TIVO Part II
There are a lot of explanations for why the networks have rushed to
embrace their own creative destruction, most of them premised on the
idiocy of network executives. Only one of these explanations is plausible:
they feel they have no choice. "If the networks could roll back the clock
and prevent digital technology from ever happening, they'd do it," says
LeMasters of Replay. "But how do you stop progress? We're offering
them the chance to adapt." Tom Rogers, the former president of NBC's
cable division who made the first network investment in TiVo and
Replay, puts it this way: "We thought that the technology was going to
come, and it was better to have some voice in shaping it than none." It
was the promise of NBC's imprimatur, in fact, that caused TiVo to
design its remote control without what Rogers calls "the ad zapper." By
the time Replay decided that it might be useful to have the endorsement
and money of the networks, the company was too far along to eliminate
QuickSkip, its ad zapper. NBC gave Replay money anyway. "We
couldn't be in a position of being seen to promote a technology that was
intended to undermine the economic support of the industry," says
Rogers, explaining the quiet promise not to market the feature to
consumers. That was in late 1998. Since then, Rogers has left NBC to
become chairman of Primemedia, a holding company for lots of little
niche media. Today, Replay markets its ad zapper. And one of TiVo's
new advertisements features a network executive being hurled out a
window by a pair of goons.
Their indiscriminate hurling of money at both TiVo and Replay suggests
that the networks understand that the companies trying to commercialize
the technology are, in a way, irrelevant. (Why not just back the one who
promises to be less hostile?) It's the technology that matters; and it's the
technology that is sure to win. "A lot of these guys had their bell rung four
years ago by the Internet," says Steve Shannon of Replay, "and they
don't want to be humiliated a second time." The Internet gave birth to a
new corporate religion to replace the one it killed. The religion says:
change is inevitable. The question now being posed by the television
establishment -- and it emerges from the belly of the beast as a weak
burp rather than a loud blast -- is no longer, "Is this new gadget going to
affect us?" or even "Will this gadget eventually change how Americans
watch TV?" but "When this gadget changes how Americans watch
television, what else will it change?"
A lot.
he black box obviously does not mean the end of commercial
television, only of commercial television as we know it. It poses
two questions that demand a response from the television industry. The
first is: How do you get people to watch ads when, with the press of a
button, they can eliminate them? The sad truth about most popular TV
programs is that they are poor vehicles for delivering advertising
messages. And the sad truth about ads -- even the ones that cost $3
million to make and win the Golden Lion at Cannes -- is that the people
who watch them really didn't ask to see them; people are just too lazy to
avoid them. The black box puts an end to that racket. Either the ads will
need to become as entertaining as the programs or the programs will
need to contain the ads, so that they cannot be stripped out. If Jennifer
Aniston wants to remain a Friend, she may need to don a T-shirt that
says "Diet Coke."
The basic formula for making
and selling TV programs hasn't
changed since the beginning of
commercial television. The
network that develops a new
program assumes it can ensure
its success by placing it in a
desirable time slot, when a lot
of people happen to be
watching TV. It further
assumes that it can pay for it by
selling commercial time during
that program. The commercials
then get flung at whoever
happens to be watching at the
time. The entire history of commercial television suddenly appears to
have been a Stalinist plot erected, as it has been, on force from above
rather than choice from below. The networks have coerced, or
attempted to coerce, consumers to watch programs and commercials in
which they have no native interest. The advertisers who pay for the
commercials have agreed to believe, without good evidence, that some
meaningful percentage of viewers actually behave in this manner. They
have further agreed to believe, again without good evidence, that the sort
of people who watch a particular program have a more than ordinary
interest in the products advertised on that program. People who enjoy
pro basketball are more likely than people who watch soap operas to
drink beer; therefore beer companies buy ad time in the middle of pro
basketball games.
Against the backdrop of the Internet boom this strikes the newer sparks
of the ad and marketing business as terribly retro. "The television
advertising business," says Tim Hanlon, a media director at Starcom
Worldwide, a large advertising and marketing conglomerate, "is a science
based on specious data." That data, generated by Nielsen Media
Research, uses a sample of 5,000 homes to determine how many
households tune into a given program, not how many watch the ads. "The
measurement we use today is very crude," says Daryl Simm, the former
head of worldwide media and programming for Procter & Gamble and
the current head of media at Omnicom, yet another large advertising and
marketing conglomerate. "It's an average measurement of the number of
viewers watching an individual program that does not even measure the
commercial break. When you think about improvements in measuring
viewer habits, you think not about incremental changes but great leaps."
The TiVo and Replay boxes represent the greatest leap of all. They
accumulate, in atomic detail, a record of who watched what and when
they watched it. Put the box in all 102 million American homes, and you
get a pointillist portrait of the entire American television audience. And
that raises the second and more disturbing question to which the TV
industry must respond: what do you do when you actually know who is
watching and why? Already, TiVo and Replay know what each of their
users does every second, though both companies make a point of saying
that they don't actually dig into the data to find out who did what, that
they only use it in the aggregate. Whatever. They know.
More to the point, they will know, in great detail, the viewer's interests,
as recorded by the black box. Even now, advertisers pay a lot more for
a well-targeted ad than they do for the sort of near-blind matchmaking
that the networks, historically, have made their chief business. Put
another way, an audience of 200,000 people you know intimately might
be as valuable as an amorphous mass of 20 million. After all, a person
with a deep interest in a subject is more likely to watch an ad about that
subject. "You and I may not care to watch a commercial for Preparation
H," Josh Bernoff says. "But for someone with hemorrhoids, it might be
the thing he is most eager to hear about. And he's the one the makers of
Preparation H want to talk to."
This is the market promise of the new black box. It can extract far more
profit from every viewing minute of American television by creating
endless clusters of new and very valuable groups of people with some
common intense commercially exploitable interest. "This technology will
encourage all sorts of niche brands," says Jim Barton of TiVo, "as well as
whole new markets." His favorite example is the field-hockey channel.
Everyone in the world with an interest in field hockey can punch "field
hockey" into their box, and the box will go and find and record any
program having to do with field hockey. At the moment, there isn't much
field hockey out there on the tube; that will change. The maker of the
new field-hockey related shows will rent cheap time -- at, say, 4 a.m. --
to broadcast. Field-hockey enthusiasts will simply record the shows. And
-- voil -- a new business is born. "The business is two guys," Barton
says. "One of the guys goes out and acquires field-hockey content. The
other guy calls people who make field-hockey equipment."
The economics of targeted ads is so compelling that to make them
possible is to make them certain. The formula for a field-hockey channel
that sells only field-hockey equipment or a hemorrhoid channel that sells
only hemorrhoid treatments is endlessly reproducible. But the same
slice-'em-and-dice-'em logic applies even to such seemingly mass market
events as the Super Bowl and the Academy Awards. The broadcaster
that owns the rights to a mass-market event will be under tremendous
pressure to carve the audience up into little pieces and to sell each piece
to the highest bidder. Once the black box is ubiquitous, an advertiser
need not buy the whole audience; he can buy a piece of the audience. Of
course, General Motors may still buy time during the Super Bowl -- and
pay a lot more for it. The company will probably use the time differently,
though. In a world filled with black boxes, G.M. might use its 30 seconds
to distribute 50 different commercials to 50 different clusters of
consumers. New mothers will see ads for S.U.V.'s, middle-age people
will see ads for sports cars and so on, and all the little groups will have
been identified for G.M. by the new black box.
But even that is a retrograde example. The operative unit in TV ratings
will no longer be the program but the moment. Advertisers and networks
will know with weird accuracy who and what within each program best
holds television viewers' attention. The black box can determine which
joke in Letterman's monologue prompted certain viewers to switch to
Leno or which medical emergency inspired viewers to exit "E.R." (If you
thought the pressure on entertainers to be perpetually entertaining
couldn't increase, think again.)
any things will change when television is able to whisper finely
tuned messages to like-minded consumers rather than hollering
crude messages through a bullhorn at millions. One thing that will change
is the price of the messages. If they are to become more valuable, the
targets must shrink, and as the targets shrink, the tools used to hit them
must shrink as well. Not even General Motors can spend $3 million on
an ad that will only be seen by 40,000 people. "We sort of see this as the
changing of television as a medium," says Hanlon of Starcom. "I know
the creative side of our business truly hasn't gotten this yet; they still see it
as a fringe technology. But they are the ones who will get steamrolled first
and most cleanly."
The people who use the bullhorn are also in trouble. Mike Ramsay
recalls how in late 1997, just after TiVo opened its doors, he received a
call out of the blue from Procter & Gamble's research division. Along
with General Motors, P.&G. is the largest buyer of television time in the
United States; between them, the two companies ponied up $3 billion of
the $45 billion spent last year on television ads. "These two guys from
P.&G. were in a car on a cell phone down the street," Ramsay says.
"They were in the valley visiting and heard what we were doing and said
they'd been playing with a similar idea in their labs because they knew
that, sooner or later, something like this was going to happen. And they
had the obvious question, 'How do we sell soap now?"'
The P.&G. research division believed that the
inevitable collision of the computer and the
television made it far less likely a) that people
would gather in groups of millions to watch
TV shows and b) that people would watch
ads that were thrust on them unbidden. But in
P.&G.'s view, this was not necessarily a bad
thing. "I'm really intrigued by this notion that
the viewer now will be more dedicated," says
Simm, who ran P.&G.'s media. "He'll have a
higher degree of interest in what he's watching
because he has an investment -- he's gone to
the trouble to capture the program. That
investment is going to connect him to the
viewing experience in a way that is stronger
than just grazing around. Viewer loyalty has
got to translate into advertising opportunities."
It does -- but for whom? It's one thing for the Internet to poach a bit of
the American attention span from the television. It's another to transform
the television into an Internet-like renegade force for individualism. The
television is the mass market. Without the television, there never would
have been Tide or Rice Krispies or Alpo but a thousand versions of Tide
and Rice Krispies and Alpo. This may not seem like a big deal to a user
of Tide or Rice Krispies or Alpo, but to a manufacturer of Tide or Rice
Krispies or Alpo it matters very much indeed. For the big brands, life
without television is no life at all. Giant corporations whose sole purpose
is to mass-market consumer goods exist in their current form because the
television shaped the mass market. If television ceases to be a mass
market, the mass market largely ceases to exist. The question isn't, "How
does P.&G. sell soap?" but "How does P.&G. survive?" It must
transform itself from a maker of mass-market goods into the world's
largest boutique. After all, the consumer would obviously prefer not only
the message precisely tailored to him but the products as well. In this new
market, there will either be hundreds of versions of Tide or no Tide at all.
But why stop there? It isn't just the mass market that is crude and
inefficient and therefore ripe for re-evaluation; it is Market Man himself.
The new technology enables the market to redefine the consumer along
significantly different lines. Instead of grouping him according to
observable traits over which he has little or no control -- age, race,
gender and so on -- the new market will know him by the decisions he
has made about how to spend his time, each and every moment of which
is recorded by his black box.
Nick Donatiello, the head of a San Francisco market-research company
called Odyssey, says that the black box -- along with related
technologies like the Internet -- makes it likely that ads will be tailored
not to outward characteristics but to the more fundamental attitudes of
the consumer. General Motors will run one commercial, perhaps, for
people with a tragic view of life and another for people with a comic view
of life. "Demographics used to be a good proxy for attitudes," Donatiello
says. "In the 50's, you could tell a lot of things about a person if you
knew where he lived. You can't do that anymore. We've become too
fragmented and autonomous a society."
The process of getting inside a consumer's mind so that you can then get
inside his wallet sounds invasive, and perhaps it is. But it's nothing
personal. TiVo or Replay or some black-box service company will be
able to present some mass-market company trying desperately to stay
alive with 40,000 consumers classified as People Who Live for Onions.
The individual consumer need never be mentioned by name or separated
from his discrete group of onion obsessives -- at least not yet. Permitting
himself to be classified with ever more intrusive precision is the price the
onion obsessive pays for getting his onions. He may still not like the way
the market classifies him, but this time he has no one to blame but himself.
In that sense, it's rather heartening.
But what happens to people when the market view of them is different
from the one they have of themselves? Do they come to see themselves
as the market sees them? Do they feel more "29-45" or "male" or
"Hispanic" because the incoming commercial signals are aimed at these
specific traits? Will they come to think of themselves not as white or
young or female but as Positivists or Relativists or whatever other types
get dreamed up in response to the data generated by the black boxes?
Stuff like this happens in America. One paradox of Generation X is that it
viewed itself as ironically detached from the marketplace, when in fact it
was itself created by the market. It grew out of MTV, which came into
being because advertisers found it handy to have young people stripped
out from the rest of us so they might be more accurately targeted.
t's a little strange to think of the mass market as a collective, but that
is what it is. People who watch commercials subsidize people who
don't; people directly influenced by ads subsidize people who watch ads
with ironic detachment. This little pocket of socialism came into being at
least in part because the technology did not exist that could measure, and
put a price on, the attention of individual consumers. The mass market
put a price not on individual states of mind but on the average state of
mind of commercially very different people. It did this because it made no
economic sense to parse in microscopic detail what each and every one
of us did with our attention and why we did it. And so the market just
lumped us together and assumed we all paid more or less the same
attention.
Now, suddenly, the technology has appeared that can unravel the
collective. That it arrives at a moment when all forms of socialism are on
the run is either a magnificent stroke of luck or a good example of a
society getting the technology it deserves. The only question is how far its
logic will be taken -- to what level of detail will the consumer's state of
mind be measured and priced?
But that makes it sound as if it is all some sort of elaborate conspiracy,
beyond anyone's control. There is a pitiless economic process at work,
so gradual that it does not really ever demand to be noticed. It is a
species of economic determinism, the reverse of the one Marx described.
The means of consumption, not the means of production, are the engine
of modern economic life. The consumer's neurons will be measured and
priced only if the consumer wants his neurons to be measured and
priced, because their precise measurement enables others to give him
exactly what he wants. If this is a conspiracy, it's a whole new kind of
conspiracy. The consumer must conspire against himself.
Maybe the best way to see what's about to happen to the mass market is
to observe what has happened already. To some extent, for instance, ads
have become more like entertainment, and TV programming has moved
in the direction in which it is about to be shoved much, much further. The
few events that really benefit from being watched live -- sports and
awards and sensational unfolding news -- have a greater gravitational
pull, and a greater market value, than ever. Synthetic events like "Who
Wants to Be a Millionaire" and "Survivor" are prescient, for they involve
the viewer as a quasi participant and require the actual participants to
deploy many vendable goods, thereby offering sparkling opportunities for
product placement. In a "real" world, real goods and services are more
naturally introduced than in a purely fictional one.
The new black box is really just a fantastically powerful accelerator of the
fragmentation of markets that has occurred in response to cable television
and the Internet. The Internet has paved the commercial imagination;
everyone understands that something like the new black box is bound to
happen to television. Already there's some rumbling in the netherworld of
advertising and marketing that suggests it is preparing itself for the coming
earthquake. For instance, last fall Starcom began to classify television
audiences not by demographics but by something it calls "passion
groups," which are defined by shared interests. Odyssey shuns
demographics and instead categorizes consumers along the lines of their
fundamental attitudes, giving them funny names like New Enthusiasts and
Old Liners. Procter & Gamble has created a Web site called
Reflect.com that enables shoppers to create their own beauty products --
a harbinger of an age in which every consumer will feel free to demand
products tailored to him and him alone.
The theme of all this -- and much of what is new in the market -- is that
groups are narrower and defined by interests and that the ultimate interest
is . . . Me! The main thing about Me! is that he always gets what he
wants, or at any rate what he thinks he wants. The mass-market
consumer was a character who subjected himself to some form of
coercion. The unmassed consumer needs to want to be sold.
When a persuasive new technology appears, it is only natural to wonder
what effect it might have on the world around it. But it is also worth
putting the question the other way around: what effect does the world
around it have on technology? That is, what kind of society gives birth to
such a gadget? Nick Donatiello makes the point that the black box is
ideally suited for American life as it is currently configured, when
consumer choice has been exalted to a fetish. "If you had offered
Americans this box 30 years ago," he says, "they wouldn't have had the
same reaction. One of the reasons people used to watch TV in the
1950's and 60's was for the shared experience. The metaphor for the
country was the melting pot: people wanted to be the same. People read
Time and Newsweek mainly because other people read Time and
Newsweek. Now the metaphor is the quilt."
This is another way of saying that a technology that was shaped by one
kind of society is being forced to adapt to a new kind of society. Most of
the changes the black box so grandly encourages are merely extensions
of trends under way: decentralization, free agency, the rooting out of all
kinds of antimarket behavior and so on. Even the birth of the black box
itself -- brought about as it was by obscure entrepreneurs working with
venture capital instead of big companies trying to impose change from the
top down -- was, as the market analysts are fond of saying, on trend.
The tail now wags the dog. |
