It’s been a tough 24 hours for TV companies in the U.S. Ever since Disney’s earnings call Wednesday that warned about network affiliate fees going forward, the stock market has been brutal on all TV companies, even those that surprised with better earnings that investors expected. At one point today, the major TV companies in the U.S., from Disney to Time Warner to Discovery to Viacom were down 10%-28% from the day before (see chart here from midday Thursday). In aggregate, this represents total declines of more than $75 billion in market value from the day before.
Whether the companies eventually recover all of yesterday and today’s losses or not, it is probably clear to most that their world has changed. Investors now know that Netflix is having a real impact on TV viewership (Another stock chart shows Netflix went up 10% on the Disney news). Investors now know that TV companies are no longer impregnable to digital disruption and disintermediation.
To be clear, TV companies are certainly in a better position than newspaper companies were 10 years ago right before the Internet largely ate them up but only if TV companies take the right steps going forward. Keeping the status quo (with a dose of healthy cost-cutting) will no longer be a successful strategy for the future. TV companies need to leverage the core power of what video, storytelling, sight, sound and motion can do in a digital, data-driven, personal consumption world. Most of them have resisted making radical changes to their business models. Maybe fears of more stock dives in the future will convince them that not acting is ultimately more dangerous than risking action.
Heres what I think TV companies should be doing:
Financial engineering wont solve for the future. Yes, Google might have been able to pop its enterprise stock $65 billion dollars in a day by hiring a new CFO, but I don’t see any similar opportunity for TV companies. They already have great finance people.
Market to Madison Ave. as if you mean it. TV companies are not great marketers when it comes to Madison Ave. Must see TV was great marketing. FOX’s Empire was brilliantly marketed. But TV companies don’t do a very good job marketing to their advertising clients and agencies. It takes more than upfront events and TCA tours. For every positive headline in the ad trades and positive research report that TV companies get, digital ad companies get 50. That needs to change. It requires focus and investment.
Stop showing so many redundant, irrelevant ads to your viewers. The data and technology exist for TV companies to stop rotating so many of the same ads to the same viewers over and over again. This happens because it’s the way it’s always been done, because TV ad scheduling systems are designed to predictably deliver GRP and demo packages, and because things weren’t so broken before that this needed to be fixed. Now is the time to fix it.
Embrace direct consumer relationships. Affiliate fees are great and arent going to go away anytime soon, even if they might decline faster than hoped. However, it is critical that TV companies proactively build their own skinny bundles of TV programing and don’t just rely on one-off apps or bundles built by third-party distributors. They need to create direct consumer relationships and sales, using technology to help custom-build high value bundles of programming, just as travel suppliers and e-commerce companies do.
Yield optimize; yield optimize; yield optimize. The present and past of TV have been all about fat bundles and managing to succeed in a world with a lot of waste: wasted ads, wasted reach, wasted frequency, wasted pilots, wasted time. The future of TV is digital, unbundled and getting more from less. It means optimizing content for users. It means optimizing ad campaign yield for advertisers. It means optimizing ad inventory for revenue and margin yield. Done well, you will be able to deliver fewer, more relevant ads to your viewers. You will yield more branding and sales for your advertisers. And, most important to Wall Street and your future, you will yield more revenue and more margins for your company.
What do you think?
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