Saturday, November 08, 2008

Peter Chernin, News Corp., on Innovation and Media

Peter Chernin, President and Chief Operating Officer of News Corp., was the keynote interviewee at TelevisionWeek’s Innovation 360: The Game Changers conference last week in Manhattan. These are MediaScrum’s notes of his comments:

Innovation, the topic of the conference, is critically important to the success of all businesses, a sentiment with which hardly anyone would disagree. Successful innovation, however, requires clear insight and discipline, which is often lacking.

First of all, innovation must to be pursued constantly, during both good times and bad. It may be tempting to scale back on innovation, either because things are going well – who needs it? – or things are going poorly – we can’t afford it. Either path, however, will leave companies critically short of necessary innovation when it is most needed during times of major business disruption, which leads to the other element of required discipline.

The second element is to recognize that legacy businesses may well be reaching the end of their lifespan. Old businesses should be maximized, not defended. Only by applying resources to new opportunities, despite the decline of old businesses, can innovation drive the business forward.

Innovation’s critical importance can be seen in three major areas impacting the media business: motion pictures, the ongoing SAG labor dispute, and digital media.


For motion pictures, quantum leaps in high-tech innovation have historically had a corresponding impact on the level of viewer interest in movies. The phenomenal success of “Titanic,” the highest-grossing move of all time, was driven in large part by the astonishing quality of the special effects.

The technologies that have such an impact are those that benefit the story-telling of the movie and the sense of wonder and astonishment of the audience. Technologies whose purpose is cost-cutting or more efficient delivery, such as digital projection, whose impact is transparent to the viewer, are important but not transcendent in the same way.

The next innovation to have a giant impact on moviemaking will be the mainstreaming of 3-D. James Cameron, the director of “Titanic,” together with Fox, has spent the last ten years developing “Avatar,” his showcase 3-D motion picture. While the concept and early efforts at 3-D movies began at least fifty years ago, it is only now that the technologies underlying production, editing and viewing have reached the stage that 3-D can be fully integrated into the storytelling, rather than merely being a interesting gimmick. Not only has it taken Cameron ten years to bring his movie to fruition, but he filmed several 3-D documentaries along the way in order to help perfect the technology.

“Avatar” and its progeny are expected to have a significant impact on the motion picture industry. IMAX’s 3-D movie versions have demonstrated the audience appetite for 3-D. Movies that are produced in native 3-D, with the narrative and other elements developed for that format, will be the next giant leap in movie technology.


The Screen Actors’ Guild (SAG) is the only creative guild that has not reached an agreement with the television and movie production community. To compound matters, internal disputes within SAG, particularly as expressed in a recent election for Guild board members, have been quite prominent in recent news reports.

Comments on this topic have been the most heavily reported in the news media since the conference, often in a much harsher light than viewed by this observer. Whether Chernin’s comments were of the “iron fist in a velvet glove” variety or simply that the news media likes a good fight, was not clear.

In any event, the producers are in quite a strong position, with the solid backing of the business community. Furthermore, the creative community has, in general, made an uneasy peace with the future uncertainty, at least for now, and is probably unwilling to have the last participants – SAG – benefit from their efforts at reaching a entente with the producers – much as drivers don’t appreciate someone who tries to take a shortcut to the exit by bypassing the cars that have been patiently waiting their turn in the exit lane.


MySpace has been key to News Corp.’s efforts in the digital arena, although not in the way that observers had expected. The conventional wisdom at the time of the MySpace purchase by News Corp. was that it would become “Fox-ified.” The true value of MySpace has been, however, to provide News Corp. a window into consumer needs and behavior in the online world.

In a world in which consumers have infinite choices for entertainment, media companies must provide vehicles that allow consumers to exercise that choice, rather than trying to restrict it, but in a profitable way.

Entertainment media is different from music, which has been devastated by the shift to digital distribution and is struggling to find a new business model. One of the underlying problems in the music business model is that it was predicated on the sale of entire albums, even when consumers only wanted to purchase certain songs – a restriction of consumer choice. Given the opportunity – legally or illegally – to obtain only the songs desired, consumers did so – record companies’ business model notwithstanding. Fortunately for movies, people tend to consume the entire product, not merely portions. Technological issues, such as bandwidth needs for bit-heavy video vs. audio and the length of movies vs. music, have prevented piracy from being as much of a problem for movie producers as it has been for the record companies, at least so far.

That being said, the advent of digital distribution of entertainment content has been challenging to other parts of the media business. Hulu, the video portal co-owned by NBC and Fox, for example, has been a reasonable success since its launch earlier this year. Online viewing of full-length episodes of broadcast television programming has apparently been used by consumers to replace viewing of reruns, but not of network first-run programming. Players in the media food chain dependent on rerun viewing, or even off-net syndication, may find themselves being squeezed by the new business model, just as record stores were collateral damage in the woes suffered by the record companies.

Advertising, however, has of course been under pressure from the changes in technology across the media landscape, and this has a direct impact on media companies such as News Corp. Experiments with new ad models for the digital world are still a work in progress.

Fortunately, News Corp. will continue to feed the public interest in consuming media, no matter the distribution channel. For example, News Corp. views MySpace and Hulu as social “media” outlets which encourage peer reviewing and sharing of content. Facebook is seen as more social “networking” with greater emphasis on interpersonal relationships.

Eventually, traditional media will develop the advertising models for digital platforms.

The interview can be seen at:

Tuesday, July 15, 2008

Re: Obama, The New Yorker Displays Its New Yorky-ness

Amid all the brouhaha over the New Yorker's latest cover, which depicts Barack and Michelle Obama as America-hating, flag-burning, big-haired, terrorist-loving armed black militants, the argument seems to boil down to whether the cover is offensive or it's let's-not-take-ourselves-so-seriously satire. The crux of the matter is that it boils down to context, audience and timing.

This being MediaScrum, this imbroglio is certainly a scrum and it's being played in, and about, the media. If this is indeed satire, the New Yorker is assuming everyone gets the joke - we all know that Barack is not a Muslim, loves our country, the fist bump is not a coded terrorist signal, etc. But let's face, this is New York, where some apocryphal dowager expressed disbelief in the election of Nixon (or Reagan, depending on who's telling the story) by exclaiming, "How could he have won? I don't know anyone who voted for him!" In other words, of course, everyone is in on the joke - or are they?

What percentage of the American voting public is not going to purchase the New Yorker but simply see the cover displayed on television and in the press and therefore have it confirm existing prejudices or raise lingering questions about Obama's patriotism, trustworthiness and so on? There was an excellent op-ed in the New York Times on June 27, "Your Brain Lies to You": A pair of neuroscience experts points out that over time, you forget where you first learned about a false statement, and you may eventually forget that it is false. Therefore, the key is not refuting a false statement; it's preventing the false statement from being made in the first place. A quote attributed to Churchill summed this up nicely, "A lie can travel halfway around the world before the truth can put on its shoes." In six weeks, a substantial (and scary) percentage of the public will swear up and down that they saw a photo that proves Barack and Michelle are Muslim terrorists!

If the New Yorker wanted to satirize misperceptions about Obama, it should have done so AFTER the election. Then we could all have had a good laugh - we're so dumb we elected a Muslim terrorist as our president, ha, ha! Doing it now feeds the confusion of an electorate so misguided that voters are opposed to Obama both because he is Muslim AND because of his nut-job Christian minister! Talk about cognitive dissonance!

Sunday, July 13, 2008

“How Publishers Are Taking Back Control of Their Brands with Scalable and Profitable Online Advertising Strategies”

On Thursday, July 9, I had the opportunity to listen to a panel assembled by ContextWeb, the primary ad network for our StoneHorse online publishing sites. The event was:

“How Publishers Are Taking Back Control of Their Brands with Scalable and Profitable Online Advertising Strategies,” with Wenda Harris Millard co-CEO and President of Media, Martha Stewart Living Omnimedia; Sean Muzzy Senior Partner, Media Director;
Ari Brandt General Manager - Digital Media, Conde Nast Business Media Group; and
William Morrison Partner, Sr. Internet Analyst, ThinkPanmure; with Randall Rothenberg President, IAB, as moderator.

With the disclaimer that my notes should not be considered a full, or even particularly accurate, record of the opinions, facts, fables and other thoughts expressed by the participants, let’s begin!

Anand Subramanian, CEO of ContextWeb, opened the event. He tried to reconcile the seemingly contradictory situations of advertisers complaining that there is not enough available online ad inventory while publishers complain that they cannot fill their inventory. The conclusion Anand reached was that there is not enough of the right inventory and there is, unfortunately, too much of the inventory that no advertisers want. Closing this gap was the main theme of the discussion that followed.

Randall Rothenberg, CEO of the IAB, viewed the macro problem as a conflict between advertisers’ desire for scale, most likely a habit ingrained from many years of reliance on television, and their desire for the targeted relevance of the ad placements made especially possible by online advertising.

The question he posed to the panel: Are online ad networks the solution? If so, how should we deal with the struggle between branded online publications and online ad networks?

Wenda Harris Millard, the chair of the IAB along with being the co-CEO of Martha Stewart Omnimedia, characterized the conflict as being between “pork bellies and diamonds.” In her view, the ad networks started as the equivalent of retail outlet centers, dealing in commoditized distressed and remnant inventory and based primarily on price – “pork bellies” – as opposed to the “diamonds” of premium branded online content. She felt, however, that ad networks are evolving into the online equivalent of luxury shopping centers – essentially multi-branded upscale retail destinations. So to her, the question is how far along the path have they come?

[Note: Ms. Millard’s discussion on topics covered at this seminar and other issues can be viewed in an interview with Kara Swisher of D: All Things Digital on the ContextWeb site:]

Bill Morrison, an analyst at the Think Panmure boutique investment bank, attributed the growth of ad networks to the fragmentation of media, particularly online. His research showed that there are 160 million websites, of which 50 to 60 million are active, and approximately 1% are being monetized. Even at those low levels of activity, that still leaves 1.6 million websites contending for dollars, largely advertising.

The ad networks, in Bill’s view, grew in response to publishers’ need for revenue and advertisers’ inability to deal directly with the plethora of websites. The number of ad networks has grown in response to this marketplace need: there are now over 300 ad networks, compared to only 100 in 2003.

As the market has grown, networks have begun specializing beyond simple commodity sales. Bill felt, however, that there is yet no effective market for what he calls "premium secondary" inventory.

Multiple vertical ad networks aggregate sites with similar content. Through such aggregation, these networks are challenging the content leaders who seek to garner premium rates for their inventory on the strength of their brand and depth of their content.

ContextWeb, the host of the morning’s event, has a slightly different model, having constructed what are in effect “synthetic networks” of pages of related content, regardless of the editorial direction of the underlying sites.

Bill argued that the networks addressed other challenges faced by publishers beyond simply a means to garner advertising which they might not otherwise have the resources to reach. Another issue could be what Bill referred to as “inventory bursting,” i.e., volatility of traffic that is hard to predict and could prevent the matching of inventory to traffic.

Wenda raised what seems to be the key issue among branded publishers – that ad networks can create the commodization of online ad inventory: it's all about price, like TV. I was a little surprised at that last comment, as it had always seemed to me that television inventory, at least at the network level, avoided commodization by differentiating itself by quality of programming, demographic targeting, and buzz in general, such as premium pricing for events like the Super Bowl and the Oscars. Furthermore, if television is unable to avoid commoditized pricing, online probably stands even less of a chance, unless targeting or other techniques can demonstrate superior ROI to TV.

Ari Brandt, the general manager of, took a different tack. He contended that his property is not competing on scale. It wasn’t clear whether this was an actual strategy or simply making a virtue out of necessity, with properties such as CNN/Money being clear leaders in the financial news and analysis categories. Ari viewed the mission of to be that of empowering business leaders with online tools, although he did not go into much detail. He also said that took a lighter approach to news, which would seem to be similar to that of the magazine itself.

All in all, he professed to be very satisfied with success of, having 3 million unique visitors and 8 million page views monthly 15 months after launch, with a heavily male and affluent audience.

After the brief comments by each of the panelists, Randy Rothenberg asked: why are people replicating television metrics in their efforts to assess online advertising, such as reach and frequency?

Wenda agreed with the underlying premise of Randy’s question and said that her efforts at IAB included resisting the wholesale transfer of metrics from other media to online. Furthermore, as scale will continue to be a key objective of advertisers, she felt that television is becoming less important every year. She argued that digital media will eventually replace television, as magazines, which previously might have been a contender, can not provide the scale advertisers require.

For online, leveraging its unique strengths such as behavioral targeting combined with contextual relevance is key. She compared the online advantages to the mass “spray and pray” approach of television.

Bill Morrison commented that audience composition is as important as scale, another factor that would seem to favor online, particularly with regard to upscale audiences.

I asked the publishers on the panel about the importance of integrated marketing, particularly as a way to avoid the commoditization of online advertising through the creation of custom and multimedia packages not easily sold via a network. Wenda contended that advertisers were looking for true value creation in partnership with the publishers and that pricing was often the last concern, not the first. She also indicated that it was an advantage to have multiple media distribution channels, such as print, TV, radio, and the others available to MSO, as opposed to the online-only limitations at Yahoo!, her previous employer.

Randy next asked whether branded networks are an ad play or a content play. Wenda said that her objective is to serve her customers, particularly with regard to the branded network created under the Martha Stewart brand. She pointed out that MSO alone can not provide all of the content that their customers want, and that the Martha network enables them to extend their content reach. She cautioned the audience, however, that it is important to properly "curate" one’s network sites to guarantee the quality, both for advertisers and customers, and that not all networks do so.

When Randy asked about the relative values of new versus old branded networks, Bill seemed to indicate that it was not a critical distinction. He cited the example of Glam, which built a vertical ad network first, then built an owned-and-operated content site. In other words, it did the exact reverse of the MSO strategy.

Along the lines of extending content reach to provide quality inventory to advertisers, Randy cited the recent purchase by CBS of CNET which was done to expand its group of sites and build out its network of content, not just for ads.

Bill indicated that having such qualified content under a publisher’s umbrella was important in that IAB publishers, generally the largest publishers, accounted for 80% to 90% of total online ad revenue. The ad networks, on the other hand, while holding a market share of 10% to 15%, are growing much faster than the publishers, at a 30% annual clip.

A member of the audience asked about the widgetizing of content as a distribution channel, with or without ads. Ari seemed to view that as a likely further development, and cited Google Gadgets – a business travel widget – that has been syndicated across the Google platform.

Randy summed up the morning by saying that the keys to maintaining price include having trusted brands, providing a good consumer experience, and generating big ideas that create results. Hard to argue with that.

Friday, July 11, 2008