Jeremy Toeman is the CEO of Dijit Media, which develops technologies for people to discover new ways to experience TV shows and movies. This article was adapted from a post on Medium.com. Toeman contributed this article to Tom's Guide's Expert Voices: Op-Ed & Insights.
To kill the traditional TV industry, it would take about $70 billion per year to maintain the rough production costs (and profits) for all the shows we love to watch. See, there's a perfect blend between live TV broadcasting and an all-streaming/on-demand library, but it's difficult to see how to get there. Meanwhile, it seems like everyone wants to talk about killing/disrupting the TV ecosystem.
So let's talk about the cold, hard facts..
TV shows are expensive to make
While new technologies certainly reduce many aspects of production, if you want a show like "Game of Thrones," "House of Cards," "Mad Men" or "Breaking Bad," you need sets, lighting other equipment and an expensive staff. We cannot get around that.
So regardless of the surge in lower-cost reality shows, if you enjoy quality drama and comedies for 44 or 22 minutes at a time, you need a budget. Unless you can get all the actors, directors, writers, key grips, etc., to take a big salary cut, this will not change.
Advertising pays the bulk of it
Other than for fine shows from HBO, Showtime, Netflix and a handful of others with additional revenue, the money that covers the costs of TV shows comes from the multibillion-dollar ad industry. I am not aware of any model — from subscriptions to a la carte options for individual channels to anything else — that can easily replace that cash flow.
Advertising models are based on real-time viewing
Another tough, but true, fact about the existing ecosystem is that advertising revenue is predicated on live audiences. While I love catchup and streaming as much as anyone, it likely does not contribute much revenue to the bill-paying. For this to change, the massive numbers of people watching programming, and the advertisers supporting it, have to come up with an entirely new model for their world. Again, even if the industry recognizes that there's a trend toward a decrease in live viewership, nobody — anywhere — has yet come up with a successful alternate structure here.
The message is this: TV shows cost a lot of money, and the only way to pay for them is advertising. And the chief way advertisers spend money is on programs viewed live.
If you want, or expect, the above statement to change, get ready for more ads in your streaming — lots of them. Like 8 minutes of ads for every 30 minutes of programming. That's what it would take.
Beyond those points, I want to add my perspective on two additional topics that are trending in the discussion around TV disruption.
1. Pay-TV operators have an arbitrarily bad reputation
It's easy to blame Comcast, AT&T and others for anything and everything, but they should not be pointed to as "the problem" with television. Yes, they have their part to play, but when you consider the fact that someone has to send people into homes to repair lines or answer customer service calls, there is always going to be an easy enemy.
And as much as cable bills have risen dramatically over the past two decades, the cost the operators are paying for content has risen more dramatically. And those costs are not entirely being passed along to consumers. I'm not defending anything about pay-TV providers, but I'm also not in agreement that they are "bad" and everyone else is "good."
2. Most startups are clueless about the TV industry
Yes, that probably sounds harsh. But considering the quantity of companies that spring out of nowhere and want to disrupt or change things, it amazes me how few of them actually take the time to learn enough about the world and business they are getting into.
This is important because the "TV industry" is actually an amalgam of many industries: service providers, content producers, distribution companies, studios, and more. It's easy to say TV industry, but in reality, we shouldn't say it at all. It isn't an industry — it's many industries. My tip to startups: pick one specific subindustry you want to get into/go after/change/kill/whatever, and go learn how it really works.
So there you have it — your simple recipe for how to disrupt the simple world of television. Good luck with that.
This article is adapted from the post Not-So-Secret Recipe to Disrupt TV on the site Medium.com. The views expressed are those of the author and do not necessarily reflect the views of the publisher. This version of the article was originally published on Tomsguide.com.
