milken conference: media moguls on parade

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This last panel--"The New Media Age: Surviving and Thriving in a World of Changing Technology"--is moderated by the very entertaining Dennis Kneale, the managing editor of Forbes. Speakers are:

  • Peter Chernin, President and COO, News Corp.; Chairman and CEO, Fox Group
  • Robert Iger, President and CEO, The Walt Disney Co.
  • Jonathan Miller, Chairman and CEO, AOL

Moderator: Are we really at the digital revolution now, or are we still a decade away?
Chernin: There's been unbelievable change over the past ten years, but that the pace of change will only accelerate from this point. People are still desperate to see stories, to see content, to consume information. They want to be entertained, be informed. (Wow. Amazingly passive view of the audience.)

Moderator: Is Disney catching up to online piracy, or are they still trying to stop it the way Disney tried to stop the VCR?
Iger: We're not playing a game of catchup, but we do need to get on board the train, so to speak. Otherwise the consumer will simply pass us by. Technology to media companies is what refrigeration was to Coca Cola.
Miller: The old projections were that the new media would replace the old media. But that's not what happens. The new doesn't replace the old, but things rebalance. What's going on now is real convergence. People are being convergent--they are multimedia, multidimensional, in ways they haven't been before.

Moderator: Is the video industry doing a better job than the music industry?
Miller: We're not stupid. We see what happened to the music industry!
Iger: WE've got to get with the program--the barriers we've perceived are dissolving, and we have to occupy this space.
Chernin: We as an industry were better positioned to deal with piracy. You get piracy when price points and access aren't acceptable to the market. The video industry has a long history of tailoring products to different needs and different markets (PPV, DVD, theatres, HBO, etc). They understand that different platforms require different price points.

Moderator: Have any of you visited YouTube? 40 million viewings a day of tiny little web-based videos. All from users. The revolution is happening from the bottom up--how do you deal with that?
Chernin: The incredible pent-up demand for video is amazing to see. Most of the favorites on YouTube are copyrighted material. There's a huge demand for our video product.
Iger: User-generated content, as ridiculous as it is (he's talking about America's Funniest Home Videos, which he first started at ABC), is endlessly fascinating to people. It won't put us out of business. We're living in a world where people are spending more time consuming media of all kinds--for companies int he business of creating media, that's a good thing.
Miller: Amazon didn't replace WalMart. YouTube won't replace current content creators. The big question is how do you find the things you want? Your social network becomes important as well as formal guides.

Moderator: Are the movie studios the ones who will create this content? Or will other, younger people need to do it?
Miller: The history of the media world says that the great broadcasting companies didn't create the great cable companies, and neither of those created the great internet companies. New companies tend to arise, while they may well later combine.
Chernin: MySpace cost 540 million, and was probably the best deal they ever made. He asks the moderator why the edge he seems to have about MySpace--is his profile not attracting the kinds of people he wants?

Moderator: The decision to put Disney/ABC shows on iTunes was stunning. How many conversations did they have with affiliates over this?
Iger: None.
Moderator: Excellent!
Iger: Of course new delivery puts a strain on existing channels. But asking permission would have resulted in it never getting done. We create a lot of value for the stations when we create these shows, and the stations still get to show them first. What the music industry ignored is that the customer had a lot more power over how they got and used music in a digital age, and ignoring that power shift was their biggest problem. Disney's not going to ignore that power shift. We're going to continue to make moves for the big screen, but they'll move onto new media more quickly.
Chernin: Fox is trying to do a 60-day post-theatrical high-def release. That's a better direction than trying to have the two compete with each other. "My job is not to protect the existing business, it's to maximize the current business and find ways to grow the new business." You have grow more than you erode, or someone else will be sitting in your chair. We won't replace the billions in revenue from theatrical releases until we've got something that will generate more revenue.

Moderator: What's happening with new development in content?
Miller: New kinds of music content--downloadable music videos and concerts. You can't put music on TV and get good ratings, but you can put it online and "cum" (as in "accumulate") an audience over time. A big question is how do you find content? They want to make video search as good as text-based search.

Moderator: If I can download a show without commercials for $2, aren't you undervaluing commercials?
Iger: We're selling a few things. Convenience is critical (mobile, time-shifted). The experience is good, but not nearly as good as what you'll get on a big HD TV. Their experience has been very positive. They put a $9.99 movie called "High School Musical" on iTunes, and it was incredibly popular.
Moderator: What more are you doing with properties like High School Musical?
Iger: It's out on DVD this week--you can buy it at WalMart. :) We're also looking to turn the company into a more global company--we have great brand depth but not as much breadth as we'd like. They're releasing it in other languages, they're releasing materials for schools to be able to do it as a school play. The soundtrack album went double platinum in 7 weeks.
Miller: Disney has always set a standard of multiple platforms for products. These things are additive, not subtractive. They grow the reach of the property. The fact that something's been viewed 30 million times on YouTube doesn't mean they won't watch more of it on TV. It may make them more likely to watch it on TV.
Chernin: We're thinking a lot about different media for delivery. We're thinking a lot about interactive aspects of delivery. We invented "Mobisodes" for wireless. That's about as exciting a platform as exists. There are twice as many cellphones as televisions in the world, and probably 3-4x as many as there are computers. Our new affiliate deal lets us run shows not just after they run on the network, but also run it before it's on the network for a higher fee. Are there people desperate to see the finale of a show, and willing to pay $4 for it. In return, they give the network affiliates a 12% share of that first year's revenue.

Moderator: Bob Iger, are you cutting a share of your extra revenues to your local affiliates?
Iger: Not from our iTunes downloads. We have a very different relationship with our affiliates than Fox has. ABC pays compensation to their stations already, whereas Fox gets paid by their affiliates.
Miller: If you think about what Google did, they cut everybody in on the action. Because of that, everyone put that box up there and it kept spreading. The web model says figure out how to cut everybody in on the action and they'll be your distribution path.

Moderator: Is Google a distribution rival?
Iger: We don't see them as a rival--perhaps that's a mistake. They're a tool that consumers can use to find our content. Google is both distribution and content; search results are a kind of content. They have become a real force in the advertising world, for good reason. Advertisers are paying extra to advertise in the Internet-based distribution. They won't be able to charge for shows that force you to watch ads. But other choices for download may well be for pay (downloadable, archivable versions, for instance).
Miller: Internet advertising is becoming as expensive in CPM terms is comparable to many cable channels. Search fragments things--it sends people in lots of different places. In a world that fragments, the people who have things that are truly unique stand out the most.
Iger: In a world with much more choice and fragmentation, the value of brands will increase. Most of our investment is in brand.
Chernin: Traditionally, CPM have tracked audience size. Advertisers are so desperate to get video advertising on the web, they're willing to now pay a premium for getting those ads online.

Moderator: Most of the time our ads don't hit people when they most need them. Google does this perfectly--you see the ad when you're engaged in the shopping behavior. It's more targeted, shouldn't it be more expensive?
Miller: If someone visits a car site, they're 10-30% more likely to click on a car ad the next time they see it.
Chernin: That's a very simplistic view of advertising. Ads aren't just to sell things. Some are there to build brands, some are intended to generate interest, others to sell a specific product.
Iger: I agree completely.
Miller: Google ads can't, be definition, be underpriced--they're offered in a marketplace, and you pay what the market thinks it's worth.

Moderator: Why the $2 price for television shows? Why not higher?
Iger: Well, these were things that were already available for free the night before. You're going to watch this on a much smaller and lower quality screen than your television. They felt they should be reasonable in their pricing.
Miller: The scarier thing would be will anybody buy it? Will they buy something they could get for free on their TV?

Moderator: What are the obstacles? Does anybody really want to watch Gary Coleman in a rerun on their cell phone?
Chernin: None of these models work at all if there's rampant piracy. [missed some here]
Miller: The biggest obstacle is making great experiences. People want what they want when they want it...moving media across platforms is not fluid and easy now. What Jobs and Apple did was they made it great, they made the experience great. Great experiences lead to adoption, and then the money follows.
Iger: Conflict and competition among channels and retailers. We want to create more value for our shareholders, and we're not sure we can grow these new channels without damaging existing ones. We need to stay in touch with the consumer in this ever-changing world. It's not an obstacle, but it is a challenge.

Moderator: Was their internal opposition at Disney to these changes?
Iger: Of course. Change results in fear, but you have to overcome that. That's why I'm charged to do, really, more than anything else in my role as CEO. You can't ask all the questions and get all the answers before you make these have to take some risks and get things out there. We have to give people what they want often before they know they want it.
Chernin: The most positive thing happening right now is all this experimentation. There's very little first mover advantage now, we can steal ideas that work from each other. (laughter) The growth of the distribution model benefits the content creators.

Moderator: I'm fascinated with "sellavision", the 24 promotion. How did that work?
Chernin: I thought it was both a brilliant idea, and a dopey idea. Cell phones aren't great platforms for narrative content. But it allowed them to learn a lot about how to deliver short-form content. This is a rush hour medium--people are watching on trains and in airports.
Moderator: what wins? Cell phones or ipods?
Iger: They all win. They're all important. And cell phones are enormously important in helping them to enter global markets with branded content.
Miller: We still don't know if cell phones are a derivative medium (a tiny TV), or a truly new medium. We're focused on mobile search right now more than mobile content. (Wow, search is a big theme for AOL in today's presentations. Fascinating.)

Moderator: So, if this new distribution takes off, who loses? Does Comcast lose?
Iger: Not if they migrate off their traditional approach and start to deliver to multiple platforms--they could be fine. But he's not focused on who loses, he's focused on who wins. Content companies are well positioned to win.
Chernin: The losers are those who are trying to protect rather than grow their businesses.
Iger: "You'd better start swimming or you'll sink like a stone, the times they are a changin'..."
Miller: Is geography now a limiting factor or an enabling factor for companies? That's shifting.

There's some brief Q&A at the end, but I'm all typed out.

1 Comment

Hey...thanks right back atcha for blogging this one and the other dufus panel. I was really interested in this one in particular.

And it was *wonderful* to meet you too, and a lot of fun. I meant it when I said I was feeling very fortunate to be at the table with all of you...amazing how much I've learned from you and David and George, and I think I can learn much from Doug and Adrian too. It was real pleasure, and I hope our paths cross again soon.

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This page contains a single entry by Liz Lawley published on April 27, 2006 10:28 AM.

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