Breaking Point. Broadcasters can show content on their websites, but this is only the starting point.

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1 TV: End of the industry? Or just the end of a business model? E: enquiries@yomego.com T: Mitchell Street Glasgow G1 3LX 33 Cavendish Square London W1G OTT T: White Paper

2 The impending death of television has received its fair share of column inches in recent years. Competition from online channels and falling ad revenues caused by recession are the oft-mentioned symptoms. But the underlying causes increased competition and lifestyle change do not make the diagnosis inevitably terminal. The business model might be on its last legs, but there s life in the old dog yet. Breaking Point TV advertising has lost its premium appeal. Only very few flagship shows or live events now attract premium status, so the options are startlingly bleak (or simple, if you re an accountant):- i) Reduce Costs Fine, in principle. But TV is not a normal industry. There s only so much you can trim before the whole shebang collapses in on itself. Going down this route becomes a game of diminishing returns and threatens any company with a slow decline into oblivion. In terms of traditional ad revenues, the current outlook isn t rosy. Standard and Poor recently estimated ITV s 2009 spot ad revenue to shrink by nearly 15% v. 08 and while ITV.com is reportedly doing ok, it is not even close to the amount the TV channel is losing. ii) Find new revenue streams Content has an intrinsic value. Viewers will subscribe to watch it (if it s good enough), advertisers will pay to be labeled alongside it (for the right price), but the online model is still evolving. The same losses are also reflecting across the Atlantic with all of the big American networks under pressure to change, or be damned. These sharp revenue declines are in stark contrast with viewing figures. Recent reports from Nielsen have shown that TV viewing is actually increasing in the US, UK, Australia, New Zealand and most of mainland Europe. Broadcasters can show content on their websites, but this is only the starting point. So people are watching more TV but big broadcasters are still hemorrhaging cash. 02

3 Bebo now has a track record for commissioning its own content (KateModern and Sofia's Diary), funded by tactical sponsorships and product placement. But Facebook has 300m users. Audience figures are potentially not the problem. It s all in the packaging. Subscriptions models using facebook apps are a potential money-spinner for content owners. Users don t want to pay multiple subscriptions to access content (hello, Hulu!) so multi-layered content for niche audiences just needs to find suitable homes. And social media channels have a rather large Welcome mat. Spreading TV content through social media channels can also have a positive effect offline too. CBS has attributed a 200,000 increase in viewers in one month to the strategic placement of sample content on You- Tube. Brace Yourself! So there s light at the end of the tunnel for TV producers and broadcasters. However, those who think goose is about to lay another golden egg, should look away now:- By 2010 Generation Y will outnumber Baby Boomers 96% of generation Y in the first world have joined a social network Years it took to reach 50 million users: Radio (38 years), TV (13 years), Internet (4 years), ipod (3 years). Facebook has added 100 million users in less than 9 months The second largest search engine in the world, based on number of searches conducted, is YouTube Only 14% of people trust advertisements Only 18% of TV campaigns generate a positive ROI for advertisers YouTube probably presents the biggest threat, as well as the biggest opportunity for content owners. 03

4 Currently an average of 20 hours of video is uploaded every minute. A lot of this content may be there illegally, or may not be very good quality, but audiences still flock in their droves. Google, YouTube s owner, has very deep pockets, so while it continues to build its audience, the commercial pressure is off (for now). Legal wrangles over copyright issues are unlikely to derail the YouTube juggernaut. A recent ruling in Universal Music Group's copyright infringement lawsuit against Veoh Networks shows that social video sites may actually not be breaking any laws at all, at least not in the USA. Under the DMCA a piece of legislation passed several years ago there is a clause called the safe harbour. This allows protection from copyright lawsuits for any online service that is making content available, providing they allow content owners the ability to find and request any contain which infringes copyright to be removed. Dance with the devil? This would seem to leave content owners with three choices: Ignore social video and hope it goes away. (Er, unlikely!) Sue anyone uploading content outside of copyright. (YouTube alone has over 600m registered users from over 120 countries so good look with that one!) Embrace social media rather than fight it. Television has always been about getting content to people and generating revenue from this process. For fifty plus years the industry has been every good at this but technology has come along and pulled the rug form under the feet of the industry. The industry must now respond by altering its business models to incorporate these new platforms before these new platforms replace TV altogether. 04

5 Yomego the social media agency. With offices in London and Glasgow, Yomego is behind the social media strategies of many household name brands. See Yomego.com for more details. For a FREE Social Media Reputation audit of your brand, please contact- Joe@yomego.com or Laurence@yomego.com Author Joe Hughes used to be Online Channel Controller at STV. 05

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