Online Extra: Q&A With Deloitte's Tony Kern

Cable World, August 8, 2005

CW: Can older cable networks with very strongly defined brands and core audiences easily redefine themselves? How do they do that without a hint of desperation in their efforts to be hip and young?

Kern: It's hard, I agree. ESPN's a good example of a network that's known for being something--sports--but it's difficult to make yourself over and expand beyond your core identity. What we talk about with some of our network clients is about becoming a branded gateway for something. Unless you're really known, it's very difficult. And it's extremely difficult to develop a lot of loyalty right now because they're so much choice and it's so easy to get to so many different programs. Between time shifting and wiping out commercials, and receiving content when you want it, where you want it, and how you want it, it's hard for networks to develop brand loyalty right now.

CW: What happens to programs when they become detached from their network--so Desperate Housewives is the brand, not ABC--in a DVR environment where people are downloading shows and not brands?

Kern: That's a major issue. It gets into this long tail theory about what's the shelf life of a show, how long does it last and how do the advertisers react. Advertising is such a big component of television, and people are talking about the concept of embedded advertising and how do you get the people in. We're starting to see some of the big consumer product companies really think through how they reach audiences, and that's bound to create some issues.

CW: At some point does the upfront advertising model of pre-selling fixed time in linear network programming just become obsolete? After all, how do you guarantee, let alone cume, an audience across all these different platforms and devices?

Kern: Advertising has got a couple of different layers to it right now. Not only are you trying to capture and understand who's watching, it's when they're watching. So if you time shift something out by two weeks, and a lot of people are doing that, the advertising--even if you watch it--in some cases is worthless because it's so time-sensitive. So it's a multidimensional problem. The makeover shows are a good example--Queer Eye, for instance, is just chock- full of endorsements--of how advertising is going to come at us in all sorts of forms.

CW: What's your advice to networks that are no doubt panicking somewhat as they try to figure out what platforms they need to be embracing now? This year alone there has been a flurry of deals announced with networks porting their content onto cell phones, trying their hand at podcasting, simultaneous streaming of series premieres online, creating broadband-only networks, not to mention cutting video distribution deals with Verizon and SBC.

Kern: One of the theories is you need to become the gateway, so who's the gateway? It seems to me right now it's the cable companies, to some extent, and the Verizons and SBCs and people who own the wireless companies are the gateways. Some of the content companies do have the option of becoming an MVNO [mobile virtual network operator, which Disney and ESPN are pursuing, for example], becoming mobile vendors and virtual network operators, there is some of that going on. I think people are kind of hunting right now for the right answer. My advice to networks is to try to become known for something, and if you can't become known for a single thing, or if the economic impact of that is such that it really harms you, then you need to take whatever current cash flow you have and start breaking yourself apart into consumable pieces, into pieces that do have--not unlike the Discovery model, which is a very good model--core groups of people associated with your content, whether that's military buffs or what have you.