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Lots of High Decibel Talk But Digital Dollars Still Amount to Diddly Squat

While the media giants highlight the digital transformations under way, revenues remain woefully underwhelming compared to Old Media

Show me the digital-revenue stream … er … trickle! 

Trumpeted by top executives in conference calls to Wall Street analysts the past two weeks, the latest quarterly earnings from Time Warner, Disney, News Corp. and Viacom highlight a massive New Media disconnect.

For all the high-decibel digital-transformation talk about TV Everywhere, iPad publications, ad-supported and subscription streams of video, digital dollars still amount to diddly squat for the corporate Old Media giants in TV, movies, magazines, books and newspapers.

Or, as former NBC Universal CEO Jeff Zucker’s famously put it three years ago, streaming or downloading episodes of hit broadcast-TV shows is tantamount to “trading analog dollars for digital pennies.” He subsequently upped the amount to “digital dimes.”

But with consumers demanding ubiquitous digital content on an increasing array of devices — from smartphones to iPads to desktops — top media executives have little choice but to risk over-emphasizing a format where any big payoff still is in the distant future.     

In fact, the payoffs are still so small, they're loathe to talk about them.

The handful of diversified media giants, including Comcast-controlled NBCUniversal, post a combined $127 billion in annual revenue. And while each company details myriad sources of revenues — Disney, for example, even projects “ultimate revenues” a decade into the future for theatrical releases — none break out digital revenues.

"In most multibillion-dollar market cap media companies, digital revenue is relatively small by comparisons — hundreds of millions of dollars,” Bernard Gershon, founder and CEO of digital-media strategy firm GershonMedia, told TheWrap. “Compare that to a couple of billion dollars total in ads and fees for a couple big cable-TV networks.”

Digital revenues “aren’t big enough to move the stock price,” he added.

Still, media executives eagerly promote the corporate digital profile, underscoring the future prospects for monetizing New Media.

“The digital revolution craves our content brands,” Chase Carey, Rupert Murdoch’s No. 2 at News Corp. declared two weeks ago in touting the company’s fiscal second quarter results to financial analysts.

The company will ensure that its brands are “properly monetized in all … digital models.”

The earnings report — which came out the same day as Murdoch’s iPad-only newspaper, The Daily — showed company-wide profits had more than doubled to $642 million on revenues of $8.7 billion. But a News Corp.spokesperson confirmed to TheWrap that the company doesn’t break out digital revenues.

It did, however, report $319 million in other “other” revenues, including the results for MySpace — Murdoch’s first bold entry into digital. News Corp., which acquired MySpace for $580 million in 2005, recorded a second-quarter charge of $275 million largely to pay for a restructuring of the foundering social networking site.

Meanwhile, in the quarterly analysts call last week, Disney CEO Robert Iger plugged content-and-brand-rich Disney, for which digital media “provide for more opportunity than we’ve ever seen before.” He added, however, “We haven’t discovered yet the silver bullet or the business model that’s going to prevail.”

On Thursday, Iger will elaborate on the digital media strategy at Disney’s “2011 Investors Conference” in Anaheim.

In 2005, the freshly minted CEO had raced to the front of the digital curve, before Murdoch’s ill-fated dash, when Disney-owned ABC became iTune’s first supplier of downloadable TV-show episodes (“Lost,” “Desperate Housewives”).

Back then, Disney boasted about its downloading dough. Then-CFO Tom Staggs told analysts to expect downloads to total $25 million in fiscal 2007, a fraction of the $700 million total digital revenues from Disney media businesses overall that year.

For the first quarter reported last week, the company saw net profit soar 54% to $1.3 billion. Of total revenues—up 10 percent to $10.7 billion—Media Networks account for $4.6 billion, which would include any digital media revenue generated out of, among others, ABC Entertainment, ABC News, Disney Channel and ABC Family.  

Meanwhile, Jeff Bewkes couldn’t resist a digital tease during Time Warner’s analysts’ call. “Warner Bros.,” he noted, “will be at the forefront of accelerating the digital transition in film.”  

Bewkes, it should be noted, is the architect of “TV Everywhere,” a generic name almost for expanding subscription television into ubiquitous access — online, on broadcast, on cell-phone, on satellite, on anything.

Like its rivals, Time Warner has minor pockets of digital successes — CNN.com, People.com and TMZ.com, for example. But they hardly make up a lot of the corporate whole.

Bewkes has avoided what he regards as buzzworthy, but economically unattractive, digital content deals. He snubs Hulu and won't make full episodes available on YouTube. HBO shows fetch premium pricing at iTunes, but no 99-cent episodes of Time Warner-owned first-run shows are to be found.

A prominent media analyst, Michael Nathanson of Nomura Securities, says he doesn’t track digital revenues because they are inconsequential — “for now.”   

Digital revenues were all the buzz beginning 10 years ago, when "Everyone wanted to show they were a new media company," he notes. But the trend backfired on the music industry, among the first media sectors to highlight digital revenue. It only highlighted the industry’s dismal decline, with sales of 99-cent digital growing at the expense of plunging $10 CD sales, Nathanson notes.

And with the digital transition having proved tumultuous so far for newspapers – not to mention the abysmal failure of the onetime AOL-Time Warner and Murdoch’s currrent MySpace woes — it probably is imprudent for (metamorphosizing) media giants to draw attention to themselves.

"It doesn't make sense to overpromise," Nathanson says.

Merely clinging to the promise of digital dollars seems precarious enough.