Lessons the Television Industry Should Take From Music's 'Napsterpocalypse': Op-Ed

Give the people what they want.

Glenn Minerley is vp Group Director, Music & Entertainment for Momentum Worldwide. Leveraging his extensive background in music and entertainment, Glenn often consults on opportunities around ticketing, loyalty programs, data, and music and entertainment platform development for major brands around the globe.

 

In 1999, we all had our eyes on the end of the world. It didn’t happen. For the music biz, however, it came close. In an age when labels were swimming in profits, a college dorm room startup was burying a bomb in their vaults. 

When Napster rocked the foundation of the industry, it took over a decade for the music business to concede defeat and embrace new technology and models. 

Meanwhile, an entire generation of music lovers grew up associating no monetary value with music -- they considered it free and disposable. They still loved it and idolized their favorite stars, they simply wouldn’t pay for it.

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As a music professional, I’m fascinated by this history and the way streaming finally presented itself as a viable option. A swiftly changed model -- consumer behaviors totally reinvented in the blink of an eye -- a decade of catching up. Admittedly, I’m a music guy on the outside looking in, but I see a comparable fate for TV.

There are parallels and differences. Piracy was music’s catalyst for change. Labels were delusional for 10 years, thinking they could do the same things and get different results. Only now do we see labels embrace streaming with the recognition that if done right, everyone can win with this model. Yes, the industry will publicly bitch about points and small checks, but behind closed doors they tip their hats and recognize the model works. All you need is scale. Once we convert a larger percentage to paid subscriptions, like Spotify Premium and Apple Music, everyone will get rich again with the added benefit of a stronger discovery engine than record stores ever offered.

As we approach five years of streaming user data, we see a complete turnaround in user behavior. Before streaming, Millennials actively pirated music. Studies of mature streaming markets show this behavior is essentially eradicated. Earlier this year, IFPI conducted a study in Norway, one of the globe's most-established markets for music streaming, that showed just 4 percent of Norwegians under 30 still use illegal file-sharing music platforms, down from 70 percent five years ago. Youth consume on their terms and if the industry isn’t serving them properly, they’ll serve themselves.

If you think TV is safe from that reality, think again.

TV has never been hotter. Americans always consumed TV insatiably, but content quality is in a golden age. 10 years ago, The Sopranos was a novelty. Outside of that masterpiece, it was all sitcoms and reality TV. Today, you can name 30+ stories, from Game of Thrones to The Walking Dead, delivering cinema-quality premium content. Quality content and the ability for people to watch on their terms have both led to huge engagement increases for platforms like Netflix, which recently boasted a subscriber base watching an average of 90 minutes of Netflix programming every day. Consider the bar raised.

Despite content quality improvement, consumer behavior is shifting radically. The reality is our “on-demand” consumption behavior is less than five years old. When The Sopranos ended in 2007, you needed a TV Guide or you’d miss it. 

This ability to serve up content when we want it has Millennials reevaluating their relationship with cable companies. If, outside of live sports and news, I’m only watching on-demand shows and a fraction of what’s being served, why am I paying full freight? Cord-cutters are being born each day; refusing astronomical monthly payments for 500 channels when they actually consume maybe a dozen. 

While some numbers go up, some traditional success figures are on the decline. According to Variety, 3.8 million U.S. households cut the cord in the past five years. Time Warner Cable recently reported a 6 percent decrease in profits and lost 184,000 subscribers during Q3 2014; Comcast lost 81,000 video subscribers in the same period. Another report shows that 97.6 million US households had TV subscriptions in 2012, but that number declined by about 410,000 over the two years following; Convergence Group forecasts a 310,000 household drop in 2015, and roughly 380,000 more next year.

The industry is taking notice, but is it too little too late?

In April, Verizon announced a “Custom TV” offering; allowing you to buy channel themes -- sports, entertainment, lifestyle, etc. -- to introduce more consumer control over product delivery. 2016 could end up being the year of over-the-top, with multiple offerings expanding the market. OTT offerings, like Sling TV, serve as the Spotify of TV; delivering mobile on-demand service, empowering people to choose packages like the Verizon offering.

It’s a familiar tune -- consumer passion, whose delivery model is not properly evolving, resulting in consumer migration away from the offering.

The difference -- the catalyst is not piracy; it’s sacrifice. Content and cable providers must react to Millennials’ willingness to cut their TV dependency, cold-turkey. 

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But are they reacting enough? Isn’t music’s history strong enough proof to show the impact of long-term greed? The music industry milked the CD too long. They recognized decades of profit, forcing consumers into buying albums full of filler just to get the single. When the public spoke, they didn’t listen. 

Dearest TV execs, the public is speaking again. 

Don’t sacrifice an industry for short-term gain. No doubt there will be some casualties from unbundling. The Wealth Channel and PetTV may fall victim; the simple result of a free-market system. But our end result will be scale – and scale is evolving. An estimated 13.5 percent of broadband households with an adult under 35 have no pay-TV subscriptions. And according to Experian, another 5.6 million households “are prime to be among the next wave of cord-cutters.” The stronger channels will prevail and mobile technology can easily increase the frequency of consumption, delivering increased ad revenue to content and cable providers.

Call me naïve, but what I believe will eventually prevail is a re-imagining of networks, not as a brand or distribution system but rather as venture capitalists — bankrolling, providing infrastructure and best practices to content makers. The distribution hub becomes an aggregator of thousands of individual programs which only recognize revenue based on consumption. 

No eyeballs, no check. Sound familiar?

Sounds a heck of a lot like the Spotify model, if you ask me.
 

Billboard welcomes responsible commentary. You can submit your ideas to the editor at andrew.flanagan@billboard.com.