One of the common challenges faced by both telco and media operators is managing the introduction of new products that cannibalise existing cash cows. The telecommunications sector faces a number of examples of this such as the substitution of mobile phones and VoIP for traditional PSTN lines and calling.
Introducing new products that position the company for the future, whilst maximising the profits from established products, is a delicate balancing act. It’s also one that has the potential to create internal conflict, as the Seven network appears to have discovered recently.
According to reports in The Australian:
“Divisions have emerged in the Seven Media group as the dominant television arm resisted plans by its internet division Yahoo7 to make more TV shows available on new digital channels.
Some executives at the Seven Network were surprised by the announcement from Yahoo7 — which is led by Rohan Lund, who reports to Seven’s advertising and digital chief James Warburton — that it was going to make about 20 of Seven’s TV shows available on a catch-up basis on Sony’s soon-to-launch Bravia Internet Video service….
…The backlash within the television arm was immediate as executives considered pulling programs from the service and allowing only library content to be shown on the Sony Bravia service.” (The Australian 15/03/2010)
As is explained further in the article, the issue for broadcasters is the impact that internet delivered programming has on broadcast audience ratings, which then flows on to impact advertising revenues.
The alleged conflict within Seven may therefore reflect the conflicting incentives of different groups within the Seven empire. If the broadcast and online business each have their own (competing) audience targets, then it seems almost inevitable that there will be tension between the two.
So what some options for Seven going forward?
As discussed in The Australian, one option for protecting broadcast audiences is to hold back the availability of programs delivered online. Monday night’s prime-time tv, for instance, might not be available online until later in the week.
Another option would be to differentiate the quality of the online programming, such as limiting the resolution of the video stream to that which is only suitable for viewing on a PC monitor.
But broadcast and online are simply alternative delivery mechanisms for the real product – the programs. Rather than setting targets that create competition between delivery mechanisms, what if audience (and revenue) targets were based on the programs themselves, irrespective of how they were delivered.
Maybe Seven does this already? Maybe its still a bit of a tough sell with media buyers? Maybe part of the problem is that Yahoo!7 is only a joint-venture. But at the end of the day, redefining audience targets to be neutral of the delivery platforms seems like a good move for reducing conflict and improving the success of the overall product portfolio.