Clay Shirky On Why The TV Business Is Collapsing

tvsnow030609We are staring into a messy, complex system with no easy fixes.

Clay Shirky, an Internet and media consultant and NYU professor, was recently asked by a group of TV executives when web video would generate enough money to cover their costs.Tough question.

Shirky: There are two essential bits of background here. The first is that most TV is made by for-profit companies, and there are two ways to generate a profit: raise revenues above expenses, or cut expenses below revenues. The other is that, for many media business, that second option is unreachable.

Shirky uses Joseph Tainter’s 1988 book The Collapse of Complex Societies to explain:

In such systems, there is no way to make things a little bit simpler – the whole edifice becomes a huge, interlocking system not readily amenable to change.

Certainly the media business is becoming more and more complex. There seems to be new revenue stream ideas or trendy Web metrics emerging every day. We see it in paywalls, HBO Go‘s restricted access and Hulu battling for profitability, and even pricing battles about the iPad. Meanwhile, companies continue to hold on to antiquated business models (and paychecks) of the past.

Here’s a must-read bit from Shirky:

About 15 years ago, the supply part of media’s supply-and-demand curve went parabolic, with a predictably inverse effect on price. Since then, a battalion of media elites have lined up to declare that exactly the opposite thing will start happening any day now.

To pick a couple of examples more or less at random, last year Barry Diller of IAC said, of content available on the web, “It is not free, and is not going to be,” Steve Brill of Journalism Online said that users “just need to get back into the habit of doing so [paying for content] online”, and Rupert Murdoch of News Corp said “Web users will have to pay for what they watch and use.”

Diller, Brill, and Murdoch seem be stating a simple fact—we will have to pay them—but this fact is not in fact a fact. Instead, it is a choice, one its proponents often decline to spell out in full, because, spelled out in full, it would read something like this:

“Web users will have to pay for what they watch and use, or else we will have to stop making content in the costly and complex way we have grown accustomed to making it. And we don’t know how to do that.”

Rupert Murdoch’s favourite phrase is: “Content is king.”

Sure it is. But as Shirky points out, cheap content from amateurs is king to a wider audience.

The most watched minute of video made in the last five years shows baby Charlie biting his brother’s finger. (Twice!) That minute has been watched by more people than the viewership of American Idol, Dancing With The Stars, and the Superbowl combined. (174 million views and counting.)

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