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Copyright © 2015 by Michael Wolff
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ISBN 978-0-698-40552-3
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CONTENTS
Title Page
Copyright
Prologue
Part 1: THE REVOLUTION IS FORETOLD
1: BLINDED BY THE NEW
2: THE LOGICAL OUTCOME
3: WHY DIGITAL IS SO SURE ABOUT THE FUTURE . . . THE MILLENNIALS!
Part 2: INVENTING NEW MEDIA
4: HOW NEWS CAME TO WAG THE DOG
5: TO BE, OR NOT TO BE, COOL
Part 3: THE NEW AUDIENCE—AND WHAT IT’S WORTH
6: TRAFFIC PATTERNS
7: THE SELF-PROMOTERS
8: TECH MEN AS AD MEN
9: EXPLAINING PROGRAMMATIC ADVERTISING
10: THE ADVERTISING CURVE
Part 4: COUNTERREVOLUTION
11: THE NETFLIX UNREVOLUTION
12: SCREEN TIME
13: MORE BOXES
14: CONSOLIDATING CONSOLIVISION
15: TELEVISION WANTS TO BE PAID FOR
16: FINDING THE NEW ECONOMICS
17: NO NEUTRALS IN NET NEUTRALITY
18: WHEN YOUTUBE CHALLENGED TV—AND LOST
19: YOUTUBE BECOMES NOT YOUTUBE
20: FACEBOOK TELEVISION
Part 5: THE NEW TELEVISION—OR THE NEW OLD TELEVISION
21: PREMIUM PLUS PLUS PLUS
22: REPACKING THE UNBUNDLE
Part 6: CONTENT IS KING—WELL, IT IS ON TELEVISION
23: SINE QUA NON
24: TELEVISION AND THE WAY WE LIVE NOW
25: THE DIGITAL POSTSCRIPT
ACKNOWLEDGMENTS
INDEX
PROLOGUE
THE STORY. THE MUSIC. THE LAUGHS.
On November 14, 2007, Kevin Morris, a forty-four-year-old entertainment lawyer, given to penumbral debates about modern culture and the state of media, and with a roster of major Hollywood clients, convened a daylong meeting in his law firm’s Los Angeles offices in the Creative Artists Agency building on the Avenue of the Stars.
A year after Google bought YouTube, Morris was wrestling with the increasingly fraught relationship between the traditional media business, which almost all of his clients were part of, and the new, aggressive posture of digital media, located 350 miles north, and a world away, in Silicon Valley. Morris, aware as everybody was of what had happened to the music industry, saw this as something of an emergency moment.
At the same time, Morris felt that logically both sides had a set of common interests, and in the end certainly needed a working understanding.
His collegial idea was to assemble interested players on both sides to discuss this shared ground, because, as he said optimistically in his invitation: “It’s about the story. It’s about the music. It’s about the laughs.”
On the old media side, you had Brad Grey, the chairman of Paramount Pictures and producer of The Sopranos; Doug Herzog, who had variously run Comedy Central, MTV, and Fox Television; Kevin Reilly, a senior executive at NBC and Fox; Anthony Zuiker, the creator of CSI; Matt Stone, the cocreator and coproducer of South Park; LL Cool J, the actor and rapper; Michael Mann, the film director; Donny Deutsch, the advertising executive and CNBC personality; and Scarlett Johansson, John Cusack, and Matthew McConaughey, the actors.
No matter how successful—perhaps as a particular result of their success—each reflected the anxieties of an industry that was ever more frequently being told it was threatened on all fronts and, culturally speaking, totally yesterday.
On the digital side, you had a less august but significantly more cocky group: Jordon Hoffner of YouTube; Kurt Abrahamsen and Adam Stewart from Google in Los Angeles (the home office had passed on the invitation); Mark Kvamme of the venture capital firm Sequoia Capital, which had backed the Web series Funny or Die; and Marc Andreessen, the creator of Netscape, on his way to being among the most significant and influential venture capital figures in Silicon Valley
The imbalance was notable and uncomfortable for everyone—or at least for everyone on the old media side. There was, even, a kind of slack-jawed response—perhaps not least of all because Hollywood power is not used to being challenged—to the certainty, impatience, and what rather seemed like the advanced intelligence of the tech side. Very quickly it all seemed something like a math class mixing slow students with advanced ones.
Morris began the day gamely recalling his college economics and Joseph Schumpeter and creative destruction and the need to come to terms with how great transformations happen—how to manage destruction. He drew a triangle on a whiteboard, with one point for tech, one point for talent, one point for media companies. We are all in this together, he said confidently.
When that did not get an obvious assent, he changed it into a kind of exhortation: “Are we all in this together?”
“Well, that depends,” responded Andreessen finally.
The technology view was in fact quite the opposite of dependence or cooperation or much meeting of the minds. It was rather that the new digital media world had unlocked media secrets: user-generated content, and new types of functionality, and a view of media that embraced remarkable new efficiency and could now only look at the traditional media discipline as hopelessly inefficient.
Kvamme, sure that Funny or Die would trump in its over-the-top distribution and bare-bones economics the $2-million-an-episode South Park with its cumbersome and costly Viacom–Comedy Central relationship (the South Park creators had just negotiated a 50/50 deal to split digital profits with Viacom, which had committed to handling advertising), got up and went to the whiteboard and brusquely erased “media companies” on the triangle, replacing it with just “consumer”—emphasizing this new, disintermediated world.
The Google guys were even more direct, pointing out, with some impatience, that there was quite some lack of understanding in the room about the nature of the revolution that was under way.
It was Andreessen, whose word alone would come nearly to have the power to create tech success, who was perhaps most daunting and in the end most frightening—signaling how far apart the two sides were, and how precarious the television business suddenly seemed. Andreessen’s lack of regard seemed all the more confounding because he kept expressing his own personal enthusiasm for television, telling everyone what was on his list to watch in the coming weeks. And yet that sentiment was divorced from the future as he saw it and as he described the complicated new terms and relationships in a world of digital media.
Finally, to what had become from Morris a kind of plea—“Are we in this together?”—Andreessen replied, “Excuse me. We are against each other. This is a zero-sum game.”
“We all wanted to run away,” recalled Matt Stone in 2014.
A funny thing happened over the intervening years, though. A strange schism developed. While everywhere there was the belief, near absolute, that the future of media lay with some ever-t
ransforming technology, twenty years into this revolution, the value of traditional media, even with big losses in print and music, dramatically grew, with an Ernst & Young study in 2014 finding traditional media and entertainment companies increasing “their lead as one of the most profitable industries,” with television margins as high as almost 50 percent.
And yet, at the same time, there was the unquestioned certainty that technology had fundamentally altered media behavior and scale—Mark Zuckerberg would say in late 2014 that you can’t really build a business with fewer than a billion users—and hence the nature of media leadership and economics.
In fact, Matt Stone’s South Park, continuing its remarkable seventeen-year run on Comedy Central, recently made a $30 million yearly digital deal with Hulu, while Funny or Die languished.
Despite all this, the belief continues, cultlike, that digital media will soon and decisively prevail.
1
BLINDED BY THE NEW
It’s not hard to make a case for the new—and for overthrowing the old. There is, for instance, quite obviously, irresistibly really, that totem of the old media establishment, the fair-haired boy of traditionalism, CBS chairman and CEO Les Moonves, with his singular passion and talent for old-fashioned American television, no matter that it seemed otherwise consigned to the dust heap.
Moonves, preserved in amber, seemed all the more galling for not understanding, or certainly not seeming to care about, his throwback status. Moonves and people like him, self-satisfied, overpaid ($67 million in 2013 for Moonves), top-down managers, whose very existence seemed to define why things stayed the same, provided both a rationale of why things needed to change, and an aesthetic counterpoint, in his meticulous suits, to what a thinking, feeling, progressive media person wanted to be (T-shirt and open-plan office). Moonves was Hollywood and show business, as hoary as the Borscht Belt.
Brian Roberts, the Comcast scion, was even more sinister and harder to understand—hard at least to understand why he would get any satisfaction from what he did, or how he could justify his retro place in a changing world. He ran a cable company—that is, bad technology about to be overwhelmed by new technology, dependent not on innovation but on backroom deals, not on giving a customer as good an experience as possible, but on giving them as mean and stingy an experience as they would tolerate.
These emperors with no clothes, their riches as ironical as they might be yet plentiful, ran an industry that, if not yet dying, deserved to die.
And the amount of money pouring into the new, no matter that it was purely speculative money, seemed to provide a blindingly clear argument for which side to root for.
Without proof that a new entertainment or news business, publishing or broadcast, would or could emerge, something close to revolutionary conviction swept through the media industry: the new was certain and inevitable.
In many ways, this story of transformation and redemption was enabled by the new medium itself—the ability to advocate for the primacy of a new media was as potent a function of the new media as the ability, at an ebullient, if illusory, moment in 2011, to argue for a new Egypt. The new media reflected the passions and righteousness of the users of new media. In this, an entire subset of journalists, as specialized as political journalists but with an even more pronounced and accepted bias, came into being: technology journalists whose very jobs and identity were hitched to proselytizing for technology.
Jeff Jarvis, a Time Inc. editorial bureaucrat who had helped found the magazine Entertainment Weekly, but had been jettisoned from the company not least of all for his intractable views (not just about new media, but about everything), emerged as a new media disciple—fierce, knowing, righteous, implacable, indefatigable, and convincing (anyway, he wouldn’t stop until you gave up arguing). Kara Swisher, a former Washington Post journalist living in San Francisco—enmeshed in the technology business culture, including having a partner who worked as a senior Google executive—became a tech propagandist and personal power center through a column in The Wall Street Journal and then with a Journal-sponsored conference.
The hierarchical media business was, arguably, disrupted not so much by new technologies as by those lower down on the media ladder suddenly being able to push up by seeming to be more farsighted, more quick-witted, more knowing, more adventurous. The economic power might still reside with the old, but who would not choose foresight over temporary riches?
Ken Lerer, for example, Michael Milken’s PR man in the 1980s, and one of the most astute media players (and, subsequently, tech players), went to AOL as its PR chief, helping to create an extraordinary public profile for the company, one that formally turned tech into media. That in turn led to Time Warner’s disastrous merger with AOL, among other results, cementing the impression that technology-led media companies were a thing apart from old-fashioned entertainment and journalism media companies. After that, the prescient Lerer went on to team with Arianna Huffington, a media figure of indefatigable energy and canny opportunism, and together they built The Huffington Post, which, in almost no time at all, grew into one of the country’s major news outlets—with an audience bigger than that of The New York Times and CNN. Lerer, following the sale of The Huffington Post to, in an ever more incestuous world, AOL, went on to start BuzzFeed, the next benchmark of media traffic growth, which, as an indication of old media discomfort with itself, becomes one of the main points of reference for Jeff Zucker—quite as much a television and old media character as Moonves—when he takes over CNN, announcing to the CNN staff that BuzzFeed is where his son gets all his news. (The teenage children of media executives became the era’s go-to consultants.)
In many ways, the case for a new medium, run by new people, with new techniques and new motivations and, implicitly, a new message, became one of the major journalistic stories of the time—albeit one of insiders talking to insiders.
There was simply no argument: a vast and successful industry, based on deeply ingrained consumer behavior, long business relationships, and an entrenched power structure, was, inevitably and quickly, going to be transformed. And its leadership would be assumed by an entirely new group of people whose important credentials included little or no experience with media as it had been. This was industrial transformation on the level of buggy giving way to automobile. That kind of sweeping language and apocalyptic view helped create a consensus opinion not only among the new group, but, in short order, among much of the old group as well.
Everybody except the hoariest of the old—like Moonves—believed.
There was, notably, The New York Times. It began to propound a clear thesis and strategy: it would gradually relinquish its attachment to print and become a digital version of itself. That is, one of the nation’s most influential media outlets, perhaps having its greatest influence among media people, had wholly bought the argument about the certainty and necessity of industrial transformation in its business and was remaking its own future around it. This, despite the fact that almost 80 percent of the company’s revenue, even in 2014, continued to derive from the print version. It had given up most efforts to protect its shrinking but profitable business, in favor of a new business a fraction of the size, on the hope and dream that—even absent any such successful demonstrations of this strategy anywhere in the newspaper business—it would one day grow to a level that might support its costs. The Guardian in London, suddenly competing with The New York Times in this new profitless space (hence a new sort of competition: who could dig the deeper hole), made this something more than a perplexing business choice; it made it a moral one. Forward-thinking journalism, journalism that could express the ever more democratic inspirations of the age, was digital. (Curiously, The Guardian’s first foray into digital media was as Wired magazine’s partner in a UK launch, which ended in tears because Wired’s founders thought the Guardian leadership was too stuck in the past, making the defensive Guardian people all the more determined t
o prove that they weren’t!)
Fundamentally it’s a generational argument, as so often happens in media. The old folks die, the young take over. Don’t they? You really don’t have to prove anything, other than that the old get ever older and then die (pay no attention to the fact that the young get older too).
The problem with this story is that none of it is true. The closer the new media future gets, the further away victory appears.
This is a book about what happens when the smartest people in the room decide something is inevitable, and yet it doesn’t come to pass. Omens have been misread, tea leaves misinterpreted. Not only has the Web not destroyed TV, but the source of new media’s strength—attracting ever more traffic, truly phenomenal traffic—may in fact become its greatest weakness.
These manifestos and venture financing rounds are based on a set of assumptions that were wrong from the start, and compounded as each year passes. The consequences of this folly are far-reaching for anyone who cares about good journalism, enjoys bingeing on Netflix, deals with advertising through their job, or plans to have a role in the future of the Internet.
What we need is a better, more honest guide to the changing media landscape, one based on a clear understanding of who makes money, and how.
2
THE LOGICAL OUTCOME
Few innovations have been as unclear in what they would become and what they could offer and yet been greeted with as much certainty and enthusiasm as digital media. In fact, what media was going to become as a digital form—information and entertainment bought and packaged and delivered to an audience—happened to be, in the most cautionary terms, a lot like Yahoo.
Not only has Yahoo wrestled for the better part of two decades with how to make money, but, going to the heart of the problem, it has, trying countless strategies, failed to engage its users in a relationship that is very valuable.
Television Is the New Television Page 1
