virtualeconomics

WoW TV

World of Warcraft has started advertising on TV (link via Kotaku) in the UK. Big deal? Slightly. When the clear market leader in an online category starts advertising on TV, it's no longer after market share - it's admitting that it has completely saturated the existing online consumer-base (7 million WoW users and counting) and that to achieve any further growth has to grow the whole category. This is necessarilly a pitch to get non-gamers, or non-MMORPG gamers at least, to give the whole concept a try.

The traditional response to this sort of activity is for the market leader's smaller competitors to scrape together the budget to run their own TV ads. Which is a fatuous and strategically myopic response - if the market leader has grown so big it's necessary for it to run category-growing marketing activity, the sensible response is to sit tight, let it, and let the rising tide raise all the boats. WoW will (it believes) get more people MMORPGing - once they're there is the cost-effective time to get them trying out alternative titles. I'm waiting with some interest now to see whether NCSoft will launch its own Guild Wars campaign in a panic or let Blizzard spend Vivendi's money on growing the category for everyone.

NFL takes website in-house

News today that the NFL is ending a five-year contract with CBS Sportsline (PaidContent) and taking its web operations in-house.

This is not about the website. This is about the NFL taking another step in building its own online destination site in preparation for taking TV distribution rights out of the hands of broadcast networks and distributing matches itself online. The last thing it wants as it goes down the route already taken by the NBA (Micropersuasion), the NHL   (PaidContent) and English cricket is to find its website in the hands of one of the broadcast networks it's busy disintermediating.

Update: and further proof of the shift away from broadcast to rights-owner or originator - the News Corp-owned show is to debut on Fox websites including MySpace (NYDailyNews via Lovelace).

I no longer want my MTV (commercials)

News from the Wall Street Journal last night that many of the major US TV channels have opted out (Reuters) of Nielssen's plan to measure the audience for their TV commercials can surprise hardly anyone. The flimsiness of the excuses are also pretty unremarkable. TV execs hate anything that measures the effectiveness of TV advertising, because the more it gets measured the more obvious it is that no-one is watching the ads and (perhaps therefore) next-day recall has collapsed from 35% in the 1960s to 10% today. But advertisers are rarely friendly towards ad formats that could be measured but aren't - it's too obvious that the media owner isn't telling them something. Hence, amongst other things, Wal-Mart, eBay et al taking the initiative to move TV ad-buying from the up-front to an AdWords-esque auction model (ArsTechnica).  What do the networks hope the advertisers will conclude from a refusal to be measured? That everything is fairly priced and no-one is skipping the commercials? Come now...

The secret of comedy

There's been a lot said about the GooSpace deal these past few days, so much in fact that I'm reluctant to stir the pot again, but here's one last thought to mull over. Would YouTube have cost Google $1.65 billion if they hadn't announced their $900 million MySpace deal first? Or to put it another way, has Google just wasted an awful lot of shareholder money by doing its deals in the wrong order?

A lot of analyst questions (SeekingAlpha) have focused on the relationship that Google has just created between MySpace and YouTube; the deal metrics, or the $1.65 billion price-tag, have been at least partly justified by comparisons with the Google/MySpace deal (that MySpace will, just to say it again, never deliver on). Just how much of that $1.65 billion could Google have saved with a modicum of better timing?

What does GooTube mean?

The GooTube deal has been pored over more than sufficiently elsewhere (Techmeme), so I'll skip the details. Nonetheless, to my mind the deal leaves several questions unanswered.

(1) Despite the justification (SeekingAlpha) for the all-share deal (tax advantages, yadda yadda), Google's largest ever acquisition leaves completely untouched its $10 billion cash pile. Google has so much of the green stuff that a while ago it risked being regulated as a mutual fund (Answers.com). If Google's $10 billion isn't for funding this sort of acquisition...what's it holding that cash for? (Clue: "because it can" is not a satisfactory discharge of its duty to maximise shareholder value.)

(2) Why does Mark Cuban et al continue to protest that YouTube is going to be the focus of Hollywood's rearguard action against copyright violation? YouTube is a hopelessly inefficient way for consumers to steal copyrighted video content off the web. It's well suited to the negligible-attention-span clips that its users post up there, to music videos and to teasers and excerpts from longer (copyrighted) works. But as a way of watching films or TV it's a poor second to downloading the whole thing using BitTorrent, and the studios will be much better served getting to grips with how they can serve the needs of their customers than suing the new YouTube owner over trivial violations.

(They could start by working out how much piracy their DRM policies actually prevents - at guess, none - and how many ex-customers would go back to paying for their content rather than BitTorrenting if they offered it DRM-free and transferable across multiple devices - another guess, more than none.)

And the most thoughtful analysis I've seen of the GooTube deal so far is Andy Kessler's, who comments,

"Who are the next media moguls and to whom do they have to sell their souls for the priveledge? The $165 billion question left unanswered by this deal is: What is media anymore? Can you just slap videos up on the Web and become a younger and more vibrant Rupert Murdoch or Sumner Redstone?"

Suing YouTube won't be the salvation of Hollywood

Mark Cuban and Forrester have both argued that YouTube will get sued, and lose, and have to take down all the copyrighted material on the site. Mark Cuban went so far as to say that, therefore, "only a moron" would buy YouTube, on grounds that only once it's owned by anyone with real money will it be worth suing. LostRemote counters that YouTube will take down the copyrighted material and it won't matter so much - that it's the long tail of user-generated video that brings users to the site, and that'll be fine.

LostRemote is right, of course - Cuban and Forrester are thinking about video content distribution in terms of the Hollywood blockbusters that dominated the pre-digital media landscape. (Still dominate the media landscape, you say? Yes, but only insofar as - to borrow a phrase from Innosight via Simon Waldman - the new game has begun before the old game has ended.) YouTube isn't even a very efficient way for audiences to pirate copyrighted video content compared to say BitTorrent, and this certainly isn't where the value of YouTube is vested.

The (largely untapped) value of YouTube is in the marketplace it engenders between content creation and content consumption (Umair), the fact that - like eBay did for the junk that was cluttering up everyone's garage - it creates a market that didn't previously exist and puts the creator of niche content efficiently in touch with the right audience for that content. It's a post-blockbuster digital content marketplace...and the studios suing the owners to take the blockbusters off will be an ultimately futile response to the collapse of their own position in the value chain.

The art of the ad

I've spoken before about PVRs spelling not the end of ads but the end of ads as an interruptive format - people who can skip thirty seconds of shilling tend to do so, and in any case those without the technology simply leave the room, skip the channel or make a cup of tea. I'm fascinated therefore to see Coke take a leaf out of the Sony  Bravia book with ads that are simply art (YouTube). This is a vast, ambitious and beautiful ad directed (Dexigner) by Manhattan animation studio PSYOP and it's already been viewed a few thousand times on YouTube (a fair few of those times by me). Now, as Umair recently pointed out, YouTube is capturing little or no value from things like Coke's ad sitting on its servers. Which is I guess a shame for YouTube. But it's great news for Coke, and part of a growing theme - that ads cannot rely on simply interrupting an audience's attention, but can capture the audience's imagination with something they genuinely want to watch.   

Someone else's man in Havana

The Observer this week reports that the BBC's new Editorial Executive of Diversity, Mary Fitzpatrick, is looking for greater "cultural accuracy" amongst foreign correspondents. "I would prefer to see somebody who understands that culture, understands what's going on and can say 'look with me, because I am part of this'. It feels more authoritative and more involved'." (via Lovelace.) Which sounds a duly worthy ambition, but surely begs the question why then that person needs to be employed by the BBC when local media in every country produces its own local reporting. If for example reports on Iraq by Iraqis are indeed more authoritative and involved - and it seems a reasonable enough contention - then the solution would surely be to syndicate existing reporting from the region rather than drain talent out of the local media to work for the BBC.
  

Fosters shifts ad budget online

The Washington Post reports (sub req'd) that Australian brewer Fosters "is to quit advertising on American TV and move its US budget to online ads", says Lovelace. AdAge has some detail of Foster's campaign with Heavy.com. This looks increasingly like the sudden, decisive tipping point I've been talking about for TV advertising instead of the gradual decline the industry has been pinning its hopes on as it experiments with a digital distribution model.   

Ads aren't finished; interruptions are finished

Two pieces of information came out today confirming the troubles faced by the exploding TV market (Buzzmachine). One is the Credit Suisse has forecast (Times) of a year-on-year drop in revenues at the UK's main commercial broadcaster ITV of 22% in Q3 and 20% in Q4. Also today a new Forrester "first look" report shows how and why TV ads are waning in their effectiveness (FT) and why money is moving out of TV. The report points out that (in the US) DVR users skip 92% of ads; that multitasking means passive TV-watching has become TV-plus-game-plus-SMS-plus-book and the ads are simply tuned out; and that a plenitude of alternatives for advertisers is encouraging them to commit budgets elsewhere.

So the TV-to-online diaspora (Mashable) continues, in both attention and revenues. And yet...amidst this gloom as viewers evade or ignore interruptive ad formats is all the attention (Adverlab) surrounding the next Sony Bravia ad (YouTube). As DVRs and IPTV roll towards ubiquity and brands such as Land Rover simply launch their own broadband TV channels (Times), it doesn't spell the end of TV ads - merely the end of TV ads as interruptions.