TV’s bloody disruptions

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.

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.

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.

Taking flight – Opportunities and obstacles in democratising luxury

I don’t think democratic luxury exists. I don’t believe in something for everyone… How can we possibly put these products on the Web site without the tactile experience of luxury?”

– Brunello Cucinelli

The democratisation of fashion took a beating this past week as news reached Zeitgeist that Fashion’s Night Out was to be no more. Spearheaded by Anna Wintour at the height of the global recession, the idea was for a curated evening; a chance for stores to open their doors late, inviting a party atmosphere and focussing spend on a calendar event. The Wall Street Journal wrote that last year, “Michael Kors judged a karaoke competition at his store on Madison Avenue, rapper Azealia Banks performed at the MAC store in Soho and a game night was held at a Kate Spade store.” The evening festivities were replicated across New York, London and other cities.
Zeitgeist happened to be on Manahattan’s Spring Street last September when the most recent FNO was held, waiting patiently for a perenially-late friend who works next door to Mulberry. While waiting, it was absolutely fascinating to see the sheer of variety of people out on the street. While the crowds were mostly composed of women, the groups ranged from college-aged JAPs and the avant-garde to hipsters and stay-at-home mothers. Most gawped excitedly as they beheld the Mulberry boutique, enticed by the glimpses of free food and drink, as well the sultry bass tones of some cool track. One elegantly dressed fashionista strode hurriedly past Zeitgeist, lamenting to her cellphone “Oh God, it’s Fashion’s Night Out tonight”.
Ultimately perhaps it was such feelings among the fashion set that caused FNO to come to an abrupt end. But Zeitgeist got the sense that, while undeniably a celebration of fashion and an opportunity for brands to showcase their attractively experiential side – particularly to those who might usually be deterred by luxury brands and their perceived sense of formality – there weren’t a great deal of people actually buying things. It’s quite possible that the whole strategy of attracting a crowd who would not otherwise frequent such stores backfired; they turned up, sampled the free booze, felt what it must be like to shop at such-and-such a label, then moved on to the next faux-glitzy event with thumping music. This then was a failed attempt to bring luxury to the masses.

On a macro scale, the cause for democratisation is hardly helped by the global financial crisis. Although over four years old, the ramifications and scarring done to the economy are still sorely felt. This is illustrated in the unemployment figures around the world, tumultuous elections and anecdotal tales of hardship. More starkly, they are being backed up by solid quantitative research that proves we as a world are less connected now than we were in 2007. In December last year, The Economist reported on the DHL Global Connectedness Index, which concluded that connections between countries in 2012 were shallower (meaning less of the nation’s economy is internationalised) and narrower (meaning it connects with fewer countries) than before the recession. Meanwhile, just this past week, the McKinsey Global Institute published a report showing financial capital flows between countries were still 60% below their pre-recession high. This kind of business environment hardly fosters egalitarian conduct, and indeed such isolationist thinking was on show at Paris Fashion Week recently, where designers clung to their French heritage as a badge of honour. Exactly at the time when art needs to be leading the way in cultural integration, as emerging markets not only continue to make up a larger part of the customer base, but also develop their own powerful brands, it seemed that designers, like the financial markets, retreated to what they knew and found safe.

The world is less connected today than in 2007

Where the ideology of democratising fashion has seen more success is of course online. We’ve written before about how luxury is struggling with the extent to which they invest in e-commerce. One of the principle hurdles is that the nature of luxury – elite, arcane, exclusive – is more or less diametrically opposed to the nature of the Internet – open, borderless, democratic.
Yet the story of Yoox – the popular and, in online terms, long-lasting fashion ecommerce platform – and its founder is one of just such democratisation. (It is particularly stunning to read of the difficulties the founder, a Columbia MBA graduate, Lehman Brothers and Bain & Co. alum, had in attracting VC funding). It also, crucially, points to the importance of recognizing multiple audiences, and how they like to shop differently depending on context. John Seabrook, writing in The New Yorker, reports that when Federico Marchetti set up Yoox in 2000, the world of ecommerce for fashion was regarded as a not particularly salubrious environment. Rather, the magazine compares it to outlet stores like Woodbury Common, fifty miles north of New York. Luxury brands like Prada and Marni could be found there, offering deep discounts on their wares, and it was for that reason – and the lack of control over their own brand – that they didn’t like much to talk about such places. This, despite the fact that they attracted 12 million people in 2011, “almost twice the number of visitors to the Metropolitan Museum”. Yoox was likewise greeted with much trepidation by fashion retailers. The article quotes an analyst from Forrester Research:

“It was a matter of principle with luxury brands that only people who shop on eBay use the internet – and their only interest was in getting a low price.”

Marchetti’s only available source of designer clothing was from last season and beyond, as no brand would sell their current collection. He curried favour with some of them though by advertising the prices without noting the discount customers were getting. Other than that, luxury brands took little or no notice.

Online shopping though would prove to be “one of the largest disruptions of the luxury-goods industry since the birth of the department store”. There are three kinds of online store today; those that sell deep-discounted goods on end-of-season wear, those that sell in-season clothing, and those that have flash sales of small numbers of clothing or accessories. It turned out there was an audience for all of these types of website. Bridget Foley, executive editor of WWD is quoted in the article saying “[T]here has been a sea change in attitude… I think [it] surprised the fashion industry… Just because you love clothes doesn’t mean you love shopping“. This struck Zeitgeist as one of the more important insights in the lengthy article. Though retailers often harp on about the importance of the retail environment, the need to touch the product, to be in an atmosphere where everything has been curated down to the finest detail, online neutralises all of that. This idea threatens those in the luxury sector, as the thinking goes that any such premium on products may seem less justifiable away from a Peter Marino-designed armchair and a nice glass of champagne. Such ideas are being challenged though. Not only is the nature of the store changing – from robotic sales staff to customers as models on the catwalk – but so is the view of the luxury customer as a homogenous, static group, devoid of context. Zeitgeist was at a Future of Media summit at the Broadcast Video Expo last week, where, as behavioural economics suggest, MD of Commercial, Online and Interactive for ITV Fru Hazlitt insisted that consumers had to be targeted in ways that were pertinent to them, not only as demographic groups, but in ways that recognised the context of how approachable they were likely to be at the time, given the programming they were watching. Fru admitted that in years past, broadcasters like ITV had seen advertising as “space to rent out”. Now they were thinking deeply about how and when is the right moment to reach their target consumer. It is the same in fashion. There is not one single way to reach the consumer; buyers of luxury goods do not want to be solely restricted to being able to buy your wares in a physical store.

Chanel are one of the few remaining luxury brands to resist fully integrating online

Behavioural economics played a role in Marchetti’s initial framing of the audience for the website as well. He hired pedigreed fashion writers, as well as artists, architects and designers to make special projects that lent the website an air of curation, of something more special and rarefied that what one might find – or more importantly the way one might feel – at an outlet mall. Marchetti wanted the customers “to see themselves as connoisseurs, even if they were really just hunting for bargains”. The New Yorker article goes into some anecdotal detail about the way people shop on Yoox, which crucially differs not only from the way they would shop in-store, but also from other e-tailers. For online shopping in general, the experience is one where you can purchase ten items, and return nine of them with very little hassle, with credit for multiple rather than a single brand, and certainly no raised eyebrow from a pretentious shop assistant. Regarding specific sites, Yoox, unlike Net a Porter, for example, does not try to force a set of looks onto the user. Behavioural economics tell us that people irrationally value something more when they’ve been made to work a bit to get it. Such is the case now shopping for luxury items, which makes clothing not in-season (i.e. not currently in every shop window), both cooler and cheaper. It’s an act not to be discouraged. A Saks representative says customers who shop online as well as in store buy four times as much merchandise as customers who shop only in the store. What will worry retailers though is that the convenience of the online store outweighs the experience of the physical boutique. The New Yorker quotes a shopper: “I’ll never buy a dress at the Prada boutique again after getting these really amazing ones on Yoox.”

As well as setting up the Yoox website, Marchetti’s company now also powers the online stores of more than thirty fashion houses, including Armani and Jil Sander. Last summer, PPR joined in too, after conceding that their in-house expertise was not up to snuff. The latest development is making designs available to any customer as soon as it hits the runway. Burberry, as well as separate sites like Moda Operandi, have spearheaded this innovative change, which is effecting editorial as well as buying methods previously seen as unshakeable. The demand for this type of instant purchasing seems to be fueled by a niche – albeit a sizable one – that is not representative of the majority of luxury shoppers. The accessibility of a brand and its products is a tricky one to tread, one which Zeitgeist has written about several times before. Tom Ford performed a volte-face this year, after debuting his womenswear collection with no press and VIPs only, relented this year at London Fashion Week by letting bloggers write about the show. Chanel still steadfastly refuses to fully engage with online shopping. The tension is keenly felt in the New Yorker article, where Amazon’s new entry into the world of fashion is referenced. The CEO of Valentino is unconvinced: “Valentino is high luxury… People going to Amazon are not going to Valentino“. This smacks a little of pride and ignorance, for they most assuredly are, though perhaps not with luxury purchases in mind… yet.

It comes back to the idea that there are myriad types of luxury consumer. The industry has not fully acknowledged as of yet that the buying behaviour of a descendant of the ancien regime in Paris is unlikely to buy in the same way as a newly-minted businessman in Shenzhen. They may know that these types of buyers exist, and they may even create different products for each. Importantly though, they are not recognising that these people may go about purchasing in a different way. It’s not just a purchase journey that has changed massively in recent years, as McKinsey’s consumer decision journey illustrates above. It’s also, as ITV’s Fru Hazlitt insists, about recognising that different people shop in different ways, wholly dependent on context. Though Fashion’s Night Out may be on permanent hiatus, and though the global economy may be sputtering along in second gear, the opportunities to leverage deep insights into consumer purchase preferences are there for the taking. Yoox, along with a deeply complicated algorithm, are trying to tap into just this. But the process must start with realising that yes, actually, someone might want to pick up that Valentino dress while surfing on Amazon.

On demographics, devices and ‘Downton Abbey’

“Keynesian paradigm shift” was a term Zeitgeist was introduced to back in those glorious days of university. We’re often on the lookout for that next shift. 2003 was the first time when Zeitgeist began to take blogs seriously, as your average Iraqi citizen started writing journals online that gave more of an insight into the invasion than any “embedded” Fox News reporter. Incidentally, anyone looking to know more about the way news was covered by those reporters under the care of the US military at the time should check out the fascinating documentary “Control Room”.

There’s has been much discussion of more paradigm shifts over the last couple of years as PVR / DVR devices like TiVo and Sky+ have set various network TV honchos and advertising execs fretting about the lessened impact of advertising caused by delayed viewing. Advertisements on television are scheduled at a particular time to appeal to a very particular audience, and may be very ephemeral in nature (eg for an upcoming event or film). Having viewers watch the commercial at a later time might be bad, as it could be – in the advertiser’s eyes – too late. But having the viewer fast-forward through the commercial break altogether is disastrous. Simply put, companies won’t pay to have an ad on TV if no one is going to watch it. This of course is especially relevant to shows with covetable demographics, i.e. Watched by the financially comfortable, as ironically they are more likely to have purchased a device that makes those advertisements fast-forwardable.

However, recent news should cheer those whose job it is to worry about such matters. In the first place, as the world economy stutters into recovery, advertisers are funnelling money back into mainstream media, particularly television, as we reported on last October. Moreover, as Variety recently reported, the feeling of watching a show as it is broadcast “live” is a special one. This has long held true for sporting events and the Oscars, but increasingly it applies to popular sitcoms and dramas, too. Shows like ITV’s recent Downton Abbey revealed that people made a point of watching the broadcast live so that they could engage more in the online conversations that were taking place on social networks like Facebook. UK TV ratings are now at their highest since records began.

This brings up two points, one of cultural philosophy, the other of political science policy. In the mid-1930s, Walter Benjamin wrote a seminal piece of work known as “The work of art in the age of mechanical reproduction”. The crux of this paper rested on the idea that there is something infinitely intangible and special about seeing the genuine artefact; beholding the original Mona Lisa in the Denon wing of the Louvre is a more special experience than looking at it on a postcard. There is an “aura” to it. If we extrapolate this to the world of film and television, that aura is fed now by social media chatter amongst friends.
From a policy point of view, an argument that Zeitgeist has mentioned before bears noting, that of technological determinism vs social constructivism. It posits the argument over whether what a technology is intended for necessarily dictates how it is used, and influences user behaviour. With a heightened demand for the live experience, evidently this is not the case with PVRs. Recent studies show that people are fast-forwarding through commercials less and less, and, as mentioned, gravitating toward enjoying the live experience more and more. A savvy person might ask how we can mesh these two worlds together. Zeitgeist wouldn’t be surprised to see in the near future programme recommendations appearing on your PVR from friends you are connected to over social networks.

Downton Abbey is worth noting again. In the past, when we have thought of wildly successful shows and films, thoughts of the latest teen sensation might have come to mind. And while Twilight and Justin Bieber do occupy a significant part of the current Zeitgeist, shows like Downton Abbey illustrate that there is another audience – a rapidly growing one – that is only just beginning to appear on the radar of media executives. As The Economist recently pointed out, the baby boomer generation has a relatively high spending power, and buys a relatively high quantity of media like CDs. And while, according to Variety, movie studios plan to release some 27 prequels or sequels this year, there are also signs for hope too. The King’s Speech came very close to not getting made after debacles with funding, and Black Swan had a similarly bumpy road to production; Variety says it “kept losing its funding until the day before principal photography”. These were two of the greatest (and most mature) films of last year according to Zeitgeist, with the former winning both Best Picture and Best Director. Black Swan has grossed more than $100m in the US. The only other film from Fox studios to do the same was the latest Narnia incarnation, which must have cost north of $200m to make, once marketing is included. Films about royalty and ballet are ones that will appeal to the superannuated audience, and not coincidentally perhaps the ones with the highest profit margins. The much-coveted 18-49 demographic is an anachronism, let’s think bigger (and older).

Is TV’s future all used up?

Signs of promise, but are reports of TV advertising’s death greatly exaggerated or not?

Near the end of the masterpiece manqué that is “Touch of Evil”, Orson Welles’ character pays a final visit to an old friend, a gypsy played by Marlene Dietrich. Usually a dab hand at fortune telling, the woman looks at the fallen detective dejectedly, and with pity tells him that his time is over, the world has moved on. What with the release of Google TV, as well as the newest incarnation of  Apple TV, the industry could certainly said to be volatile. Reuters have an excellent primer on what both behemoth’s machines actually do, here. This will surely only divert eyeballs away from advertising. Why watch a commercial when I can easily watch other media from the Internet before Pop Idol returns from its break, as is possible with Google TV? Why watch broadcast television at all when all the films, music and photos I want are streamed from my computer’s iTunes via Apple TV?

Furthermore, increasing DVR penetration can also do nothing but dent the impact of above-the-line advertising. In an article in Variety by Brian Lowry a few weeks ago, the journalist commented that digital video recorders were now in 38% of US homes. “To which many will doubtless say, ‘Only 38%? But everyone I know has one!'”. As Lowry points out, this delayed and fast-forwarded viewing has led Nielsen to create special designations, such as ‘Live+7’, to allow for the different impact of viewing an ad after its original airtime, as commented on by The New York Times recently. More importantly however, the rise of the DVR – from only 1% penetration less than five years ago – “points to a shift that threatens to hasten the separation of haves from have-nots”. Augmentation of these platforms will, Lowry writes, cause a fracture between those doomed to watch commercials, and those suitably kitted-out to avoid them. In particular, the problem for advertisers, and hence the networks they support, is that those people that own DVRs tend to make up a more desirable part of the population, which 30-second spots will no longer reach.

“[W]eaving messages into programming will become even more of an imperative… Taken to its logical extreme, advertisers peddling big-ticket items will have to think twice about whather 30-second spots are an efficient use of marketing budgets. The companies still relying on TV… will be the ones pushing inexpensive products[.]”

So it would seem the structure of television as we know it is an endangered species, soon to shuffle off the coil. William Gibson once wrote that the future exists already, it’s just not well-distributed. Surely this is the case here, and what we are glimpsing at the fringes with uptake of new platforms for viewing multiple media serving as a looking-glass into what will be the widespread norm in the coming years. Yet despite these new technologies, and the continued rise of all things digital, a front page article in Variety at the beginning of the month noted,

Advertisers appear to be returning to TV again, with automakers, especially, shelling out more coin… In fact, the major broadcast and cable networks were cheered at the start of the summer by a better-than expected upfront advertising sales market.

Indeed, The Economist reported last week that, with the recovery of the ad market, the two clear winners are the Internet, and, yes, television. The article states that at the end of last year spending on British TV was predicted to fall by 0.2%. It is now forecast to grow 11.6%. The previously moribund ITV has seen advertising revenues shoot up by 18% in the first half of this year. And while disruptive technologies may eventually take hold, the fact remains that people are watching more and more TV; 158 hours a month in America, two hours more than last year. Markets less mature that the US or UK have not yet faced the technological developments that await. “30% of Chinese regularly use the internet, whereas 93% watch TV”.

The article doesn’t address the fact that this is likely to change though, and importantly it’s likely to change a lot more quickly than it has done in the West. Moreover, the articles states that “search engines and online banners… do not offer emotional experiences.” But this is not all that the internet offers as far as branded experiences go. To see some great examples of work done to promote this past summer’s onslaught of films, click here. But the thoughts of The Economist clearly are the prevailing philosophy at the moment. According to an article in the FT last week, online advertising “increased by 10% in the first half of the year, but has fallen behind that of television and other traditional media for the first time.” Cinema also gained 12% and outdoor was up 16%. Press continued it’s slow decline. The thinking is that in the midst of still-prevalent economic uncertainty, advertisers are flocking back to a medium that they trust. For how long this trust will hold is a question that few in the world of above-the-line and TV networks will want to answer.

Knowing Your Audience

The World Cup runneth over with news happy and sad depending on which country you’re from. Insight into the context of a situation is always tremendously important; there are no essential truths, only whether people believe them to be true or not. For cephalopods, of course, it was a dream World Cup. Paul the ocotopus in Oberhausen, Germany, managed to guess with pure luck correctly predicted every one of Germany’s World Cup results, single-handedly raising the profile of these water-bound creatures and their ability to cogitate about the outcome of sports matches, out-predicting those boffins at Goldman Sachs. For those who enjoyed betting with this facade of insider information, it was also then a great tournament.

The results of the World Cup also tell us that people (and nations) deal with loss in different ways. Argentina was apparently one of the teams that had expected to do well in the tournament. As The Economist notes, France and England returned home to a disgusted populace; Argentina, after being thrashed 4-0 by Germany, came back to a hero’s welcome. This is not because the Argentinians are particularly cognisant of fair play or giving everything one can. For, when the team returned in defeat in 2006, the reception was a “non-event”, as opposed to the weeping on the streets that took place this time. The way people behave though, is not always due to a single linear circumstance. The article suggests the “tens of thousands of fans” who turned up to greet the defeated players was due to the political machinations of the not-so-squeaky-clean Kirchner couple, who currently preside over the country; an attempt to boost their own poor approval ratings by throwing their support behind football, after gaining much gratitude from the man on the street by taking football matches off a premium cable channel and making them available “over free airwaves”.

Elsewhere, broadcasters enjoyed the riches of their coverage of the event. In the UK, the FT reported that commercial network ITV saw “advertising revenues increase 45%… in June compared with the same month in 2009 due to the tournament”. In France, Telecompaper reported last week that “despite the national team’s poor performance”, around two million people watched some of the World Cup on their mobile device, according to a survey for La Tribune. Viewing was only possible after downloading “a pay application co-developed by Fifa and broadcaster TF1”. According to the study, “between 3 million and 5 million people, or 8 percent of French residents over 15 years old, watched highlights on the internet.” In the US, over 24m people watched the World Cup final, with the networks purporting to be “over the moon”. Indeed, despite some of the jingoistic rhetoric spouted by Republican mouths on the unpatriotic desire to play football, as reported by the New Yorker, football is growing massively in popularity in that country. When the US was sent packing after losing to Ghana, Nielsen recorded 19.4m viewers:

“It’s not just more people than had ever watched a soccer game on American television before. It’s also more people than, on average, watched last year’s World Series games, which had the advantage of being broadcast live in prime time. It’s millions more than watched the Kentucky Derby or the final round of the Masters golf tournament or the Daytona 500, the jewel in NASCAR’s crown.”

Again, like the example in Argentina, it would be easy to point to a simple, linear cause and effect correlation, in this case that the US is finally warming up to football, despite having a plethora of other sports at their obsessive fingertips. What these record-breaking viewing figures actually give us an insight into is “the changing complexion of the U.S. population, particularly the growth of immigrant and second-generation Hispanic and Asian populations with deeper cultural ties to the sport.” With the national census recently completed, we should soon have a much clearer picture of the continually evolving melting pot that is America. Broadcasters around the world are beaming, but may need to manage expectations; some 58% of U.K. TV audiences expect to watch the next World Cup in 3D.

Insights often come about from studying behaviour, even the simplest behaviours, because sometimes we make presumptions that turn out to be wholly inaccurate. Just as Goldman Sachs did by presuming England would be a semi-finalist and just as Zeitgeist did presuming that an octopus with nine brains couldn’t predict the outcome of a football match.

Regulating Media Consumption

From the July Zeitgeist…

As Brian Lowry wrote recently in Variety, both TV and newspapers are struggling to respond to the changing ways people are consuming their media. “Both are communications media, and each faces a conundrum regarding what to do about the free online consumption of their product that’s rocking their respective worlds”.

Both industries have become subject to massive arbitrage; absent of a consistent way of protecting themselves, these two media are trying all sorts of varying methods to make money: FT.com allows you to view a select amount of articles a month before asking the user to register to their details; most general news on WSJ.com is free, but the more niche articles on the markets are charged at a weekly subscription rate.

On television, there is a similar discrepancy. In the US, Disney, Fox and NBC have all aggregated their content on a free-to-air, ad-supported platform called Hulu. The site is tremendously popular, although debate rages – recently between The New York Times and eConsultancy ‐ as to its efficacy. Other networks like CBS offer free, ad‐supported
content too, but only through their website. UK networks operate under this latter mantra; you can watch our shows but only on our own proprietary website. And a long‐gestating proposition to aggregate all TV content across the BBC, ITV and Channel 4 under Project Kangaroo (exactly like Hulu) has recently been blocked by the Competition Commission. Regardless, Hulu is carrying on with plans to launch it’s services in the UK in the coming months*. If all this sounds confusing, that’s because it is.

Both media recognise that the way users consume their respective content has changed dramatically in just a couple of years. However, their collective response has been mostly in fits and starts; uncoordinated and uncertain. Consumers will not rush to embrace any model (profitable or otherwise) until there is uniformity and simplicity across a medium, and for this to happen companies must work together.

*For more news on the increasing amount of video users are consuming online, click here.