Parks Associates Blog

Tuesday, November 06, 2007

The TV Writers Strike and the Future of Television

I can definitely see why the general public would look with either disdain or disinterest at the current Hollywood writer's strike. One could argue that it's just the "rich getting richer," or wonder why these creative minds are battling over the wasteland that many would argue is the state of primetime television today.

I see this impasse as a precedent-setting stage for both the writers and for the producers. Although the total revenues generated by Internet video services remain a tiny percentage of the overall entertainment industry (particularly paling when compared to current box office receipts, DVD rentals and sales, and current television advertising rates), what is occurring on the Internet today is going to be the face of television and entertainment tomorrow in a much more significant way. Consider the fact that many industry observers see our current television model (dominated by a linear delivery model) shifting to an on-demand model, where the important measurements are not based on a total audience at 8 p.m. Eastern, but rather a total audience plus the metrics about who chose to watch a certain streaming advertisement associated with the video. So, while the stakes that are being battled for today are relatively small (our own estimate is that TV downloads is only a $133 million market today - growing to $950 million by 2011), the total TV market revenues of tens of billions of dollars will soon be counted in the same way that Internet streams are today. So, getting the precedent of establishing revenue shares per streams is going to keep the writers involved in revenue streams when much more of the TV experience shifts to an “Internet-like” delivery system.

Intead of focusing on the revenue portion per download, I think that this battle is going to be built around the writers' share of the advertisign dollars generated per view. The major revenues for the on-demand video space are not necessary going to be driven by user-paid downloads. In fact, when you look at Apple’s user-paid download numbers, you’re actually starting to see a peak occur with total downloads of video. As DVRs and on-demand content become much more prevalent as vehicles to deliver video to viewers, advertising is going to be the major revenue generator. Our own estimates indicate that ad-supported Internet video revenues will grow from $1.4 billion in 2007 to $5.8 billion in 2011. If I were the writers, I’d want to focus there.

This current battle will definitely shape the way in which other creative personnel are compensated for their work, including actors and directors. There is precedent that will be set with the final agreement. In my mind, it hopefully does acknowledge the need to compensative the creative work behind this content, regardless of the delivery vehicle. So, yes, I would expect that this will impact conversations about residuals for other creative personnel.

For more insight into the online video space (including recent news and analysis), please see Parks Associates' white paper: Broadband Video: A Market Update. This paper is available for free download.

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