO Steve Ballmer and Google CEO Eric Schmidt.

An announcement is imminent, though as Hakim Kriout of Grigsby & Associates points out ‘Very few companies regain their leadership once they’ve lost it.’

Whichever route Nokia go down the lesson is there for brands in every category.

It is infinitely preferable to stay top of the pile than to have to climb back up after a fall.

Regardless of your current dominance, if you fail to keep up with what people want and expect from you, someone else will deliver it and take your crown before you’ve admitted there is a problem. Brands must avoid the complacency that dominance can bring.

Despite their size, Avis demonstrate the challenger attitude with their ‘We try harder’ ethos while Google are ‘always in beta’ .

If brands assumed that they were surrounded by crocodiles and stayed alert to change and ready to react, they’d be much more likely to avoid getting trapped by ‘blazing fires’.

Christian Dior in China Derided

Contention, Controversy and Criticism, the three Cs that no brand wants to hear (unless they’ve intentionally brought it upon themselves in an incredibly well-orchestrated way). The Gap recently tried this, in an effort that Brandchannel called a “Gapocalypse”, i.e. not well-orchestrated. Mea culpas followed hard upon.

Last month, the Daily Mail reported that Dior was being similarly torn apart; “slammed” for its apparently racist imagery. The images in question, shot by Quentin Shih as part of the ‘Shanghai Dreamers’ campaign commissioned for the new store opening in the eponymous city, show a woman draped in Dior finery, surrounded by Chinese people who all look exactly alike. The campaign has been called racist, but Mr. Shih says, “I wanted to show the power of Chinese people standing together and a kind of socialism in Chinese history (only in Chinese history not China now)… The Chinese models are not people. They are symbols of Chinese history between the 1960s and 1980s.” According to the article, The Guardian’s Jenny Zhang wrote “[They] should have sent Chinese models for Shih to shoot, and should understand that the modern Chinese Dior customer will not recognise herself or himself in these photographs.” Dior could be forgiven though for playing on the well-known admiration that the Chinese have for luxury, exotic Western brands. Actress Marion Cotillard was similarly used in an international campaign for Dior recently, highlighting China’s rising prominence.

The ‘Shanghai Dreamers’ photos, intentionally glazed to give the appearance of those family photos from bygone days, remind Zeitgeist of old school photos… just not theirs. As always, your thoughts and raging tirades are always welcome on what you think of this campaign, and how well it treads the line of being at the cutting edge – which is what haute couture fashion is all about; pushing boundaries – while maintaining cultural sensitivity.

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