Crashing The Gatekeepers

In 1976 MCA sued Sony over the new Betamax video player/recorder. MCA feared the public would copy its movies and TV shows off the air. Sony contended it was not responsible for how people used its video recording machine. Both sides lost. MCA's protectionist attitude prevented them from taking the lead in the video cassette rental business. Sony's reluctance to license its recording technology allowed the rival VHS format to prevail.

Neither MCA nor Sony heard the consumer. Both companies were seeing the market place filtered through their own priorities. MCA was afraid of piracy. Sony knew it had a superior recording technology. But all the consumer wanted was to stop by his local video store on Saturday night and rent a couple of movies.

Looking at the MCA vs Sony suit today, it was the first indication that the viewer wanted to be his own programmer. The phenomenal growth of VHS and the home rental business was the precursor of the explosion of channels and choices that is now before us. Then, like now, the facts were misunderstood and the signposts were ignored.

As much as we deal in ideas and think we embrace the future, there is a disquieting pattern in our business to resist it. If we are to fully understand what lies before us, then we must first learn to look at our business not as television but as part of a broad scheme of entertainment and information marketing spawning all media. Forget terms like "broadcaster" and "viewer". These are archaic. Substitute "gatekeeper" and "end user".

"Gatekeeper" is used by audience researchers to describe the closed systems (networks, studios, distributors), that unilaterally make programming decisions. Gatekeepers think they are serving the audience but they serve themselves. "End user" is borrowed from the computer software industry to describe the consumer who ultimately makes use of the product. The end user is the last active participant in a chain of decisions that start with the software programmer. The viewer we once knew was a slouchy, passive Homer Samson character who sat passively in front of the tube. That's changed.

In 1991 BILLBOARD MAGAZINE finally got around to updating its data retrieval system for the weekly chart of best selling recordings. For as long as anyone could remember the chart was based on reported shipments by wholesalers and telephone surveys of stores. But most big retail chains were now keeping track of their inventory with bar code scanners at the cash register. Why not use the same data to track national sales for the BILLBOARD chart? BILLBOARD finally overcame resistance from the big recording labels and changed to an electronic data base.

In one week rock went down, country went up, and classical music proved it still had a loyal audience. The industry went nuts. Accusations were hurled about faulty research and inadequate sampling. The research methods were fine tuned, but the same conclusions held. What had happened? The recording industry was a business long accustomed to making its own hits.

Recording companies tended to push artists they thought would break through. The wholesalers depended on this hype to push merchandise into the stores. The customers seemed to be buying it, but sales figures were always suspicious because of returns, dealer discounts and questionable data. Now the data was no longer in question, and people were not buying what they were supposed to, they were buying what they wanted.

The industry had evolved into a closed system, deciding what was hot and what was not. Much of this effort was to please the wholesaler who had to push the merchandise into the stores. The customer who went in to buy was not part of this decision-making process. The industry was acting as a gatekeeper, and the true end user was not so much the customer as the wholesale rackjobber. When the customer finally had a vote, the industry cried foul.

Compare this to the big three broadcast networks. For years they made decisions based not only on ratings but advertiser acceptance and clearances from local stations. Without network confidence that a program will attract ad commitments and clearances, the public would never see it.

The justification for this system was the rating. If they were good, the executives guessed right. But ratings reflect available choices, not true preferences. The industry was acting as the gatekeeper, the end user was not the viewer, but a combination of the local station and the advertiser. The analogy is a newsstand where the reader (end user) can buy anything that is available, but the choices are limited by the news vendor (gatekeeper) who picks the newspapers and magazines to be displayed.

Pay-cable channels like HBO never have had the luxury of this sort of self-delusion. They can't afford much hyperbole because they always have to face the grim truth of the check in the mail at the end of the month. If they don't please the audience, they're gone. This is the most direct link between broadcaster and end user.

HBO's very successful premiere movies are tested in screenings with HBO subscribers. In contrast to the blind-sided ACE testing with antique audience meters and the Magi cartoon that the networks long-employed as a research tool and a political weapon against producers, HBO's audience samples are a direct link with current end users of the service.

Basic cable services operate differently. Unlike an HBO, they have advertisers and local operators to contend with. But their minuscule share of market forces them to be much more sensitive to audience behavior and to demand far more specific information from research than the major over-the air networks.

In this confusing new marketplace, where long-cherished truths are succumbing to rapidly changing tastes, the role of audience research is ever more important. Research has long been the adversary of the producer and sometimes the political ally of the network. New data collection techniques may actually help the producer by providing an edge in understanding where the business is going. Research may also give the consumer his best chance at a democratic vote in programming decisions.

The new breed of researchers (including Tim Brooks at USA and Andy Fessel at Fox who were very helpful in preparing this article), see the changes in the viewer as a topic of much discussion. The explosion in data gathering techniques in the last few years has provided so much new material that much of it has yet to quantified and analyzed. The floodgates opened when Nielsen replaced its old hand-entry notebooks with electronic diaries two years ago. Suddenly the preferences of the new end users started to take shape.

Among the findings: people watch fewer episodes of each show, even their favorite shows. (This may explain why the networks have started double exposing the first episode of some shows in the fall.) Even the loyal audience for big hit shows rarely sees more than two of four episodes (great news for reruns). Most people watch only eight or ten channels, no matter how many their set receives. But every end user's favorite eight or ten may be very different.

Even within the preferred eight or ten, most people are confused over what they are watching. Both Fox and USA have put logos in the lower right corner of the picture to help grazers identify on which channel they have landed. Some people complained at first, but most of the audience either didn't care or found it helpful.

This is leading to fragmentation of the audience. In one decade (the 1980's) cable penetration went to 60%, VCR to 75%, and remote control devices to 80% of American homes. In the same period, network viewing declined not only in cable homes but non-cable homes as well because of choices available on local stations and ad-hoc networks. The splintering of the audience will make it ever more difficult to launch new mass appeal shows, but may provide opportunities for sampling new shows targeted to specific interests.

However, people still enjoy coming together to watch mass appeal, hit shows. This activity is far more communal than was thought. The image of the lone TV watcher, especially in prime time, is not accurate. (This communal aspect of viewing should be a great boost for pay-per-view.)

The channel selection devices will increase in sophistication. If the Newton can remember handwriting, how long will it be before the channel selector remembers what every member of the household likes to watch, and what time and day they like to watch it? Measurement devices will become even more sophisticated. Some cable operators with addressable capabilities are already doing their own surveys. They can instantly tell which subscriber households are watching each show.

Both Nielsen and Arbitron are working on individual people meters that will measure each viewer's unique preferences. Arbitron's version is a beeper-like device that will pick up embedded signals from TV shows, recordings, video games and perhaps even feature films. Wherever the wearer goes, whatever entertainment he is exposed to he will be on an electronic leash. Nielsen's version is a "passive" people meter that will recognize a stored digital image of your face when you sit down to watch. In either case, the audience sample will likely increase to 5000 or 6000 from the 1200 it was a few years ago.

All this information will be invaluable not only to broadcasters and producers but to advertisers. The dependence on masses of viewers living in HUTs went out with the Nielsen diary. The trend toward specific demographics of well-defined target groups within the population is well-established. Audience information overload has already retired heavy-handed soap commercials in favor of longer, more artful, mini-informationals that can entertain as well as sell. These commercials cost more to produce, and can be run less often.

They are effective, but only a stop-gap solution to the problem of too many commercials running too long. The genius of the next decade might be the broadcaster who figures out the economics of less commercials less often. Television may go through the sane growth experience as radio when listeners discovered FM. Remember gimmicks like "commercial-free" hours and "soft-sell" commercials built into the programming?

FM-style TV is one new possibility, and direct satellite delivery is another. Next spring Hughes Direct TV starts spinning out its signal across America. Unfortunately, this is one case where the technology may not be as advanced as the intent. The converter will cost $700. Add this to the cost of pay-cable channels, and the inability of the system to provide coverage of local stations, and it doesn't seem very likely that people will go for it unless they live in rural areas or they really hate their cable operator.

Direct satellite will probably have more impact in countries where the government and a few chosen licensees are still the gatekeepers of programming. Canada is a prime target. Established broadcast interests in Canada refer to the proposed new direct satellite service as "the deathstar."

Direct satellite may not be a good test of pay-per-view, but Carolco's deal with cable giant TCI is certainly worth watching. Carolco made a deal with the devil to allow TCI access to certain films for pay-per-view prior to theatrical release in order to extract itself from bankruptcy. The deal was considered a triumph for pay-per-view and a potential disaster for theatrical exhibition. Not surprisingly, theatrical exhibitors have threatened never to show these films theatrically.

Doyens of the feature film business have already invoked the usual palliative slogan "seeing movies in theaters is a communal experience that can't be duplicated on TV," to quiet fears of pay-per-view's potential erosion of the theatrical business. But research says TV watching is also communal (and a great deal less expensive than tickets, parking, popcorn and a Diet Coke).

What will happen to the theatrical film business when it must undergo the same metamorphosis from viewer to end user that is reshaping the recording and television businesses? Even though the movie business would seem to have a direct link from studio to consumer (you step up to the box office and hand over your money), the reality is somewhat different. The movie business is a prime example of a closed gatekeeper system. Movie distribution is a monopoly of seven studios. Exhibition is controlled by half a dozen major chains.

If a big film cannot open in 2300 theaters on Memorial Day, it can't compete. The theater chains grant clearances just like local stations. They operate in combination with the studios to hype hits just like the recording companies do with the rackjobbers. Who is the gatekeeper? Who is the end user? The public pays its money but is limited to the choice of what is available.

Pay-per-view may change all that. If the studios become dependent on pay-per-view pre-release, they will be forced to tailor product for that market. It probably won't effect the big blockbusters, since they will most likely still open in theaters. Everything else is anyone's guess. The likely scenario is that pay-per-view will break the distribution monopoly that has existed for 70 years and leave the theatrical market wide-open to world-wide competition.

It's one thing to understand how protective networks and studios have become gatekeepers and the audience has changed into end users. Making use of this information as a producer, writer, or director is something else. Research confirms that people still like a good story, and that if you analyze successful series and movies over the long view, they are more often good than bad. The press paints pretty pictures of the information-and-entertainment-zonked world that is just in front of us, yet most of us see diminished possibilities for our own work. It is almost impossible anymore for an independent producer to own product. Talent fees are being pushed downward by back-end economics. Fees and profits at the newer cable networks are sometimes insulting.

The new opportunities may not be in doing the same thing for different masters; but searching for innovation in the way we create. A fragmented universe needs new ways of reaching people at prices it can afford. It can not pay the same price as the old gatekeepers, but it thrives on freshness. The end users won't accept old ideas--they can see them on reruns any day of the week.

The new empowered audience works by visual shorthand and embraces ideas faster than light. (Who ever heard of Beavis and Butthead last year?) And when unthinkable and inevitable change strikes corporate giants, it usually strikes rapidly. Both MCA and Sony thought they had the game figured out. But the winners of the first round in the programming revolution were Blockbuster Video and Domino's Pizza (they deliver). Who could have known?

Robert Lovenheim is President of River City Productions.