Is Digital Media Invading the Television Business?

Digital media has failed at its original vision and is now turning into the third leg of the television business, said Michael Wolff, a tech entrepreneur and author of the book “Television Is the New Television: The Unexpected Triumph of Old Media In the Digital Age.”

Speaking at the Promaxdba conference in New York City and interviewed by Eduardo Ruiz, president of A&E Networks, Latin America, Wolff, a former editor of Adweek and author of several books on media, told the conference that 20 years ago the argument developed that digital media was the future and television was the past. That argument went unchallenged. “Everyone came to believe that digital media was superior to television,” he said.

Now, he said, after 20 years, there are still only two success models with digital technology: Google and Facebook. “We tend to think of them as companies that can do anything. But let’s be precise about what business they are in. Both Google and Facebook are in a singular business — they are volume sellers of low cost ads.

Michael Wolff, tech entrepreneur and author

Michael Wolff, tech entrepreneur and author

“Low cost ads need one thing: low cost content. That content became user-generated. The revolution was that entertainment can be very bad. Users will tolerate it if they are not paying for it. But income increments for digital media has been barely above zero. So content had to be even cheaper and traffic had to become greater.”

This, Wolff said, led to absurd claims of traffic for websites. “We heard small companies bragging they had in excess of 100 million unique users each month. Everbody had a Super Bowl-size audience. What’s wrong with that? It was a lie. Partly, it was just fraud. Thirty to fifty percent of all internet traffic is fradulent (triggered by robots to increase traffic). Another big part of the internet audience doesn’t even see ads before leaving the page. We have now learned that traffic is not an audience.”

Digital companies tried to create “premium content” by giving cameras to their staffs, but that didn’t work out so well, Wolff said. When companies determined how difficult it is to create good programming, they turned to where it is already available: television.

Everyone now asks: “What are you watching? What people watch drives social media discussions and most conversation. Where does that content come from? Television.”

Netflix, which has been billed by many as a “disrupter” of video media, now IS television and is wholly dependant on the television industry for its programming. “It’s not some new form of digital media. It’s not some new form of digital experience. It is television. Next year, Netflix will be paying $6 billion to the television industry for programming,” Wolff said.

Shows like House of Cards are not being created by Netflix, Wolff said. The creative people of the television industry make House of Cards. Netflix is paying for it. Netflix has to go to the traditional sources for television content. They are essentially expanding the base of the television industry.”

“There was a time when everyone said computing was going to come to the television screen. Well, that didn’t happen. The exact opposite of that happened. Television came to the computer screen. That’s what people do with portable devices. They watch television on them. They watch more television than anyone has ever dreamed that anyone could watch.”

During the birth of digital, Wolff said, television also changed. It got better — much better. Now every writer and actor wants to work in the medium. “The value of media is in the art of storytelling. The better the story, the better the media and the more money is made from it.

“Technology platforms, it turns out, are kind of easy to build. Creating content is hard. Technology is now a commodity. It needs content. My entire career has seen the premium on software engineers. Now we have come to a different point of view. We have come to a dawning and general understanding that software engineers are a dime a dozen. Now what is truly unique and are of great value are the storytellers. They make television and all media successful.

“Five years from now, I predict the television industry will go from two legs — broadcast and cable — to three legs: broadcast, cable and streaming,” Wolff said. “That expands, rather than vulcanizes, the TV industry.”

On the other hand, what the digital industry should say, but won’t say, is that so far it has been a disappointment. “They can’t say that, but if you read between the lines they are saying that.

“Digital as an ad-supported idea has been a disappointment,” Wolff said. “They are in a business where all they see is their ad rates going down, down and down. That’s a problem. So they look to see where ad rates are going up and they find, you got it, television. They are trying to redeploy and go into the television business. That's precisely what’s happening right now.”

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