For two decades now, journalist and author Michael Wolff has been a thorn in the side of the media elite. As a media columnist for numerous publications, including New York, Vanity Fair, and USA Today, and author of several books, including a biography of media mogul Rupert Murdoch, Wolff has been sharply critical of the business and editorial decisions of all kinds of media outlets, whether newspapers or film studios, in print, on TV, and online.
In his new book, Television Is the New Television: The Unexpected Triumph of Old Media in the Digital Age (Portfolio/Penguin, 2015), Wolff asks a simple question: Who actually makes money in the media business? In his view, the answer is easy. Companies that produce content for television, regardless of how rapidly change occurs in how it is distributed, continue to make money — lots of money. This is true even as virtually every online media company struggles to earn a profit, on still-meager revenues.
Wolff recently spoke with strategy+business about his new book. Given his acerbic reputation, it’s no surprise that at one point he referred to the management of a top newspaper organization as “real dummies.” Still, Wolff comes across in person as thoughtful and reasoned. He has strong but well-considered views on what’s right about the TV business, what’s wrong with digital media, and what the former can teach the latter — and those views raise critical issues about the present and future of all kinds of media, both online and off.
S+B: In your new book, you argue that the television business, contrary to all expectations, has only grown stronger over the past decade or two. How come the Internet hasn’t killed television the way it did print or music?
WOLFF: Television used to be a simple business. Everybody had a box in their living room, and advertisers quickly learned how much to pay for ads, depending on the size and nature of the audience. It was a totally ad-driven business. Producers of TV content varied their costs in terms of the relative value of the audience, so prime time became the most expensive time to advertise.
Then came cable, which only opened up more channels for content producers and advertisers, as well as an additional revenue stream, as cable companies had to buy content for their networks. And now, logically, it includes streaming, not to mention syndication, international rights, and myriad other revenue streams that the TV guys have gotten good at leveraging.
“The key is that the TV guys have figured out a way to maintain the exclusivity of their content. That’s what has made content king again.”
The key is that the TV guys have figured out a way to maintain the exclusivity of their content. That’s what has made content king again. If you compromise that, it very quickly becomes the opposite of the king — a pawn.
S+B: What is it about the TV model that makes it so sustainable?
WOLFF: It’s the product. You’re making narrative programming, and nobody has invented anything else that holds an audience’s attention from beginning to end. That’s a pretty powerful attribute, and it includes sports, which continues to be the top weapon in many TV programmers’ arsenals. And now it’s at least partly supported by subscription. People are willing to pay for it. Amazing.
Moreover, access to TV programming has been growing exponentially. It used to be that television was a good business because everybody had a television. And then that expanded from this country to developed or half-developed countries around the world, where brand advertising still garners a high premium. And now everybody has multiple devices that can show programming. It’s a fabulous moment for people who are creating television product.
S+B: So why isn’t something similar working on the Web?
WOLFF: Television content used to be bad because it was supported almost entirely by advertising. You didn’t have to prove to an advertiser that you had good content. It was just content reaching a particular audience, and since there was little competition, everybody got to reach that audience. The content itself was an afterthought. The audience wasn’t making a conscious decision to accept or reject that content.
That’s pretty much the Web model now. Back in 1995, at the advent of the Web, and probably at the instigation of AOL, everyone said, “Oh, my God, the Web is going to have a huge audience. It’s going to be vastly larger than television’s audience. Therefore, if we make it an advertising-driven business like television, we’ll make so much more money than television!”
That committed the digital media business to be almost entirely advertising supported. And so they ended up creating what was essentially an old-style television-like business, except for the fact that it was impossible to pull off because there was no way to enforce any kind of exclusivity for their content.
So now it’s all advertising supported, and it is all dross. The quality of the content has no precise relationship to what advertisers are paying for when they buy an ad. Worse, the technological marvel of the Web allowed websites to boast that they could measure that audience, and how it responded to ads. And when it turned out that very few people were clicking on those ads, that only drove the cost of online ads down further.
Now there is an ever-increasing expansion of space to advertise online, and advertisers can buy that space on an ever more efficient basis, through technologies like programmatic advertising. Programmatic advertising defines not a particular site by its content, but a particular audience by its demographic. But that audience is no more loyal to a particular site than any other essentially undifferentiated audience. You can define the kinds of people who might read the New York Times, but that doesn’t mean they actually do read it — and it doesn’t make it any easier to figure out which sites to advertise on to reach that audience. So online advertising only gets cheaper and cheaper and arguably less and less effective. It’s just a matter of oversupply and lack of demand.
Meanwhile, TV has transformed itself. People pay cable bills, and choose which cable networks to pay for, and that’s a relatively active decision: I want this, so I have to pay for it. Why do they want a particular network? They now want it for motivations other than just by default, which is what television used to be. The audience is self-selecting, and the new, so-called over-the-top Web channels [Hulu, Netflix, and other vehicles that deliver content via the Internet without involving cable systems] that people have to pay for only further that business model.
S+B: So why don’t the online media sites understand this distinction?
WOLFF: Because they are essentially technology driven. Their real interest is in functionality rather than content. Facebook isn’t really about the content. It’s about what Facebook can do and how it changes behavior and how it creates myriad efficiencies in the way people interact and communicate. And that expands to the advertising and how advertisers interact and communicate with Facebook’s audience. The content is an afterthought, and it’s an afterthought on many levels.
Let’s face it: What does anybody at Facebook know about show business? I think they would readily admit that they know nothing about show business and that they aren’t interested in it. That’s not even what they believe is really germane to their business model. Facebook founder Mark Zuckerberg himself said that he wants the social networking site to become a “utility” — basically the opposite of what good television is. Show business just isn’t their skill set.
S+B: OK, so television is the new television. Do you see any threats to its current dominance?
WOLFF: I began my book with a scene in 2007 when a number of media executives, including old media execs from Paramount, NBC, and CNBC, met several of their new media counterparts from Google, venture capital firm Sequoia Capital, and Mark Andreessen, inventor of the Netscape browser. The Silicon Valley folks basically said to the Hollywood people, “Give us your content. You’re going to be screwed if you don’t. We’re going to march right over you.” That’s effectively what happened to the print guys, and the print guys said, “Oh, my God, we’re going to be screwed. Here, take our content.” But the television guys said, “What? Are you crazy? No way.” And they lived another day.
That just shows that this business isn’t at bottom a technology business; it’s a people business. And anybody in television could screw this up. Yes, there’s a large structural component to the recent success of television, but it is also remarkably dependent on who’s making the decisions, who’s in charge. What happened to print is largely a management fiasco, similar to what happened in music. The television people have been very successful in preserving their business. But if they had made certain other decisions, I think they probably wouldn’t have been [so successful].
In this world in which things can change so fast and in which the measures of success are so skewed, in which you find yourself believing [in] people who have no business at all telling you how to run your business, who knows? You can lose your way very easily in this new world in which there are no truly fixed points of success.
S+B: The latest trend in the industry is unbundling, and selling content on an à la carte basis. Do you expect that to threaten the TV industry, or at least the revenue sources that allow companies to produce shows like The Sopranos?
WOLFF: Yes, [TV executives] could screw that up very easily, and I think the folks at HBO, for instance, know that. And nobody is really trying to unbundle. Everybody is trying to say, “OK, you want to bundle, well, we’ll unbundle it and then we’ll re-bundle it.” And they do have a structural advantage. If you have a hit — if you have something that everybody wants — you can create a bundle. Why wouldn’t you?
S+B: Given the current supremacy of TV, what’s the future for digital media firms? Comcast’s NBC Universal unit, which is in the television business, recently made big investments in digital media companies Vox and BuzzFeed. Doesn’t that undermine your thesis?
WOLFF: I don’t think so. I think two things are going to happen. First, such sites are going to go into the television business, and we’ve already seen that happening, as more and more sites begin to produce their own content. And second, there’s going to be a whole series of rollups. These companies just cannot exist independently. I’m not even sure what they are independently. You can build a business based on huge traffic, but none of them have really succeeded yet, other than Google and Facebook. BuzzFeed gets hundreds of millions of page views a month and it makes nothing.
I just don’t know what such businesses become. All of those businesses are fundamentally arbitrage businesses, hoping to make money purely by the volume of traffic they can accumulate and the ads they can sell against that traffic. But traffic isn’t an audience.
These companies feel to me like the old direct-mail business. Every piece of mail you sent, you made your fraction of a penny on. And I think that they probably will evolve toward that model and make some money. But why would you want to be in that business? And why would the entire world marvel at them and give them the huge valuations they now command? I don’t get it.
- Edward H. Baker is a longtime business journalist and a contributing editor at strategy+business.