Is Web Video Really Hurting TV?

The current conventional wisdom is that the rise of Internet video may mean the end of television as we know it — a view that extends to the music industry as well, as we’ve seen before. Viacom’s $1 billion copyright infringement suit against the Google-owned YouTube continues to lumber on, and the TV writers’ strike has led to speculation that the lull in new TV content could drive more viewers to the Web.

As Forbes recently pointed out, much of the TV industry’s anxiety is based on the assumption that entertainment viewership is a zero-sum game — i.e., if more people are watching programming online, then fewer are left to watch TV. But not much data has been offered to prove that sites like YouTube are actually responsible for declining TV ratings. As Koleman Strumpf showed in his paper “The Effect of File Sharing on Record Sales,” the deleterious effects of the Internet on entertainment industry models have a tendency to be overblown. Some evidence even points to Web clips enhancing TV viewership, as programs like The Daily Show see their popularity increase through viral Web distribution.

The Wharton economist Joel Waldfogel (who has a new book out, The Tyranny of the Market) examines this issue in a new working paper, “‘Lost’ on the Web: Does Web Distribution Stimulate or Depress Television Viewing?” He tries to measure the effects of online TV clips, both authorized and unauthorized, on television viewing between 2005 and 2007, using a survey of viewers’ tendencies. To isolate the typical Web viewer (i.e., young people), he restricted his subjects to 287 people on the University of Pennsylvania campus. Here’s what he found:

While I find some evidence of substitution of web viewing for conventional television viewing, time spent viewing programming on the web — 4 hours per week — far exceeds the reduction in weekly traditional television viewing of about 25 minutes. Overall time spent on network-controlled viewing (television plus network websites) increased by 1.5 hours per week….

The effect of web availability depends on whether users watch programming they would already have watched (i.e. if their valuations exceed the “price”). If viewers watch on the web in instances in which their valuations exceed the price, web distribution will cannibalize conventional viewing. On the other hand, if web viewings is drawn from the region of the viewer demand curve where valuations fall short of the price p0, then web distribution will raise consumption without reducing television viewing.

Because of the serial nature of many programs, watching an episode (or an excerpt) on the web can stimulate interest in watching other episodes of the same show on television. This shifts the demand curve out, perhaps raising the number of instances in which people “pay” for conventional television.

Waldfolgel’s reasoning makes perfect sense: the brevity and accessibility of Web clips can raise awareness of a show, give viewers a taste of its content, and thereby entice more viewers to catch the show when it airs on a network. These findings are contrary to the entire modus operandi with which networks have approached Web video, and could provide an entirely new perspective on the future relationship between the two media — not to mention provide a valuable argument for YouTube in its case against Viacom. After all, if those 100,000 unauthorized clips served to stimulate interest in Viacom programs, who’s to say they caused any damage?

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  1. Mike B. says:

    In the long run, web viewership will certainly damage traditional television ratings/revenues. We’re seeing in our society a growing refusal to honor standard entertainment packages. As the balance of power shifts from the hegemonic RIAA (and its borderline unconstitutional copyright monopoly) and the powerbrokers of the three big networks to file sharing, MP3s, “TIVO”, and video streaming, consumers are unwilling to accept broken or frustrating product distribution.

    For example, the twenty dollar CD with one desirable song, the shoddy theatre that plays fifteen minutes of commercials before the crappy movie begins, or the television network that airs important shows one time and then expects you to maybe catch it on a rerun or patiently wait a year to buy it on DVD. People want their content when and how they want it; they don’t want companies dictating how they receive their entertainment.

    Those that adapt and offer good products will thrive from the increased exposure and ancillary revenue streams (even if they’re receiving less from traditional advertising); those that don’t, will cry foul and dwindle away. Hard core pirates cannot be stopped — just about everyone else will pay a fair price for a fair product so long as they aren’t having a ten p.m. Friday time slot rammed down their throats.

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  2. Mike B. says:

    In the long run, web viewership will certainly damage traditional television ratings/revenues. We’re seeing in our society a growing refusal to honor standard entertainment packages. As the balance of power shifts from the hegemonic RIAA (and its borderline unconstitutional copyright monopoly) and the powerbrokers of the three big networks to file sharing, MP3s, “TIVO”, and video streaming, consumers are unwilling to accept broken or frustrating product distribution.

    For example, the twenty dollar CD with one desirable song, the shoddy theatre that plays fifteen minutes of commercials before the crappy movie begins, or the television network that airs important shows one time and then expects you to maybe catch it on a rerun or patiently wait a year to buy it on DVD. People want their content when and how they want it; they don’t want companies dictating how they receive their entertainment.

    Those that adapt and offer good products will thrive from the increased exposure and ancillary revenue streams (even if they’re receiving less from traditional advertising); those that don’t, will cry foul and dwindle away. Hard core pirates cannot be stopped — just about everyone else will pay a fair price for a fair product so long as they aren’t having a ten p.m. Friday time slot rammed down their throats.

    Thumb up 0 Thumb down 0
  3. Maynard says:

    While I certainly do my fair share of viewing unauthorized programs online, I also watch a significant amount of authorized programs over the networks’ website. Sports is the only TV that I go out of my way to watch, and as many shows are difficult to enjoy if you haven’t seen previous episodes, I’d just about given up on primetime network television. Now that networks post episodes of some of their shows online, I can watch them at my convenience. I watch far more television over the networks’ websites than I ever would on a real television. If I had a DVR, I’d go that route, but for now there are five programs that I watch every week that I wouldn’t if they weren’t online.

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  4. Maynard says:

    While I certainly do my fair share of viewing unauthorized programs online, I also watch a significant amount of authorized programs over the networks’ website. Sports is the only TV that I go out of my way to watch, and as many shows are difficult to enjoy if you haven’t seen previous episodes, I’d just about given up on primetime network television. Now that networks post episodes of some of their shows online, I can watch them at my convenience. I watch far more television over the networks’ websites than I ever would on a real television. If I had a DVR, I’d go that route, but for now there are five programs that I watch every week that I wouldn’t if they weren’t online.

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  5. Charles says:

    I think TV is slow to evolve just like music. They want to do the same old stuff and cry foul play when technology pushes them to continue to upgrade their product.

    I’ve watched less and less network TV in favor of cable channels that blast through a series and let me fully take in the show. I hate getting into a series and wait for its one showing per week. Most young people are on very random schedules, so it is not worth our time to involve ourselves into a series when we don’t know if we will be able to continue to watch it. Its much easier to wait until a good show is on constant play like Scrubs is on Comedy Central or SVU on USA. TV needs to adapt, not complain.

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  6. Charles says:

    I think TV is slow to evolve just like music. They want to do the same old stuff and cry foul play when technology pushes them to continue to upgrade their product.

    I’ve watched less and less network TV in favor of cable channels that blast through a series and let me fully take in the show. I hate getting into a series and wait for its one showing per week. Most young people are on very random schedules, so it is not worth our time to involve ourselves into a series when we don’t know if we will be able to continue to watch it. Its much easier to wait until a good show is on constant play like Scrubs is on Comedy Central or SVU on USA. TV needs to adapt, not complain.

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  7. matt says:

    “…just about everyone else will pay a fair price for a fair product so long as they aren’t having a ten p.m. Friday time slot rammed down their throats.”

    Is this about Stargate Atlantis? I, for one, haven’t been able to catch a single episode this season because of its new time slot.

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  8. matt says:

    “…just about everyone else will pay a fair price for a fair product so long as they aren’t having a ten p.m. Friday time slot rammed down their throats.”

    Is this about Stargate Atlantis? I, for one, haven’t been able to catch a single episode this season because of its new time slot.

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