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?


Mike B.

Matt, that show in particular, but basically any Friday, Saturday, or Sunday show will work.

D_U_K_I

danke

Mike B.

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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jener

I download NBA replays from torrents bcos we dont get
regular NBA shows here on cabletv.BTW i live in india
and am not a tv buff as they say it.

Maynard

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.

Charles

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.

matt

"...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.

Jason

I think TV is doing better this year--at least you can catch up online, although it took them long enough. As someone who watches less and less TV (maybe numbers are down because, I don't know, TV exes seem to think Cavemen is something most people want to watch?), I'm waiting for the movie studios to get with the program. I love movies, but with kids I get to watch very few of them in the theater. I have a nice TV set up at home--why not just offer new movies on-demand when the come out? They'd get a lot more of my money if I could watch a movie at night, from home, without going to the theater ...

iratecat

If I can watch the same show on my TV or on my browser or video playback program, I prefer TV, since I have a better TV than a monitor.

I still record everything and skip through the commercials, though.

Ernie Geefay

Speaking for myself, I'm watching a lot less TV as the internet adds more content.
For example, when the Tsunami hit Asia the Networks kept running the same worn out clip over and over. NOthing compared to the clips people posted on You Tube. When the big fires hit southern California I went right to YouTube to see what people in the path of the fire were uploading.
I don't watch a lot of TV programming on the net. But my internet time is definitely eating into my TV time.
The internet gives me what I wantn to see. TV gives me what THEY want me to see.

Sean DeCoursey

A friend sent me the link to this after we had a discussion tonight about, quite frankly, not watching tv anymore on tv. We're probably in the leading edge on stuff like this (both MBA students) but I'm not willing to allocate my time according to some network schedule just because that happens to be when the show airs. Whether its through the web, dvr, or xbox downloads, I find that I rarely watch tv ON tv anymore, and am mostly annoyed that all the shows I like aren't available on demand.

Dan

When did college students become an indication of anything other than binge drinking? If I lived in a matchbox with a roommate, was as socially isolated as are today's college students, and lived in front of a PC, maybe I would watch lots of TV on the web rather than, God forbid, hang out with other students as I did when I was in college and engage in group TV viewing in a dorm. The premise is ridiculous as are the findings and the comments.

Matt Birchall

1) Watching online is being superseded by hard disk video recorders that pick up your favorite shows and shift them to times that are convenient. These will converge with YouTube type systems into entertainment systems that deliver what you want (from both web or broadcast sources) at a time when you want it.
2) Whilst "Waldfolgel's reasoning makes perfect sense" a sample of a few college students doesn't prove anything other than the plausibility of his reasoning.

S Otner

http://news.yahoo.com/s/ap/women_street_fight

Your Name Theory continues to play itself out in the news.

Stephen Lewis

The rise of blogs, you tube, even Sports Center on ESPN all tell a story about how busy our lives are and how we are now looking for a lot of digested and summarized packages of entertainment and news. In a multi-tasking, distracted-driving kind of world, the old model of network television has not adapted to this evolving lifestyle.

Maureen

I live in South America, and here, we cannot watch TV on the network's websites. Those are only available in the US and a handful of other places. We would probably use that service nearly all the time if it were available here, since we can hook our TV up to the computer or project it on our wall for a marathon party.

Instead of watching free network-sponsored TV with advertisement, we are now purchasing pirated TV on DVD from stores that are all over our city. Cable is ridiculously expensive here, and has very limited programming, so for TV lovers such as we, this is our most reasonable option.

I think that the networks need to come to terms with the global market for their shows, and realize that their rigidity and old-fashioned thinking is giving pirates the upper hand.

Justin

I get that Joel Waldfogel wanted to survey "young people," but only interviewing people who are on a college campus will give you very skewed results, in my opinion. As someone who went to undergrad, took a year off, then went to grad school, I can attest that TV viewing habits are far different while being in school than when being out. It is also a conversation I have had a million times with my peers. They're viewing habits even vary from the summer (when they're HOME) from when they're in school.

I would not say it is a bogus study, for it does offer some insight, but it definitely needs some follow up.

frankenduf

what about when TV switches to a digital signal?- i bet when that happens, more viewers cross over to computerTV rather than fork over the exorbitant price to purchase a digital TV

Furiousnerd

I have been working in internet-related video of various stripes, off and on, for going on 8 years or so now. In my experience, the factors slowing the convergence of the two are:

1) The inability of "traditional media" companies, such as AT&T, GE etc. to understand and by virtue not be in fear of new technologies that have potential to make their robber-baron business models irrelevant.

2) The speed at which hardware and software advancements are made in relation to the public's ability to understand and adopt them.

3) Perhaps most importantly from the standpoint of "old media," the fact that a reliable advertising model for what they think of as internet video has yet to emerge.

IMHO, that last one is key if one thinks of the future of "TV" as something involving the current crop of media companies as we know them. They move slow, incredibly slow. What you want, when you want it is the future, and it could have already been in place years ago if not for the "Cavemen" - wink-wink, nudge-nudge - in charge of the entertainment industry.

This isn't about clips on YouTube, it's about hardware with common interfaces (DVI, HDMI, whatever comes next), ubiquitous broadband, the availability of content online and the race to brand and own the new delivery systems for media.

BTW, how can anyone do a study like this without considering torrents and P2P sharing?

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A E Pfeiffer

As I understand it, there's disagreement over the reliability of Felix Oberholzer-Gee and Koleman Strumpf's data and the way they have interpreted it.

Stan Liebowitz highlights the fact that they have used SoundScan sales data, which risks understating the decline in music sales since this data does not include non-retail sales, such as via record clubs or direct sales on TV (Liebowitz, S.J., 2006, “File sharing: creative destruction or just plain destruction?” Journal of Law and Economics, vol. XLIX , April)

Martin Peitz and Patrick Waelbroeck, in their comment on an earlier mimeograph of the Oberholzer-Gee and Strumpf paper, state that comparing music downloads with sales in the last quarter of 2002 will include pre-Christmas sales and so be unrepresentative of the general situation (Peitz, M. and Waelbroeck, P., 2005, “An Economist's Guide to Digital Music.” CESifo Economic Studies, Vol. 51. 2-3, 359–428 )

But, as I've said before, the long-term benefits of the dissemination of new ideas and new technologies will far outweigh the risk of any short-term losses to firms with vested interests to protect. In the long run the question isn't so much whether web video is hurting TV, but what new ideas emerge from the battle between the two.

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