The present and future of post production business and technology

On October 31 last year Edo Segal wrote an article on TechCrunch with the title For The Future Of The Media Industry, Look In The App Store. The article is definitely worth a read but this jumped out at me:

But the entertainment industry has a vested interest in the success of this new type of convergence, as within it lies the secret to its continuing prosperity. The only way to block the incredible ease of pirating any content a media company can generate is to couple said experiences with extensions that live in the cloud and enhance that experience for consumers. Not just for some fancy DRM but for real value creation. They must begin to create a product that is not simply a static digital file that can be easily copied and distributed, but rather view media as a dynamic “application” with extensions via the web. This howl is the future evolution of the media industry.

It brings together some of the thinking I’ve been doing on how to challenge the loss of revenue from direct consumption or from advertising revenue when digital files of programming and music are so easily shared and copied. Techdirt.com like to summarize their approach as CwF + RtB = financial success: Connect with Fans and give them a Reason to Buy some scarce goods. Many musicians are already doing this and the results are summarized in the article The Future of Music Business Models (and those who are already there).

I agree that CwF + RtB is part of the future: we can’t charge for infinitely distributable digital goods but we can charge for scare goods (or services) promoted by the music.

But I’m not as sure that will work in the same way for the “television” business, which I define as being “television style programming professionally produced” even if it’s never broadcast on a network on cable. Certainly it will be possible to sell merchandising around programming, and everyone is encouraged to do that.

I’ve also written and presented – as long ago as my Nov 2006 keynote presentation for the Academy of Television Arts & Sciences – that producers and viewers have to be more connected, even to the extent of allowing fan contributions.

Well, last night I had something of an epiphany that bought together Edo Segal’s thoughts and my own as I contemplated the implications of the recently announced Apple iPad.

As a brief aside, I find the iPad to be pretty much exactly what I was expecting (although I thought maybe a webcam for video chat) and interesting. Although I don’t see where it would fit in an iPhone/Laptop world, I can see plenty of uses particularly for media consumption. (For example a family shares an iMac but each of the older children have their own iPad for general computing, only using the iMac for essays etc.)

But the iPad doesn’t really lend itself to static media consumption as it has been: where the producer sends stories fully finished and complete to viewers who passively consume. That’s when the import of Edo’s comment struck: there is more of a future in media consumption for those producers who create the whole environment.  This has definitely been done by many movies and shows but usually with more of a consumption-of-information about the show, rather than a rich interactive experience where fans of the show are as important as the producers.

The future of independent production and media consumption is an immersive environment (website, or better yet and iPad app) with:

• Content
• Community (forums, competitions)
• Access to the wider story, side stories or “back story” in various media formats
• Character blogs
• Cast and crew blogs
• Fan contributions and remixes.

Such an experience would be almost a cross between a typical television program and a video game environment. Sure programming is part of what can be consumed on the site; but there are competitions, games, back stories; additional visual material edited out of the program source, with additional shooting, using technologies like Assisted Editing.

Any unauthorized distribution of content will only be distribution the content, not the experience of the program in its full glory.

Now, there’s no particular reason why this couldn’t be largely done on a website, but it is as an immersive iPad app that I think it will really be fantastic. The iPad is very immersive and tactile. It presents no “border” (i.e. browser window and other computer screen elements) to distract from the programming. It begs to be interacted with because holding it in place to watch a 22 or 44 minute show doesn’t appear to be going to be all that great.

There’s one more selling point for the iPad: it allows in-app sales, so some of the “reasons to buy” can be sold very transparently without even leaving the app’s environment. Avatars, screen savers, certain games or activities might carry a small charge. Yes, even the media itself (or some of it) could carry a small transaction charge. Smooth, frictionless sales in an environment optimized to engage people in the story of the show.

Apple’s iTunesLP format is a very small start in this direction by building a micro-site for the album artwork. This is very powerful because it supports most modern web technologies in a tight package and interactive features (all, b.t.w., without Flash but looking a lot like Flash).

Edo has some further good ideas and I recommend reading the article at the top of this post.

Over recent months Larry and I have spoken regularly on a variety of topics, so I thought I’d post some of the interviews here.

RED Digital Cinema’s latest announcements and more on how we’re going to fund entertainment

http://www.digitalproductionbuzz.com/BuZZ_Audio/Hodgetts_BuZZ_091105.mp3

More of my thoughts on the Democratization of production

http://www.digitalproductionbuzz.com/BuZZ_Audio/Hodgetts_BuZZ_091126.mp3

My Look Back on 2009

http://www.digitalproductionbuzz.com/BuZZ_Audio/Hodgetts_091224.mp3

My thoughts on what to expect in 2010

http://www.digitalproductionbuzz.com/BuZZ_Audio/Hodgetts_091231.mp3

I’ve had an inordinate interest in how the news industry, particularly newspapers, are faring in the Internet age. It’s only relatively recently I realized why I thought that was even relevant to the fields I study – among them what is going to replace (or grow in parallel with) the current model of “Television”. Then it struck me…

Television is to newspapers and magazines what movies are to music.

In the music and movie models we’ve been used to, there is a direct transaction – payment is made to buy music (on disc or download) or to pay to view a movie (in a theater or by buying a DVD). This is a fundamentally different model than Television, where the content is “free” in return for your “attention” to advertising. Advertising supports both Television and newspapers and magazines.

Yes, people pay a small amount for newspapers and magazines, but that is nowhere near the cost of producing the magazine. Newspapers and magazines (I’ll just say “newspapers” from here but I include magazines) are heavily subsidized by advertising or they can’t survive. (Consider how many magazines have been closed in the last year all attributed to the “loss of advertising revenue”). Given that I don’t believe advertisers are coming back, what are the implications of the music experience for movie distribution, and the newspaper experience for television distribution. Without distribution there is no production.

The music industry has found that “infinite goods” – those that can be produced for close-to-zero (a digital copy) – has changed the market. Classic economics tells us that the sale price will trend toward  incremental cost of a sale. For music that’s zero or close to it because there is no scarcity. Scarcity, again classic economics tells us, is what drives up price: no scarcity and the price drops toward the marginal cost of producing the copy. (Yes, classic economics ignores the cost of production.)

The movie industry is finding some of the same dynamics happening, except that the movie industry has an advantage: the primary product is not the movie, but the “going to the movies” experience. Clearly the movie-going experience is more important than the movie otherwise attendance would have dropped dramatically as the quality of picture has dropped. Instead movie attendance is up despite audiences being treated like criminals with bag searches and, in some theaters, full body, airport-style scanners.

The smart people in the music industry have also realized that the business model they grew up with – where Record Companies actually had a role to play – is no longer viable. (When you have to sue your customers to “keep control” of your product, you have acknowledged a total failure of business model and you should be allowed – encouraged even – to go out of business.) So they’ve been deriving new business models that use the non-scarce good (the recorded music) to promote scarce goods – like concerts, experiences and merchandise.

Music, and movies, will continue to have “direct pay” models but they won’t be the same as in the past. (Nor should anyone who has two working neurons think the models can remain the same.)

It is newspapers and television that I’m worried about. The current models for both are unsustainable. Advertising revenue has dropped dramatically partly because of the current economic conditions, but long term because advertisers have better alternatives than renting some irrelevant eyeballs for 30 seconds at a time with a message that’s irrelevant to 99% of the audience who aren’t ready to buy your product right now.

Newspapers once provided a valuable service(s) that have been replaced by better models online. Craigslist has effectively killed the cash cow of classified advertisements because it’s a better model (free, instant). No-one really needs a newspaper to learn the session times for the local movies (available online) nor really, to decide what car they’ll buy next.

People, by and large, don’t need newspapers for news either. Not that most newspapers did that much “reporting” anyway. Surveys of typical local newspapers showed that they often have as few as five or six “real” stories (researched and written by staff reporters) not sourced from elsewhere. Most “news” comes from Associated Press, Reuters, people-in-foreign-countries, press releases, etc.

Worse, most newspapers (and television news) do not really vet their stories, taking away one of the major claims that we “need” professional journalists because, unlike bloggers, they “fact check”. (Really CBS? Who “fact checked” last night’s industry-lacky piece full of major errors on 60 Minutes?) It’s hard to make the case that the majority of professional journalists actually fact check anything. (Quick quiz – in any news story that you’ve been involved with and then seen the reporting, has it ever been completely accurate? Never in my experience, never.)

So, when the impetus for “demand” drops, and the money to produce evaporates because even the advertisers have a better way to do things, newspapers will, of necessity, die. That does not mean that great journalism will die, but it will be funded differently and have very different forms.

Television, including basic cable, is facing the same challenges: advertising revenue is drying up and unlikely to come back to previous levels, meaning the whole model is probably broken. Not this week, not next year, but long term Television as we know it is being destroyed by this lack of advertising revenue; the failure of the “players” to adapt business models, and that audiences for any given show are much smaller because there are so many choices.

What we’ve known as Television will have to evolved into a model that allows for “any program, any time, any device for a fair price” (i.e. a return that is similar to the return from advertising, not an attempt to get a 4x return as the Networks currently do with iTunes et. al).

I suspect that will, like with the Record companies and Movie Studios, leave the Networks out of the picture as middle-men imposed between producer and audience.

I don’t (yet) know what that model is going to be, or indeed if there will be only a single model, but the transformation of a nearly-70 year old business model based on scarcity (broadcast licenses) has to evolve when that scarcity no longer exists. And it no longer exists.

On last night’s Digital Production BuZZ, host Larry Jordan quizzed me on why I thought advertising was doomed and what would replace it.  I’m including the 6 minute interview here because it extends the thinking in my previous post on What will replace advertising? from a couple of days ago.

Philip Hodgetts on how branded media will replace advertising.

Update: Larry Jordan continues the conversation with his post: Where Are All the Ad Dollars Going.

Over the last two years I’ve been thinking extensively, and speaking on, about funding new media. (Want me to come speak on the subject at your group – email me!) It’s become increasingly obvious that advertising probably isn’t the way the majority of media will be funded in the future.

In the (relatively brief) period of mass media – Television, newspapers, magazine and radio – the publisher or license holder built an audience and then sold that audience to advertisers to push unrelated products and services to the audience who mostly didn’t care. With 70% of Americans desirous of paying to avoid advertising (counting me among them) you have to wonder how long the tedium of irrelevant advertising will be tolerated by audiences.

Even the web is a horrible experience unless you are smart enough to enable ad blocking and Click2Flash (Flash blocking in webkit displays system wide – OS X only afaik). With those two add-ons enabled the web doesn’t burn my eyes with the pain of flashing, jumping, irritating distractions. If my failure to ruin my experience of a site by blocking the ad sends the site off the net, so be it. I didn’t ask for the advertising.

Technically, of course, it’s not all advertising that’s horrible, just irrelevant advertising. Like watching a 45 minute show on Hulu and seeing the same fabric softener ad five times!!!! And Hulu has the temerity to complain that I’m using ad blocking! People don’t really mind relevant advertising, but so little of it is! In fact, for me about 99.9% of advertising is irrelevant. In maybe 200-300 hours of in-car listening to KNX1070 (LA News radio) I’ve heard one ad that was relevant (Windscreen chip repair). That is the only ad that doesn’t carpet KNX wall to wall! (Figures!)

So, I have a fairly hard-and-fast rule that I don’t buy from anyone who advertises to me. Send me junk mail, go out of my purchase consideration list.

Anyhow, I’m not alone. Not only is advertising losing its effectiveness, it turns people off (and yes, I have references for every assertion I make, I just don’t want to clutter the blog) and that’s just not going to be a way to build an audience.

But there’s a much bigger problem. There’s not enough advertising for any “new media” and “old media” is losing advertising support in dramatic amounts.

But most relevant of all. Advertising in someone else’s show makes no sense. The biggest advertising brands would be much better off with branded entertainment, where they would pay for the content and integrate the advertising. American Academic Mark Pesce, now at the Australian Film, TV and Radio School, coined the term “Hyperdistribution” where a single sponsor integrates ads relevant to the show’s audience and in the style of the show, and then it’s distributed anywhere and everywhere it can be. P2P and Bittorrent distribution is welcomed!

My friend Cirina Catania worked on a very successful series of branded media (online video) for Chivas Regal and I believe that this is the direction of the future: useful, interesting content that is, in some way, relevant to the brand and hooked back to the brand. Why torture audiences with irrelevant advertising when you can entertain them and still get the brand message across in a relevant way?

I’m clearly not the only one that thinks this. I recently found a great presentation called (correctly) The Audience is always right. Check it out and then make a comment.

I’ve been thinking a lot over the last couple of months about news. In fact somewhere within me is brewing a book on the way that the Internet and technology has changed news so when the Digital Production BuZZ asked me to comment on the subject this week, it forced me to put some of the thoughts into a coherent form. Hopefully last night’s interview (my segment starts 20 minutes in) was, but I’d like to share those thoughts with you here.

I think most people are aware that the newspaper industry, in particular, is in trouble. The Internet and modern technology have changed the way we get and consume news. It’s also changed the way the way the news itself is gathered.

There are several ways that the Internet  and technology have changed news and I’m sure my thoughts here are going to only skim the surface. First, a little history. Back in the days PI (Pre-Internet) – really just on 15 years ago – news was hard to come by. We didn’t get information internationally, or even nationally, without the newspaper and to a lesser degree radio and Television but mostly the newspaper. The entire contents of an hour-long evening news bulletin would not take up the space of the front page of most newspapers of record, so it was to newspapers we looked for local, national and international news.

I used to be a 3-paper-a-day man back in Australia. The local newspaper for local news; the State-Capital based newspaper of record and the National financial news for, well national financial news. (I was a Fellow of the Australian Institute of Company Directors in those days, and had a keen interest in such things.)

I haven’t read a newspaper on a regular basis in 10 or more years! These days I get my news via RSS into an aggregator. My general (local, national, and international) news comes from eight major sources: AP, LA Times, Wall Street Journal, Washington Post, NY Times, CNET, Sydney Morning Herald and Yahoo Technology News across two countries. But I’m only interested in a fraction of what they report.

But these are just eight of the nearly 300 RSS feeds that feed me the news I’m really interested in. No newspaper would ever be likely to give me that personalized look at the world as it evolves. Plus, I don’t have to wait 24 hours to get “aged news” (as Jason Jones put it on The Daily Show).

Now, back PI we needed the same AP article reproduced in the local paper in each market because that’s how we got the news. These days we only need the source – the original source which is rarely a newspaper or AP – and a link. It annoys me that the same story appears 20 times or more in one set of news feeds, duplicated from the same AP article and rarely with any editorial influence or rewriting.

In fact, I think you’ll find a good portion of most papers are simple rewrites of press releases or AP stories, with very little real reporting being done at all.

Blog aggregators like the Huffington Post and to an increasing degree, AOL who has more than doubled the number of reporters in the last year hiring those discarded by mainstream media, are creating their own reporting and commentary networks. News is coming directly from the source. We don’t need an AP or NYT outpost in Iran during an uprising. We get news from Iran, from The Tehran Bureau or Global Voices Online (a blog aggregator who knows which bloggers to trust).

As an indication of how much the news industry has changed, The Tehran Bureau, published by volunteers out a small suburban house in Massachusetts, has had very accurate and detailed information about what is going on in Iran while the mainstream media have been sidelined by the officials in the country and not able to report. Their information was being quoted and “reported” by mainstream media who can’t get coverage from their traditional channels.

None of this could happen without the Internet infrastructure and specific technologies that sit on top of it, and sometimes link into other technologies like the cellular phone network’s SMS system.

It was a blogger who bought down Dan Rather by revealing that the papers purporting to reveal irregularities with President George W. Bush’s service in the Air National Guard were fake. There are dozens of such incidents where bloggers,with time and the Internet at their disposal, have broken dozens of stories, with more accuracy and greater detail than the mainstream media. (Frankly the accuracy rate of mainstream media is pretty appalling.)

It was a cell phone recording that affected the balance of power in the Senate in the 2006 mid-term elections when a Democrat staffer recorded George Allen’s infamous “Maccaca” comment that, arguably, lost him his almost certain return to the Senate.

It was the cell phone video of “Neda” being shot in the civil disobendience after the Iranian election that helped inspire more people to come out in opposition to the Government of the country.

With millions and millions of cell phones in consumer’s hands it’s now more likely than not that a camera will be at the scene of a major incident. The first picture of Flight 1549 in the Hudson was from Janis Krums’ iPhone on the ferry that was first on the scene to pick up the passengers. Naturally he shared the photo via Twitter. (It was 34 minutes later that MSNBC interviewed him.)

Twitter was first to break the news, again. People have sent tweets from within the midst of the news, including instances where people have tweeted their involvement in a disaster like Mike Wilson, a passenger on board Continental’s Flight 1404, which skidded off the runway at Denver airport and burst into flames. Mike tweeted right after he escaped out of the plane’s emergency chutes and posted a picture of the foam-covered aircraft long before any traditional media was even aware of the accident.

When a Turkish Airlines Boeing landed short and broke apart at Amsterdam’s Schipol, the first word to the public was a Tweet, sent out by a fellow who lives near the airport. (FlightGlobal.com)

Twitter has become a major news source, such that there are now sites, like BreakingTweets.com, dedicated to breaking news on Twitter as a news site in addition to Twitter’s own Breaking News page. If you want the up-to-the minute news, you follow Twitter it seems.

Even if newspapers and the Associated Press ultimately fail, as they are most likely to, I still see a bright future for journalism, just not in the traditional places.

There is one more aspect to “news and the Internet” and that’s the social one. Many of the source I subscribe to in my RSS reader are bloggers who write in the space. I may miss an article or resource but Scott Simmons (on his own site or at ProVideoCoalition.com), Oliver Peters, Larry Jordan, Shane Ross, Lawrence (Larry) Jordan, John Chapell, or Norm Hollyn are there to find the things I miss and bring them to my attention. (Of course, usually with some insightful writing in between.)

I don’t have to read everything or be everywhere because the social networks I participate in create a new network far more valuable to me than the best efforts of the Associated Press!

The catalyst for this post was Henry Blodget’s provocative post Sorry, There’s No Way To Save The TV Business. There’s a lot in the article I agree with, but also a lot of good counterpoints in the comments. Clearly it’s not yet universally agreed upon!

That article alone would probably be worth commenting on, but add it to a whole bunch of other articles I’ve been holding for comment:

TV: The Next to Fall by Jeff Jarvis at Seeking Alpha (i.e. strong/good) Media

We’ve been wringing hands over newspapers and magazines, but TV and radio aren’t far behind. Broadcast is next.

It’s a failure of distribution as a business model. Distribution is a scarcity business: ‘I control the tower/press/wire and you don’t and that’s what makes my business.’ Not long ago, they said that owning these channels was tantamount to owning a mint. No more. The same was said of content. But it’s relationships (read: links) that create value today.

Why Television Needs a Reality Check on Sustainable Business Models by Diane Mermigas

Time for a reality check. You know your business model is in trouble when …

Revenues and free cash flow recede and profits evaporate

The TV Industry Is Terminally Ill by Bruce Everis, also at Seeking Alpha

The demise of TV is because it is old technology. Quite frankly I find it pretty boring these days. They just cannot compete with computing, the internet and gaming. And they cannot compete because they are not interactive (except in a farcically limited way), they do not connect the user with other users and their content is purely linear. Their main market now is the educationally subnormal, geriatrics and babies, because these are the only people left who aren’t online.

Broadcast TV Faces Struggle to Stay Viable in the New York Times by Tim Arango

For decades, the big three, now big four, networks all had the same game plan: spend many millions to develop and produce scripted shows aimed at a mass audience and national advertisers, with a shelf life of years or decades as reruns in syndication.

But that model, based on attracting enough ad dollars to cover the costs of shows like “Lost” and “ER,” no longer appears viable. Network dramas now cost about $3 million an hour.

The future for the networks, it seems, is more low-cost reality shows, more news and talk, and a greater effort to find new revenue streams, whether they be from receiving subscriber fees as cable channels do, or becoming cable networks themselves, an idea that has gained currency.

For Television, It’s a Whole New World again by Diane Mermigas

Anyone expecting television advertising–including network upfront spending that could decline more than 15%–to rebound to former levels is in serious denial of the deep-set economic changes underway.

Systemic shifts in how companies and consumers make and spend money could throw media and other commercial players into a death spiral if they are unwilling to alter behavior and expectations. Advertising is not going away, but its fundamental economics are changing. That makes widespread media market deflation and deterioration (the worst being local media) much more than a cyclical glitch, according to a new Goldman Sachs report.

There are others but it’s too depressing for a Monday evening!  For an industry that’s still making money and still incredibly popular – latest figures show the average American viewing about 310 minutes a day (just over 5 hours) – that’s an awful lot of doom and gloom.

And probably unjustified. New technologies have never wiped out any preceding industry. Film did not destroy stage. Radio did not kill film. Television killed neither radio nor film. It’s unlikely that Internet Video or Internet TV (call it what you will, I still like New Media with the caveat that it’s unmediated) will replace Television.

What has happened is that the role of different media has changed. Radio has few panel or game shows and very few drama programs anymore. These have migrated to Television. A lot of film production is dedicated to Television distribution so, instead of replacing the Film Industry, Television helped it grow.

So, it’s likely that Broadcast Television will remain – the big four networks will have a role. But I think we’ll see it change to feed the few mass markets remaining: sports (definitely); news (although most TV news is pre-recorded and edited before the broadcast); reality television, talk and game shows (because they’re relatively cheap to produce).

Pretty much everything else will migrate to on-demand consumption. There’s little loyalty to a channel, but there is loyalty to the programs. What a lot of TV executives haven’t yet realized is that people don’t care about their network or channel, just the individual programs that they carry. Increasingly – since the Betamax in 1976 – that has been consumed on the viewer’s schedule. The only thing I’ve watched real time in the last three years has been the Superbowl, because I’m at a Superbowl party! (And to be truthful, I’m there for the party and people first, the ads in the broadcast second with little interest in the actual game.)

As the audience for drama and comedy splinter, the advertising supported model is almost certainly unsustainable. Advertising online isn’t going to match broadcast revenues per viewer leaving only subscription or direct pay to support quality programming.

Not that any of this is going to happen overnight. Still, I have to agree with the doomsayers: the traditional advertising supported broadcast model (aped by most cable channels) is unsustainable long term for most programming.

In case you haven’t heard, The RIAA/MPAA and their international equivalents, are working desperately to make ISPs kick people off the Internet if they are accused of file sharing more than three times. (Three strikes and you’re out.)

There are so many things wrong with this idea it’s hard to know where to begin. Firstly, there’s no current legislative support for file sharing P2P being illegal and the RIAA, despite suing thousands of  people, hasn’t obtained a conviction. (It obtained one conviction but the judge himself overturned it when he discovered that “making available” was not a crime, contrary to his comments to the jury during the trial.)

Then there’s the methodology. These organizations are seeking to implement three strikes merely based on their accusation. No legal due process, no right of appeal. We already know that these same clueless organizations have been very, very wrong in the past, attempting to sue people who had no computer (but may have paid for an account) or other blunder. No other place in law, particularly in a “innocent until proven guilty” legal system, allows – effectively – conviction upon accusation. There is no right of appeal.

Finally, there are already copyright laws in place that provide the protection that the copyright owners feel they need. They have it. It just has this teeny tiny shortcoming that the copyright owner has to prove   that the accused actually committed the “crime”. They’d have to actually prove the case to a suitable legal standard.

Fortunately, although France’s ruling body enacted three strike legislation. That legislation was rendered Unconstitutional by the French Constitutional Council (their highest court). This is in line with the European Parliament who also ruled against three strikes laws as has the UK.

The real problem isn’t file sharing because it turns out file sharers are also those industries’ best customers and the piracy can actually help sales, but rather there’s an industry that’s changing in a way that means there is less and less need for the role that the RIAA or MPAA’s members once played.

Instead of doing the hard work of trying to find a new business model they expect governments, ISPs and just about everyone else to help maintain the one that is heading for obsoleteness. Of course it doesn’t help when the make up totally bogus numbers to support their contention as to how much is being lost to “piracy”. (I’d call it free promotion.) 

Even actually studies manage to be spin-doctored beyond control, even exaggerating the number 10x, and yet no reporter or journalist checked them for accuracy, leaving the thorough debunking of the numbers to non-professional journalists. (This is why I don’t care about the news industry as it is; they’re notoriously inaccurate.)

The solution isn’t to try and prevent piracy, because it’s not possible. It’s time to realize that you can sell abundant goods at premium prices. What you have to do is to find where there’s scarcity that can attract premium prices. The role of abundance and scarcity is the subject of another post.

Somewhere in my feeds today I found a link to a blog I’d never heard of: A Working Library. An article called On Advertising caught my attention, probably because it expressed my thinking better than I’ve been able to articulate: 

“There is no end to this, in that short of eviscerating the content all together (and removing any impetus the reader might have to visit in the first place), our attention to the advertisements is always waning. Sadly, our attention elsewhere also suffers and declines; instead of staying still to read, we skitter from place to place, like frightened prey assured the predators are near.

So, let’s stop pretending, shall we? Any economy which charges ever less for ever more intrusive ads will eventually be successful not in creating wealth but in driving the readers away, until the only ones left to heed the ads are all the other ads, the cell phones searching in vain for a target market among the cellulite.”

Are we really sure this is the way to fund new media? The only way according to ‘common wisdom’. If it is, combined with the precipitous drop in advertising expenditure in recent months and a dismal outlook in the future, then new media is doomed. 

Fortunately I don’t think traditional advertising has much role in new media or new television. Integrated, relevant product endorsement or placement; pay for download or view or subscriptions are much more likely in a world where producers and audiences are disintermediated.

It’s very important to keep in mind that the single most successful model for online distribution has been Apple’s pay-for-download iTunes Store (and lately rentals) by a several billion dollar margin over advertising support for new media projects. As I’ve said before, the advertising supported viewing of Dr Horrible’s Singalong Blog returned negligible income but served to promote the iTunes download or DVD.

Perhaps I have a higher-than-usual aversion to advertising, but I do think we need new models. I have no confidence that the mass-market advertising model we inherited from the “Mad Men” of Madison Avenue has any relevance in a fragmented audience. 

Research shows that “relevant” advertising is more acceptable than any other form (to which I have to say “well d’oh”) and truthfully I appreciate seeing information-rich advertising when I’m looking for a product. Other than Googles Adwords text ads, I don’t see any attempt to target advertising. Even so I rarely follow those links because the informational links are where I go.

That’s why integrating products or services into the programming, or building branded webisodes around the main project seems to me to be far more viable than running a traditional 10, 15 or 30 second ad before or after the main content. The consumption model is different so there’s no reason to believe that old models will carry forward.

But personally, I’d still rather pay a producer a fair price for the content and skip the advertising completely.

Of course, if I ask the question like that “How much will you pay to watch ads?” most people would immediately respond with “nothing” or something close to it. However most people already pay to watch ads on cable television. You pay the cable company a fee but the majority of channels you can get without paying another, additional fee, all have advertising.

In some of my presentations on the subject of the future of Television, I like to point out that the advent of cable is when Americans started paying twice for Television: once with your attention to the advertising (which was supposed to be enough) and again with cash to your cable company for the privilege of a clean signal and no outdoor antenna.

At least with the cable company you know what you’re going to be charged ahead of the game and you’re not charged specifically for each commercial you watch. You will if those same companies move to capped or tiered bandwidth on your Internet connection. With caps along the lines so far proposed by Time Warner (50 GB a month) a couple of movies downloaded every week (or the equivalent TV watched on Hulu, or YouTube et al.) will soon put you up to that limit. Then, every single advertisement you’re forced to watch will be adding to your bandwidth bill directly.

Capped bandwidth is not necessary and will cause a crippling effect on the growth of video on the Internet (of all kinds). It’s not for nothing that Australia – with very low bandwidth caps – is a broadband backwater in international terms, even compared with the USA. To meet the demand, the cable companies need to invest in their infrastructure just like any other business. If they don’t, let’s find an alternative because the only thing stopping a truly competitive business is the lack of competition.

In most places there is, at best, a duopoly of Internet suppliers: a cable company and (if you’re close enough) a telecommunication (a.k.a. phone) company. Duopolies get comfortable and start to think they’re running the business for themselves and “customers” are a rather unavoidable nuisance. Throw WiMax, 4G cellular or other technologies into the mix and we’ll have real competition. With real competition, all need for a discussion about “Network Neutrality” will evaporate: none of the competitive organizations can afford to be the only one throttling their network.

Without real competition, start to think about paying for watching ads – not only at SuperBowl time but all year round. Ads you don’t care about for products you’ll never be interested in buying, but that you’ll pay for anyway.