The New TV, pt. 1–Understanding Old TV

Wow.  If you’d asked me when I left what the odds were I’d end up in the Media Industry, I would have said the chances approached 0.  I guess that’s part of the fun of being an entrepreneur!  Interestingly, in some ways, I’m right back in Identity as well.  Let me explain a little about how big media works and where SetJam, my new company, hopes to play a role.

As usual, I’d like to start with one of my big ugly diagrams:

This diagram shows how the money flows in the Media Industry.  Red represents money that end-users pay directly for content and the blue represents money that advertisers pay.  The thickness of the arrows give some indication of how much money is spent.

Let me explain a couple of the media industry terms:

1. MSO: An MSO or “Multi-Service Operator” is a cable company (the ones that run the lines to your house and you pay a monthly subscription to.  They’re called Multi-Service Operators because according the the FCC each cable office is a single operator, so these giant cable companies (Comcast, Time Warner, Cox, Cable Vision) that have 100s of local cable offices are MSOs.  Dumb industry jargan really.

2. OTT: OTT or Over-The-Top refers to anyone who tries to deliver you video content outside of (or over the top of) the services run by the MSOs.  Not long ago, the only companies doing this were over-the-air broadcasters.  Today we’ve got a whole slew of companies trying to do this.  Some for direct advertising dollars (Hulu, YouTube, etc), others on a subscription basis (Netflix), and still others on a pay-per-view basis (iTunes, Amazon).  As you can imagine the MSOs hate all of them.

So who are the Media Companies?  In some way you can think of them as the content providers, but more accurately, they are the content owners, or more accurately still, they are the deal makers.  As you can see from the diagram, all the money ultimately flows through the Media Companies.  They have the direct relationships with the money providers (both advertisers and MSOs) as well as with the content providers (the Studios).

Given their central role, they ultimately decide what content gets made.  Studios pitch them concepts for new shows, the media companies decide if they can sell the new concept to their advertisers and subscribers, and then make the call whether they’ll finance the concept.  Without the backing of the major media companies, very little full-length video content is made.

Amazingly (or perhaps not surprisingly) given the power these organizations have in determining what we see, there are only 5 companies that really matter for the US:

Time Warner: Really a holding company for HBO, Turner Broadcasting, Warner Brothers, and Time.  In video they control: HBO, Cinemax, Cartoon Network, CNN, TBS, TNT, Tru TV, Turner Classic Movies, and Warner (TV, Movies, and Home Video).

Viacom/CBS: Officially they are two separate companies but Sumner Redstone has controlling interests in both.  They own such brands as BET, Comedy Central, MTV, Nickelodeon, Spike, The Movie Channel, TV Land, Showtime, and CBS.

News Corporation: Besides their huge news paper holdings, in video they control all of Fox (TV, news, sports, kids, business), My Network TV, and FX.  Internationally they control all the Sky and STAR properties and they also own MySpace.

NBC Universal:  Owned by GE, in video they control NBC (TV, sports, news), Bravo, CNBC, Oxygen, SyFy, Telemundo, USA, and the Weather Channel.

Walt Disney Company:  In video they control ABC, ESPN, and Disney (studios and channel).

Wow… and in Identity I thought I was walking amongst giants!  In my next posts I’ll explain which companies are likely to win and lose from new technologies, and how identity and SetJam are going to play a role.

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