Feature Stories | May 02 2006
By Greg Peel
The journalists at FN Arena have been following the evolution of "new media" for some time now (in a previous publication). In general we have been pushing the line fairly hard that certain forms of old media are not just suffering effects, but are in danger of dying out. Over time we have found brokers picking up the same line.
So what is "new media"? It is probably best described as anything that is not "old media". Old media is hardcopy newspapers, free-to-air television and radio, VCRs, cinemas and even books.
New media to date has brought us anything to do with the internet, broadband, pay television, digital television, multi-channelling, narrow-casting, mobile phones, iPods, personal video recorders, downloadable TV and movies, even home theatre systems.
New media is, by its nature, a rapidly evolving beast. Who knows what next innovation might be just around the corner? Whatever that may be, the bottom line is media is undergoing an evolution that will change the way we entertain ourselves – quite a quantum leap. Probably the greatest innovation within new media, outside of improved delivery quality, is audience discretion – the ability to be able to choose what, how and when we watch/listen to programs, movies, music et al.
This poses all sorts of problems for the advertising industry, and for those providing advertising space. It is even more vital when dealing with the younger generation, as it is they who are embracing new forms of media, and shunning old, most readily. They also tend to spend quite a bit.
The two forms of old media that are most under threat are newspapers and free-to-air (FTA) television. Various broker reports have crossed our desk recently, and a common belief is emerging: newspapers will manage to hold their appeal for a while yet but FTA TV is on a slippery slope. Let’s look at TV first.
In many ways Australia can take its lead from the US. The technology availability gap has consistently narrowed in past years. One difference however is in television, and particularly pay television.
Despite the obvious population differences, pay TV has remained out of reach of the average Australian because Keating’s policy of required competition meant two rollouts of expensive infrastructure, instead of just one. It also meant a bidding war for content. In short, the pay TV networks could afford to do no more than charge hefty amounts for their service. Despite having come to a merged arrangement now, there is still a lot of cost to recoup.
Not helping pay TV has been the anti-siphoning laws imposed upon sports broadcast. Sport is the bread and butter of cable (witness football in the UK) but while average Aussies have enjoyed the benefits of "iconic" events being delivered on FTA, the pay TV networks have suffered.
Nevertheless it’s still proven an unreliable system, with some sports events being corralled and then withheld for viewing. Channel Nine was the master of this – a testament to the influence of one now late Kerry Packer. Packer was probably the biggest influence in keeping FTA TV at the forefront for so long.
The experience in the US is that the relevance of FTA TV is winding down. This is reflected in the movement away from the medium by advertisers. Whereas FTA TV means you have to be in front of the box at the specified time, and suffer through the ads, new media provides not only for viewing time discretion but the ability to avoid the ads.
Digital television offers many benefits over analogue, but one is that you can choose to view when you want through systems such as IPTV (internet protocol). Or you can download FTA shows from the net, as early as the next day, or you can record onto your PVR (personal video recorder) and use an ad-skip function.
The experience of the music industry went a long way to establishing the new ground rules for visual entertainment delivery. Record companies fought for years against the concept of downloadable music, and while court battles were won on a copyright basis the industry eventually realised it would have to go with technology, not fight it. Hence we now have the likes of iTunes.
The television industry has quickly adapted as the speed of broadband has grown exponentially. Fast connections mean it is not just computer nerds who can download programs or movies onto their hard-drives and onto DVD. Instead of fighting it, the networks have gone with it.
Another response has been to adapt to new forms of advertising, replacing the standard interruptive block within television programs. Product placement, endorsement by characters, and cross-media promotions (eg, see the dress on Desperate Housewives, buy it on the website) are now the go.
Advertisers have also turned directly to the internet in forms such as "viral marketing" (talk about a product in a chat room) or even fake blogs (Zero Coke infamously tried this).
All of these innovations leave poor, tired old FTA out of the loop. Advertisers are moving away to where they feel their message will be best acknowledged. Merrill Lynch analysis shows that average commercial TV audiences have declined by 9% over 2001-05, and that the tech-savvy16-39 demographic has declined by 17%. By 2010 Merrill Lynch forecasts FTA TV will account for just 28% of the total ad market, down from 36% in 1990.
It surprised a lot of people that Football Federation Australia has signed a deal with pay TV instead of FTA TV, just when its star was rising (not for the World Cup though, which will still be on SBS). Many commentators saw this as an own-goal given the poor penetration of pay TV into Australian households.
Apart from the money on offer, the FFA has apparently put its faith behind the newer medium, believing (as Rupert Murdoch did) that if you build it, they will come. The greatest catch-22 faced by pay TV networks is that without top notch programming it is never going to attract the advertising dollars to allow for a reduction in subscription costs. If they can just get a toe in the door – and soccer is a decent toe – then the whole concept will begin to feed on itself, resulting in exponential growth.
If the Australian government were to drop the anti-siphoning laws, then it would be a pay TV bonanza. This would result in subscription costs falling rapidly and penetration rising proportionately. There would, of course, be a backlash from average Australians however.
And that leads us to the government’s "discussion paper". In typical form, the government has dithered on media laws for some time. A lot of this can be put down to keeping Mr Packer and friends happy (supporting FTA TV against digital evolution thus restricting new players) while simultaneously keeping them at bay (restrictions on cross-ownership).
Kerry might be gone but the legacy of bowing to the incumbents has continued, while at the same time attempting to "protect" average Australians. The latter has ensured that technology readily available in the rest of the world still seems like Star Trek stuff to Aussies. And it won’t get any better in a hurry.
Although the discussion paper provides for a window of resolution in 2007, no one expects consensus to be reached in that time. The next window, as provided by the government, will be in 2