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RUPERT MURDOCHrecently appointed his son James chief executive of 21st Century Fox, prompting the obvious question: How can a guy whose main credential is a silver spoon compete with Silicon Valley’s meritocratic coders and entrepreneurs?
I suggested that disconnect in a testy interview with James several years ago, when he was running his father’s satellite broadcasting company, BSkyB. “You must be incredibly stupid,” he said with trademark Murdoch dismissiveness. “Look around you, man. It’s television!”
Supremely confident that the Murdochs were old-media toast, I looked around, and it was in fact perplexing that BSkyB had, despite the Internet, become a colossus — one of the biggest businesses in Europe.
Another most counterintuitive fact: No matter the skyrocket valuations of digital companies, and the hype and press — much of it coming from digital media itself — people still spent more time watching television than they did on the Internet, and more time on the Internet was spent watching television. Indeed, the period since my conversation with Mr. Murdoch — a period in which almost everyone in media has uttered the words “digital is the future” — has been one of the biggest growth periods in the history of television.
Online-media revolutionaries once figured they could eat TV’s lunch by stealing TV’s business model — more free content, more advertising. Online media is now drowning in free. Google and Facebook, the universal aggregators, control the traffic stream and effectively set advertising rates. Their phenomenal traffic growth has glutted the ad market, forcing down rates. Digital publishers, from The Guardian to BuzzFeed, can stay ahead only by chasing more traffic — not loyal readers, but millions of passing eyeballs, so fleeting that advertisers naturally pay less and less for them.
Meanwhile, the television industry has been steadily weaning itself off advertising — like an addict in recovery, starting a new life built on fees from cable providers and all those monthly credit-card debits from consumers. Today, half of broadcast and cable’s income is non-advertising based. And since adult household members pay the cable bills, TV content has to be grown-up content: “The Sopranos,” “Mad Men,” “Breaking Bad,” “The Wire,” “The Good Wife.”
Looking for irony? Television, once maniacally driven by Nielsen ratings, has gone upscale as online media becomes an absurd traffic game. TV figured out how to monetize stature and influence. Nobody knows how many people saw “House of Cards,” and nobody cares. Mass-market TV upgraded to class, while digital media — listicles, saccharine viral videos — chased lowbrow mass.
So how did this tired, postwar technology seize back the crown? With old-fashioned businessmen in charge. When YouTube threatened to become a TV piracy site, television, led by Viacom’s 84-year-old Sumner Redstone, dragged Google, YouTube’s owner, into a painful spiral of litigation. A throwback like Mr. Redstone turned YouTube from pirater to licenser. He made Google hiscustomer.
Television, not digital media, is mastering the model of the future: Make ’em pay. And the corollary: Make a product that they’ll pay for. BuzzFeed has only its traffic to sell — and can only sell it once. Television shows can be sold again and again, with streaming now a third leg to broadcast and cable, offering a vast new market for licensing and syndication. Television is colonizing the Internet.
Streaming video is now not only the hottest media draw — 78 percent of United States Internet bandwidth — but, defying the trend, many of its creators are getting paid. Netflix bills itself as a disrupter of television — except that it is television, paying Hollywood and the TV industry almost $2 billion a year in licensing and programming fees.
The latest pseudo-crisis is the flight from the box — cord-cutting — but more people than ever are consuming television, and paying for it as they please on whatever screen. Well-produced, highly structured narrative video entertainment is so profitable that everybody in digital media — frustrated by tumbling ad rates and rising traffic demands — wants to be streaming premium video (i.e., television). Yahoo just cut its first big sports deal. Mark Zuckerberg of Facebook says that his company’s future is video. Just last week, BuzzFeed and the Huffington Post announced their new TV plans.
The fundamental recipe for media success, in other words, is the same as it used to be: a premium product that people pay attention to and pay money for. Credit cards, not eyeballs.
In 2014, Rupert Murdoch, at his son James’s urging, made a bid to buy Time Warner, quite clearly the opening shot in a battle that now involves all the major content owners, the cable Goliaths and the digital platforms — a struggle for primacy in the video industry. It’s not the digital revolution. James Murdoch is right. Look around you man, it’s the television revolution!
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