An alien landing in Soho would probably get the distinct impression that the world is accelerating away from the current entertainment establishment. There is revolution in the air and the time has come for the broadcast industry to do something about it.
The real winner so far from the internet revolution is clearly the consumer; it is improving choice and introducing huge competition for every pound spent, but in the meantime disrupting retail, education, travel, finance and almost any industry you care to mention. Nowhere is this more true than in the entertainment business. The music industry has been rapidly revolutionised – arguably too rapidly – eroding the traditional distribution model impacting on careers and shareholder value. Consumers around the world are downloading more music than ever, yet over 80 per cent of it is not paid for. Piracy – or criminality, to those of us who occupy the real world – has almost killed the golden “creative” goose.
The TV and film industries have not been hit so hard, yet. Video file sizes mean they’re not as easy to move around the web as music, but greater capacity in the internet backbone, increasing connectivity speeds and better compression will soon change all that. Cisco is predicting that half of all IP traffic globally will be generated through video consumption by 2012. The question, as posed recently by an analyst at Lehman Brothers, is whether the TV business is following blindly in music’s footsteps.
We certainly do not have to. The news that the so far elusive online revenue stream is growing from a drip to a trickle is very welcome. Advertisers are increasingly moving online, a trend born not only to match consumer habits but an economical move that makes sense in the current financial climate, as highlighted by Michael Grade’s recent announcement that ITV stands to lose 20 per cent of |TV advertising revenue “in |the light of the uncertain economic outlook”.
Advertisers are hungry to maximise the benefits that |online video can deliver, but it is becoming clear that they will |not embrace the user-generated phenomenon and are giving YouTube, Facebook et al a wider berth than expected. Why? Because they want safe, well-lit environments in which to showcase their valuable and protected brands in order to make money from the huge traffic these sites deliver. Advertisers want to sit next to high-quality, rights-cleared content, and will pay good prices to place their products and services around material that complements their position. A study in the US predicts that over 95 per cent of all revenue from online video advertising will be around professionally produced content. User-generated content is at risk of becoming a promotional backwater with dwindling commercial relevance.
The cost, complexity and scale of the problem of protecting intellectual property has defeated all media companies to date. Policy makers now realise that laws passed years ago, such as the Digital Millennium Copyright Act of 1998, are increasingly irrelevant. France is leading the way, establishing laws and quangos to enforce intellectual property rights, while media companies are suing user-generated video platforms for lost revenues and viewers. In Britain, a new Memorandum of Understanding between the internet service providers and the music business, brokered by the Government, establishes an important and justified step in allowing professional producers to generate a return from their spark of genius. Without this previously indisputable right, it was increasingly hard to see where the next Paul McCartney or Madonna might come from.
Of course, the greatest antidote to piracy is not the stick but the carrot, in the form of broad distribution. Why steal something when it is readily available for free? As the music industry starts to embrace advertising-funded business models, this lesson should not be lost in TV and film. There is a very large prize to go for – global online video is projected to be a $20bn industry in a few years. That is a large market, especially when coupled with lower distribution costs and, as the leading US online video hub Hulu.com proves, the ability for content owners to go direct to the consumer.
Equally, failure to grasp the opportunity quickly risks a fate worse than that suffered by the music companies. If left to their own devices, consumers will take the content they want on to the platforms and hardware they want. The opportunity is to lead and benefit from that process rather then being dragged to the party. Commissioners, producers, actors, musicians and writers need to resolve their differences and agree a new framework for exploiting their collaborative creations in the digital world. Ricky Gervais is one such producer of content who has embraced this new market, wheeling and dealing his own content rather successfully online, retaining his rights and making money. Producers should increasingly look to get themselves in the position Gervais has, looking to retain the digital rights.
It is ridiculous to see trade unions go on strike because ITV are cutting back on a local TV show in the Border region. This is just an inevitable consequence of audience fragmentation and its impact on advertising revenues being forced on the former commercial TV monopolist. Rather, staff and their representatives should focus on retraining and redirecting their experience and talents, allowing them to grasp the large and growing opportunities offered by online media. The audience, facilitated by technology, is moving at a rate never seen before, and we must keep up.
Government is, quite rightly, starting to listen to the arguments of intellectual property rights owners, and it is now time for us to grab the opportunity.
Ashley MacKenzie is the founder and CEO of myvideorights.com. The board of the company includes his father, Kelvin, and the television entrepreneur Peter Bazalgette