Television Is the New Television

by Michael Wolff

  Even to the degree this absolute vision is true (no more broadcast, no more cable, through which, of course, streaming is possible), software is neither going to create television comedies and dramas nor change the underlying licensing or advertising structure of the business.

  And then finally Auletta gets to Netflix as exhibit A in television’s video revolution. And yet his revolution is immediately reduced to Netflix’s efforts not to change the nature of the business, but in fact to find its place in it:

  Hastings sees his main competitors as Showtime and, especially, HBO. Both have lucrative arrangements with cable providers, through which they offer a library of shows and movies to watch on demand; and both now offer apps—HBO Go and Showtime Anytime—that enable cable subscribers to watch any of those channels’ programs on any device. HBO has more than two and a half times as many subscribers worldwide as Netflix—a hundred and fourteen million—and its list of original hits, from “The Sopranos” to “Game of Thrones,” is extensive.

  Then Auletta winds up for his knockout punch: the television advertising model is teetering, he says, because people now have the technology to skip ads. Martin Sorrell, chairman of WPP, the world’s largest advertising agency holding company (Auletta says it’s the second largest), tells Auletta that WPP has moved a big chunk of its spending to digital. And then, says Auletta, Netflix and other streaming services offer an existential challenge to television. Why watch the box and subscribe to cable when there are so many other options?

  First, almost the entirety of digital media is advertising supported (ads that are far easier to skip and to ignore than those on television), save only for Netflix and other streaming services that charge for television content. Second, television, once wholly advertising driven, now derives 50 percent of its revenue from other sources—not that it has lost 50 percent of its advertising revenue, but rather that it has effectively doubled its revenue from non-ad sources. (NYU Stern School professor Scott Galloway argues that the healthiest media companies will have a revenue base that is evenly split between advertising and other licensing and subscription revenue streams.) What’s more, the Martin Sorrell point means virtually the opposite of what Auletta suggests: the overwhelming amount of advertising dollars that have moved into digital have not come from television budgets; in addition, this money has been parceled out in low-value increments that have hobbled rather than fueled the digital revolution.

  As for the existential specter of Netflix, what Auletta and The New Yorker describe sounds a lot like an ever-expanding market for television’s product, and not, per se, much like competition. As for cable, again, how is it that streaming happens?

  The challenge for television is not the Netflix model; rather, the challenge for Netflix is to figure out how to adopt more of a television model. On similar earnings, HBO’s net operating profit in 2013 was $1.8 billion, while Netflix’s was a mere $0.62 billion. This is largely because, in its over-the-top assault, it doesn’t have cable companies picking up much of the cost of marketing, billing, and service.

  What Netflix needs is a cable deal.

  12

  SCREEN TIME

  It isn’t really computing that rescues Apple from its 1990s decline when Steve Jobs returns to run the company; it’s entertainment. First it’s music. Apples saves the music business from chaos, and then puts it into a kind of receivership, making it dependent on its device, the iPod, and its store, iTunes. And then, in one of the most far-ranging revolutions in the media industry perhaps since the advent of television itself, it makes portable screens ubiquitous.

  In this, Apple has had two goals. The first was an extraordinary success: piggyback off ever-growing media demand and create devices that become a necessary part of that market. The second has been less successful: achieve some point of significant control in this market—to do for video what it did in music.

  Jobs ought rightly to be regarded as much as a media figure as a computing giant. Jay Chiat, whose advertising agency Chiat/Day created the Apple Big Brother 1984 spot, and was Jobs’s longtime friend and confidant, described—in many discussions we had about Apple before Chiat’s death in 2002—Jobs’s relative lack of interest in technology figures and obsessive and competitive interest in movie and television moguls. Most of Jobs’s personal fortune, amassed after his return to Apple, came from his investment in the animation studio Pixar, and its eventual sale to Disney. His early motivations and sensibility are more pop culture than data driven. He’s impresario-like. He’s top-down. He’s message, not process. He’s a control freak. What set Jobs apart from the competition was his ability to create a narrative—often with Chiat’s help—about his products when the competitors were churning out soulless gray boxes.

  Instead of his mobile machines becoming new venues of extended functionality—walking computers, taking the desktop with you—they became a new proscenium, a new way to frame pastimes and entertainment, designed for distraction as much as for usefulness (perhaps more for distraction).

  Jobs himself was, relatively speaking, anti-Web. He was rather the last guy who would be at home in an unruly, contributory environment. He was basically an old-fashioned, ever-controlling, hopelessly obsessive media mogul. It was his way. It’s a closed system. Or, in a better metaphor, it’s his theater and his show. (He really was a mogul.)

  Apple may be the most valuable company in America, but it did not get there by selling ads. It makes things and sells things, which is very different from everyone else in the BuzzFeed bubble, including Facebook and Google (though even Google seems to realize this, putting more effort into Android than new Web products).

  The introduction of the iPhone and then iPad is an important moment in which the cultural onrush of the Web, of its seeming octopus grasp of all experience, information, and functionality, is slowed and challenged: Apple mobile devices establish their own parallel world. Apps compete with, and to some extent sideline, the Web.

  His is, Jobs explicitly argues, a better media world—and a better world for media. His self-serving pitch to the media industry is that he can give back control over look and feel; he can control access; he can police the environment; he can design the experience; he can dictate the business model. At this point, beginning with the iPhone in 2007 and extending to the iPad in 2010, the media business is in full panic over the digital maelstrom. Jobs was saying the deluge could be controlled and that he was the man to do it. He was the alternative.

  Eddy Cue, a twenty-year Apple veteran, with no presence in the media industry and, indeed, hardly any presence anywhere—he’s even a social media blank—became Apple’s intractable and fearsome negotiator, though of the more take-it-or-leave-it than getting-to-yes type. (“An inflexible and unpredictable negotiator who frequently reverses and contradicts himself,” according to Adweek magazine, which described a negotiation for media content in which Cue suddenly decided content creators ought to “use Apple’s own terms-of-service agreement, designed for software developers.”)

  What Jobs had in mind, surely, was, in addition to selling vast quantities of units, an über–distribution control. The music business, helpless in the digital deluge, granted Jobs and Apple something like surrender terms in its arrangement with iTunes.

  That example was already frighteningly clear to the larger media business. Rupert Murdoch came back from his first look at the iPad and reported, “This thing could screw everybody if we’re not careful.”

  But Jobs’s devices had reduced—finally reduced—the digital world to a straight distribution deal. However hard the negotiation was, it ultimately ran up against the need for brand-name content—that was what made the iPad different from a laptop.

  This was not an inverted world where producers gave up control and audiences assumed it. This was not a Google appropriation by a thousand cuts, give them an inch and they’ll take a fair-use mile. This was not tools over entertainment (tools that so
often became the means to claim and redistribute entertainment). This was wholly familiar licensing and distribution—the two pillars of the media business. (Although magazines rushed into this new channel, they were hobbled both by an advertiser lack of interest and by the need for constant technological improvement; video, on the other hand, was neither dependent on advertising nor on upgrades.)

  In the first, a third party paid you for the use of your intellectual property in ways that were, quite unlike the unruly Web, precisely defined, representing a half century of media art and custom. In the second, you paid a third party to help bring you to a preestablished audience: movies need movie theater chains; television producers needed broadcast networks and then cable operators. Again, these were the defining relationships and deal structures of the business. Where they were hellishly disrupted by the Web, these business relationships were largely restored by Apple’s screens.

  Apple had become a licensing organization. And, too, it had become a distributor of apps that had struck their own licensing agreements. Jobs’s screens became a predictable and legitimized world of content distribution.

  Still, the nature of the device, and how behavior would adapt to it, remained uncertain. In the consumer mind would these be primarily computing devices or entertainment devices—for various information processing tasks, even for general communication and social media interactions, or passive content transmission tools? How would the pie divide?

  What market did they expand?

  The tablet’s initial strategy, and raison d’être, was as an incursion into the living room, a kind of personal television and games console, ideally an Apple-controlled personal television and games console, an effort on Apple’s part to pull the center of gravity away from the television itself and from television distribution (a better gamble than its continuing efforts at a set-top box). But, in fact, in some sense use shifted in the other way: tablets, especially in the younger market, started to replace PCs. It even seemed to appear that instead of becoming an entertainment device, tablets would merely become a lower-cost computing device.

  But, more unexpected, both things happened: tablets and smart phones (with constantly expanding screen sizes) became entertainment devices that end up taking over PC functionality. In other words, they become incursions into the office and computing. With a little critical interpretation, television comes to the computer, and not, as had long been predicted, the other way around (that previous notion was WebTV—you’d browse the Web and do e-mail and perform other computing functions on a big screen from your couch).

  It’s an elemental point: the television does not become a computing device; the various computing devices become remarkably satisfactory entertainment devices, not just making entertainment available at any time and in any place but pushing entertainment—professionally made, scripted narratives—into the realm of digital activity.

  The devices themselves mean that digital media executives become as reliant—or more reliant—on writers, actors, directors, and producers as on programmers.

  13

  MORE BOXES

  “Digital convergence” turns out not so much to be about bringing computing to your television but about bringing more television to your television.

  Accept that the medium is the message (in Douglas Coupland’s succinct explanation of Marshall McLuhan’s still opaque aphorism—more than half a century later still opaque: “The ostensible content of all electronic media is insignificant; it is the medium itself that has the greater impact on the environment, a fact bolstered by the now medically undeniable fact that the technologies we use every day begin, after a while, to alter the way our brains work, and hence the way we experience the world”), but what is the medium?

  The box, that retro term of objectification and dismissal of television, that dominating presence in living rooms for half a century, has new, more fluid meaning, in the myriad, mostly boxlike devices that move digital video from the Internet to the television.

  We are in a land of curious metaphors. There is the suggestion that television is one world and the digital realm another—and in the minds of most users that is probably true. In that view, there are two routes for video into the home, the first by some conventional, limited, old-fashioned, literal, and hardwired cable, and the second, more mysteriously, “over the top (OTT),” coming from the cloud or other cyber provinces. (In the past, there was broadcast, which came, in a sense more magically, over the air—but broadcast of course now comes over cable, as does, in fact, OTT.)

  And then there is a conjunction in the middle—with a box or boxes. One box gives you cable. Another box moves video from the cyber world onto the television. True, some boxes do both things, or at least provide an intersection for both functions. But, notionally, there are separate streams converging through discrete boxes to the central box.

  At the same time, there is a reverse process that is also over the top, which, in another set of complicated procedures and behind-the-scenes maneuvers, moves video, heretofore exclusive to the television, out into the cloudy cyber world. Hence, now retrievable on your computer and other devices and secondary screens, but, confusingly, also reroutable by your streaming box back to your television.

  Functionally, this just defines the ubiquitous availability of video content, except that, changing the nature of the game, it also sets up exclusive channels of content, such that we now lack an overall metaphor for the experience. It is no longer television that gives us, well, television. It is no longer cable that gives us a cable system with its basic and premium options. It is something else that gives us access to this division of television, or to this addition to television, or to this particular television licensing organization, but not to another competing television licensing organization.

  Behind vast new programming options, through this multitiered system of licensing and technology, there are of course new power centers and new points of leverage in the system, as well as new innovations in watching, retrieving, saving, and finding. In addition to there being many OTT options and approaches competing against one another, they are all, in theory, competing against television system monopolies (i.e., cable companies), except that because there aren’t, in actuality, two routes into your home, but only one broadband line, transporting both television video and digital video, they are all entirely dependent on the broadband owner, who also maintains the television monopoly.

  But still the basic questions apply: Does this really change television, or is it just more of the same (although this just-more-of-the-same was always the charge against cable, and cable in fact did change television)? Does it give someone else real power in the game? Does it favor distributor or maker? Does it further fracture or further consolidate the industry, or both? And does the consumer ever really catch a break?

  The short primer:

  “Streaming media devices”—as they are increasingly referred to—include far more varied options than just stand-alone units like an Apple TV or a Roku. There are more than fifty such devices applying various approaches currently on the market. But whatever we call them and however they’re configured, the key component of each device is that: 1) it’s IP-capable (whether via an Ethernet port or Wi-Fi); 2) it connects to your TV; 3) it can install apps for a variety of streaming services that you can navigate via an interface similar to, but fortunately simpler than, a PC operating system.

  One bit of research in 2014 estimated the market penetration of the stand-alone devices in U.S. homes at 17 percent. (Apple TV and Roku are at the moment the current market leaders by far, with Apple’s device holding a 39 percent market share, and Roku 28 percent.) This study forecasts a 39 percent market penetration by 2017 for all devices in the category. In other words, adaptation is happening here faster than cable penetrated U.S. households.

  Google and Amazon are both making major moves into this market. Google is doing it via its Chromecast dev
ice as well as its new Android TV platform (an adaptation of the Android operating system that is being used by third-party manufacturers, similar to the way smart phone makers use Android for mobile but, of course, designed to be viewed from across the room rather than up close). Chromecast is one of several new stick or dongle streaming media devices that plug directly into an HDMI port on your television, rather than being connected to a separate box via a cable. Amazon, meanwhile, now has the Amazon Fire TV, which uses an Amazon-developed OS adapted from Android.

  Beyond these stand-alone devices, a number of other home A/V-type components are also now capable of delivering streaming media. TiVo, one of the earlier leaders in the DVR market, has added the ability to deliver streaming apps to its most recent devices. The same is true for Sony’s PlayStation, Nintendo’s Wii, and Microsoft’s Xbox platforms (with Sony recently adding a stripped-down PlayStation TV device to its product line).

  But a far larger potential user base includes IP-capable Blu-ray DVD players, which have been in the market for several years now (an estimated 169 million in the U.S. market as of 2014), as well as the so-called smart TVs, which are rapidly entering it.

  Then, too, it is probably an unnecessary limitation to consider this market just devices that can connect to your TV (or may in fact be your TV). In many ways, the media streaming universe—the over-the-top content world—includes anything with an IP connection that can play video: tablet, smart phone, set-top box, dongle, computer, and television. One analyst put the total shipment of all OTT-capable devices in 2013 at 1.67 billion.

  We are not in Kansas anymore.

  Or are we?

  The early assumption about IP-connected television devices was that it would bring the Web to your TV, a kind of futuristic, interactive big brother on your wall. As in the original Internet construct, it was about opening a further larger window into a new, surround-sound, 3D, information world— Matrix-like stuff. We would run our lives and interact with the world through a TV-like monitor. (In fact, this rather turned out to be the realm, in smaller form, of the phone.) Almost nobody imagined that the television would become yet a greater platform and showcase for conventional, beginning-middle-end entertainment. And yet, in a development that ought to be confusing to every futurist, television, occupying more, not less, individual daily attention, has remained almost wholly an entertainment device. What’s more, other than games, which have become ever more video-like and video-inspired, the form of television entertainment has stayed remarkably the same: three scripted acts, with designated players. Even unscripted “reality” television, that money-saving response to fracturing audiences, has become increasingly structured and, in fact, scripted.