Jamie Kellner: clueless dinosaur

Wednesday 15 May 2002

Continuing our informal series of highlighting clueless business-people: Jamie Kellner (CEO of Turner Broadcasting) believes that skipping commercials is theft. I won’t go into lots of details here, because I couldn’t do it better than LawMeme did in their dissection of the issues.

Here’s my take on it: advertising is a risky business. There are hundreds of reasons why advertising might fail. Skipping the commercials with a TiVo is just one of them. Mr. Kellner and the rest of Hollywood should study business, and especially capitalism, a little more. Businesses come and businesses go. I don’t think anything will make broadcast TV go away, even TiVo. A business is built on assumptions about the environment it runs in. If the understanding of the environment is wrong (think CueCat), the business will fail. If the understanding of the environment is right, the business will succeed. But success doesn’t guarantee future success.

Broadcast TV (along with any other advertising-supported business) is built on a slightly convoluted and risky business model:

  1. Viewers will watch commercials,
  2. Viewers will be compelled by the commercials to buy products,
  3. Sponsors will see increased profits,
  4. Sponsors will buy more advertising time.

Look at these four steps. It is easy to think of a dozen reasons why any of the steps might fail. And any one failing makes the whole plan fail.

If inexpensive technology changes the first assumption in the business model (“viewers will watch commercials”), the business may fail. Does this make the viewers criminals? Don’t be ridiculous. There never was a “contract” with the viewer. There was only the broadcaster’s assumption in their business model. They were counting on people behaving a certain way. People did behave that way. Now people are not behaving that way (or at least, the industry is afraid people are not behaving that way).

So what we have here is not criminal activity. We have a business in a tight spot because its business model is failing, through no fault of its own. That’s business for you. Grow up and deal with it. If broadcast TV has to morph because ad revenues fall, so be it. That’s the market at work. When men stopped wearing hats in the ‘50s, did the hat-makers lobby congress to require men to wear hats? No. Did hat-makers go out of business? Yes. Was it a tragedy? I suppose for some hat-makers it was, but the world continued to spin, and the hat-makers found other things to do.

One final ironic twist: the full original interview with Mr. Kellner is only available after paying real money up front, probably because inside.com discovered they couldn’t make a go of it with ad revenues.


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