Free is Part of the Solution, not the Problem
The keynote speaker for Day 2 of Ad:Tech, NBC's Chief Digital Officer, George Kliavkoff, understands the dilemma posed by the digital space very clearly. It was very refreshing to hear from an executive -- a lawyer, no less -- who refuses to blame (and sue!) users for pursuing something they are passionate about -- a passion that actually benefits the company anyway. Under Kliavkoff's leadership, NBC created a solution that is both profitable to the company and free to the users.
Instead of whining about how much money it costs to create a show and moaning about how the users are stealing content (like a lot of content creators are still doing), NBC simply created a new and innovative way to consume the content, and they made it easy.
As a result, people would have little incentive to go through the effort to illegally copy and distribute a show, since it was already freely available to them.
"The threat of a lawsuit isn't going to get people to do the right thing ... I truly believe that if you provide an incredible customer experience and you do it in a way that you've given as much flexibility for the user to interact with your content ... they'll do the right thing." - George Klaivkoff
What's more, Klaivkoff reports that NBC's net operating profits for their digital solutions has never been higher. They're up 50% from a year ago. And far from cannibalizing their TV viewership, NBC has learned that when more people watch a show online, more people watch it the next week on TV, too.
We can speculate about the reasons, but I think that placing the shows online fills the primary purpose of allowing people to keep up with their favorite shows, if for some reason they missed it or forgot to record it.
I'd love to see the statistics about when people are watching the shows and what the correlation is between online viewing and DVR ownership. Perhaps from that we can anticipate how many ads are they seeing, anyway (and if they're seeing them at work, at home, or on the road).
And I'm sorry I cannot forbear... I admit that I feel a bit vindicated from all of this, because I laid out the principles for Hulu.com over a year ago when Viacom sued YouTube for hosting copyrighted content. I said, "Make it easier to comply than it is to crack the code," and though Hulu.com doesn't take it as far as I suggested, that is essentially what NBC did.
Unfortunately, there are still pockets of resistance. Based on other panels I attended, it appears to me that publishers such as the Wall Street Journal and Access Hollywood know that what they're doing right now with respect to online video is wrong.
"I hate preroll ads," said one panelist (and I'm paraphrasing), "Especially when it's 30 seconds long and comes right before a 45-second piece of video."
They allow them on the site, he said, because that's what advertisers will buy. The other panelists agreed.
And from the publishers' perspective, that's a perfectly reasonable action to take. If they cannot raise revenue, they cannot exist, so they do what they must to stay afloat, even if their particular flavor of existence happens to annoy their users.
The problem is that it may work in the short run to raise revenue, but as companies like NBC create excellent consumer experiences, these competitors will likely bleed audience members and, as a result, drive down revenues, because the same or alternative content can be consumed more readily elsewhere.
Advertisers and agencies need to understand a fundamental truth: When people search for either entertainment or information, they have no interest in being interrupted, and online especially they resent the interruption.
That is no way to build brand affinity.
However, since websites aren't free and publishers need to raise revenue somehow, traditional thinking leads us to believe that we must charge for access to the content, but history has shown us that this just leads to piracy and further resentment.
Instead, consider following NBC's example by actively allowing the users to control how, when, and why they consume the content. Be more innovative in your revenue model. If you must deliver ads, do it so unintrusively in a way that does not give users incentives to seek other means of consuming it. You, and the users, are likely better off when they have a reliable means of getting it from you. - Cam Beck
Photo by James Cridland