Big media seek 21st century business models
Discussions around issue of free versus paid contentSUN VALLEY, Idaho -- Media moguls at this week's Sun Valley conference have spent as much time discussing how to reconfigure business models disrupted by the Web as they have worrying about the weak economy.
With difficult credit markets and an unclear future, talk of dealmaking has been at a minimum this year. Yet there has never been a more important time for media conglomerates and their financiers to act and adapt to the Internet age.
The mood at the conference was described as "somber" and "very bearish" by executives. While the recession was a key reason, the other was the uncertainty over how future profits can be made from distributing news and entertainment online and across devices like smartphones.
"We're not using long-form content on the Web because it's not clear to us that's the way people want to consume content, said David Zaslav, chief executive of Discovery Communications Inc, which owns the Discovery Channel.
"But also the business model isn't there yet, so we're taking it slow," he said in an interview on the sidelines of the event organized by boutique investment bank Allen & Co.
In the late-night bar at the Sun Valley Lodge, from which the press was banned, most of the discussions were around the issue of free versus paid content, said one senior executive who asked not to be named as his conversations with other executives were private.
The challenge is how media companies can keep alive the lucrative cable business model at a time when consumers are increasingly used to getting content for free online. Cable operators pay affiliate fees to cable networks for their programming, and both share advertising revenue.
Plans such as Time Warner Inc's "TV Everywhere" and Comcast Corp's "On Demand Online" seek to preserve that business model by offering cable shows on the Web to authenticated, paying cable TV subscribers.
"Authentication is an interesting intermediate step and is something that we're looking at," said Zaslav.
The conversations about TV Everywhere are heating up. Google Inc CEO Eric Schmidt confirmed to reporters that he has had early talks with Time Warner about the possibility of getting paid cable shows up on YouTube. But he did not elaborate.
Television studio executives do not want to repeat the experience of their colleagues in the hard-hit newspaper and music businesses and are worried that consumers will expect TV shows, movies and all professional programming to be free.
Hulu.com, owned by News Corp, NBC Universal and Walt Disney Co, offers broadcast TV shows and movies for free on the Web, but there has been talk at Sun Valley among executives of introducing a paid content model.
Wired editor Chris Anderson argues in his book "Free" that many companies, with media at the forefront, could build bigger and better businesses around the notion of giving away their content for free.
Many executives in Sun Valley would not agree. "Free" -- supported by advertising -- is not a new concept. After all, broadcast TV is free but its dominance has been eroded by cable channels and its future as an advertising outlet is bleak.
Newspapers owned by News Corp. and others are fervently examining news-bundling pricing models to seek ways to get users to pay to read news online. One consideration may be to bundle different properties along vertical lines, such as business and sports news, for a monthly fee.
Far from free, what media moguls would want to preserve on the Web and mobile platforms is the dual-revenue stream from subscriptions and advertising.
"The big thing for these guys is how do you come up with that dual revenue streams online," said Jeremy Alliare, chief executive of Brightcove, an online video company that partners with many major media companies. "Cable TV is a part of that but I think it's a broader industry discussion."