Producers, distributors, aggregators and tech enablers are now pitted in momentous clashes, with tens of billions of dollars at stake
Old Media is not going down without a fight.
The past few months, content owners, producers, distributors, aggregators and tech enablers all over the media landscape have been pitted in momentous clashes, with tens of billions of dollars of revenue at stake.
“I can’t think of a time where the publishing, music, TV and movies have all been going through these rapid sea changes,” analyst Michael McGuire of Gartner Inc., the information-technology research firm, told TheWrap.
At the root of it all: the sheer seismic impact of digital technology. The fault line, however, varies from upheaval to upheaval.
Arianna Huffington’s mega-payday exposed the bitter divide between unpaid bloggers and her namesake online news-and-information kingdom, part of AOL since February. In the rift between giant Time Warner Cable and the cable-channel empire, Viacom, for example, it’s the iPad.
Netflix's sudden rise to video-streaming juggernaut has Hollywood on edge. And steadily building pressure from the dying DVD and CD businesses factor into the studios’ and exhibitors’ potentially epic face-off and in music labels’ beef with Amazon.
Michael Nathanson, the prominent media analyst for investment bank Nomura, says the tensions boil down to this: media companies grabbing or trying to maintain a bigger slice of revenues as industry growth becomes more challenged and new business models heat up.
“There’s a pot of money that consumers pay for media; the question is, what will be the [new] splits?” Nathanson asks.
Also at play is the instinct for self-preservation on the part of Old Media.
“All of these changes that are so exciting for consumers, people who love media, artists and producers of editorial content … have bad implications for traditional media businesses," says Eric Garland, CEO of Big Champagne, which tracks digital-media consumption.
The explosion of tension, within the span of just weeks, is striking.
RECORD LABELS VS. AMAZON
In early April, the near-vanquished labels, almost down to just two or three austere giant companies, began beating war drums over what is one of media’s newest battleground — the e-retailer's “cloud.”
In a preemptive strike, Amazon launched “Cloud Drive.” The service allows consumers to relocate huge amounts of their digital music collections to massive Amazon-owned servers for storage, then stream tunes to their smartphones or compters from anywhere over broadband.
Light users can sign up for free, heavy for $20 a year and whales for $1,000 annually.
Cloud Drive is “a harbinger of the new era," as the oft-quoted Rutgers University media professor Aram Sinnreich told Computerworld.
Labels want a share of the loot — in this case, licensing fees on any music-streaming clouds. Amazon reportedly is balking, having raced to market ahead of long-anticipated rival cloud-music services from Apple and Google, which apparently have been entangled in inconclusive financial talks with labels over rights. "We keeping our legal options open," Sony Music warned after the Amazon's debuted Cloud Drive.
BLOGGERS VS. ARIANNA
Bloggers’ economic worth in media’s morphing ecosystem — long a subject of debate in industry circles — is now in bitter contention, thanks to the Huffington Post.
Little did proprietor Arianna Huffington realize that a $315-million sale to AOL would prove to be a grave provocation. In many quarters, it is being seen not as the triumph of a new kind of news-and-information business model but as one that succeeds on unpaid labor and free content.
Huffington is under fire from several directions: In a snarky essay, New York Times Editor Bill Keller belittled her as the “queen of aggregation.” The 34,000-member Newspaper Guild, representing old-media’s ravaged workforce, then formed an “electronic picket line,” discouraging unpaid writers from contributing to her site.
Last week, the offensive shifted to federal courts. In a class-action suit in Manhattan, former HuffPo blogger Jonathan Tasini is seeking to establish “whether, in the digital age, profitable digital media sites should be required to compensate creators of valuable content.”
HuffPo owes bloggers a $105-million cut of the buyout booty, he argues in asking the court to order the payment.
THEATER OWNERS VS. PREMIUM VOD VS. NETFLIX
Movies and television may be media’s most volatile business arenas, with battles opening up on a variety of fronts.
Theaters owners and studios are inching toward open war as D-Day nears for Thursday's DirecTV launch of premium VOD — Hollywood’s daring move at last to reconfigure release windows by making current movies available sooner for home viewing.
Through DirecTV’s looming “Home Premium,” Sony, Time Warner's Warner Bros., Comcast-controlled Universal and News Corp.'s 20th Century Fox are aiming to accelerate movies to home screens eight weeks from theatrical release — shrunken from an average of 12 — at $30 per VOD rental.
Worried that moviegoers might skip the megaplex for the home couch, some top circuits reportedly are privately considering retaliation, including killing movie previews and lobby posters of upcoming movies as well as other financial counterattacks.
Meanwhile, having unwittingly nurtured Netflix's growing dominance, Hollywood is determined to contain the streaming-video juggernaut. Already, streaming via the mail-order rental giant has become an attractive cord-cutting option to cable-TV giants like Comcast and Cablevision and Time Warner Cable, not to mention to pricey pay-TV powerhouses HBO and Showtime.
CBS-owned Showtime, for one, reportedly has pulled such current hits as “Nurse Jackie” and “Californication” from Netflix. Perhaps alarmed by such moves — real or contemplated — and Hollywood rhetoric, Netflix recently expanded into original content by purchasing its first series, “House of Cards,” by Kevin Spacey.
VIACOM VS. Time Warner Cable
The freshest evidence of the rising industry-reshaping upheaval can be found in federal court in Manhattan. In addition the blogger-HuffingtonPost showdown, Time Warner Cable and Viacom sued and countersued each other last week in a battle that illuminates the volatile atmosphere into which the introduction of a single digital gadget — the iPad — can be explosive.
When TWC, the nation’s second largest operator, launched an app that allows channels to to be streamed onto customers' iPads, Viacom demanded to be paid extra. The cable-channel heavyweight (MTV, BET and Comedy Central, among others) is arguing that cable operators are limited to delivering Viacom's programming to TV screens.
Cable networks "aren't going to let someone else create another window and not be treated fairly,” says analyst Nathanson of Nomura.
Viacom declined to comment.
The industrywide “fighting can seem personal and shortsighted,” says a spokesman for Time Warner Cable. “But in the end, it’s about making sure the ecosystem properly rewards shareholders all along the chain.”
So, are the threats and brinkmanship simply business as usual, as some industry executives note? A top media executive says yes, citing the theater-studio showdown. It's just another stage of negotiation, the exec concludes, especially on the part of Hollywood, which is seeking to leverage exhibitors into cutting the movie companies a break on revenue splits for big-budget box-office flops.
Still, there is something mystifying about the future of digital media that morphs at bewildering velocity. And no one dares underestimate the potential of perennial game-changer Apple (reportedly now developing its own branded TV) or of such New Media forces as Twitter and Facebook to rewrite the media-industry script.
So anxiety and emotions are destined to run high.
Eric Schmidt, the former-and-very-much-living Google CEO, should have his tombstone inscribed, “I killed newspapers,” Bob Woodward, the iconic Watergate investigative journalist recently told a reporter. And rocker Bon Jovi recently charged that he is "holding Steve Jobs personally responsible for killing music."
Media seems fated to keep marching to beat of war drums.