Google dominates Internet advertising, with 44.1% of the $113 billion per year global online advertising market, but it's quietly gunning for control of the even larger television advertising sector. As Robert Kyncl, a senior manager at Google's YouTube operation, said in a recent New Yorker interview, "[T]his industry [i.e. TV] is worth three hundred billion dollars, worldwide, and we hope to see value shifting hands."
"Value shifting hands" sounds like a feisty challenge to entrenched interests, but in practice it's likely to mean one more step in dismantling the middle class in this country. In industry after industry in the last forty years, we have seen "value shifting hands" from working families into the hands of corporate shareholders promoting "globalization" or the next "disruptive technology."
And here's the thing about Hollywood: while the name stars get a lot of attention, the reality is that line workers in the television industry, from the people working the cameras to those delivering the food, are part of one of the last union town bastions. With auto, coal, steel and other major unions a shadow of their former selves, the Hollywood unions largely formed in the 1930s are actually one of the last thriving representatives of that historic surge of working class power.
The danger is that a Googlization of the television industry could mean the end of a living wage industry there as well.
In a typical multi-front approach, Google is taking on the television industry by trying to control the television software in the homes, remaking the television advertising industry to suit its strengths and funding alternative television content in competition with the major studios.
Taking Control of the Remote: A key goal for Google has been to make watching television more like surfing the web -- with all the opportunities that implies for inserting Google advertising throughout the user experience.
Google has been promoting its Google TV technology for a number of years, and now seems confident that the combination of alliances with manufacturers to install its software directly into televisions and the popularity of its Android handset software -- which now powers Google TV -- can put the company firmly at the center of the television watching experience for home viewers. Google's Eric Schmidt predicted at a conference in December that by this summer, a majority of televisions sold in stores would have Google TV -- the company's interactive software system -- embedded in the hardware.
A number of analysts have questioned the likelihood of Google's software moving that fast into consumer hardware but sources told tech website Neowin that Google was making payments to multiple vendors to ensure they included Android in their television hardware. While Google denied the report, a few dollars per television from Google would, in Neowin's words, "go a long way for vendors who have been seeing diminishing margins over the past few years."
The benefit for Google of sitting in user remotes will be clear. The company will have more data to track user references for advertisers and the ability to promote alternative content channels where Google advertising is prominent.
Remaking the Television Advertising Marketplace: However, Google is not waiting for television to come to it; its been aggressively entering the traditional television advertising market -- albeit with its own twist that could upend how television production is paid for.
Google has a whole Google TV Ads service for placing ads on television, much as it places ads on websites through its AdWords service. By cutting deals with Direct TV, Verizon FioS, Viamedia and, just this month, Cox Media, the third largest cable operator, Google can place ads reaching 48 million US households on over 100 channels. In the last year, Google claims a six-fold increase in the number of ads aired each day.
What is most radical about Google's service is not that a new player is grabbing a share of the television ad market; it's the way those ads are being sold. Most television advertising is often sold before a show's season even starts in what is called the "upfronts," where top advertisers lock up prime advertising spots on most shows. Traditionally, those advertisers who failed to make those bulk advertising deals were stuck buying overpriced remaining slots from a handful of advertising brokers in what's known as the "scatter" market.
Google is creating an end-run around the networks in cobbling together a "national inventory pool" of ad slots available over multiple cable and satellite operators. Those operators can now easily put slices of unsold ads into the inventory pool, while advertisers can buy ads reaching a large national audience, in what Jim Edwards at Business Insider describes as "a model for killing the broadcast TV business as we know it."
And the advantage of Google TV Ads will be that, with Google's tracking of consumer behavior -- online and in their television watching choices -- advertisers will be able to target their ads to particular households based on a range of behavioral profiling.
Exploding Niche Channels for Advertisers: The holy grail for advertisers is to have a show with viewership specifically attuned to their product. Google Ads can help advertisers find the households they want but to ensure there are more channels serving the exact niche market an advertiser may want, Google is funding an explosion of new television channels that will begin broadcasting this year on YouTube (which will be easily accessible on any television with Google TV installed -- see how the pieces all come together?).
YouTube is currently streaming 4 billion online videos a day -- with three billion of those videos each week delivering advertising revenue. But the problem is most of these are watched in short bursts without users plopping down to watch for hours on end.
So Google is currently handing out $100 million in upfront production money to partners to create professional long-form content that will air throughout the week on 100 new specialized television channels broadcasting on YouTube. These partners include Madonna producing a dance channel, Amy Pohler making a comedy channel, The Wall Street Journal and Reuters producing news channels, and Jay-Z, Shaquille O'Neal, The Onion, Slate and a range of other entertainment and media players delivering content for particular taste and demographic niches.
Google will supply the advertising, of course, for these shows and split the revenue with the partner channels (recouping its upfront costs from the partner share of advertising revenue). With online delivery of content, Google will be able to tell advertisers exactly who is watching their shows, their demographic and taste preferences and pretty much anything else those advertisers want to know to more effectively push their products.
With the ability to track consumer preferences and with Google TV direct a chunk to its specialized channels, Google will be able to sell television ads in real-time for any niche audience an advertiser wants at any time.
Producing for niche audiences inevitably means fewer resources -- and production companies will likely make up the difference in lower wages for many production workers.
This threatens the current production system, where entertainment unions in Hollywood have built an amazing machine to share the profits of the entertainment companies with the line workers in the industry, not just with the name actors but also with the people who work the cameras, build the sets and deliver the food to the set.
While actors and top-line talent benefit from residual (repeat) payments from shows they directly worked on, the broader workforce in the industry receive residuals essentially from all shows -- hits or stinkers -- to a shared health care and pension fund, the Motion Picture Industry Pension and Health Plans. And those residuals are a majority of the funding for the health and pensions of those "below the line" workers. That integrated system means that the health care and pension of those workers doesn't depend on winning the lottery of being on a hit show; as long as they work, whether consistently on one hit show or on a bunch of shorter-lived ones, they and their families are taken care of. For those "below the line" workers, the union benefit plans paid out over $500 million in health benefits alone last year.
Likely Union Busting in Cut-Rate Google Productions: As with other industries "transformed" in recent decades, a fragmenting of the industry will likely mean a disintegration of an integrated delivery of health benefits for those in the industry and the destruction of long-term pension benefits.
If all Google YouTube production outfits signed up with the existing unions and their benefit plans, that might mediate the damage. But every indication is that these productions are likely to try to evade unionization; Anthony Zuiker, who created the crime show C.S.I., is developing a channel called BlackBoxTV for Google and is enthusiastic about the chance to avoid traditional rules -- including presumably union rules -- in production:
[On traditional television] there is a lot of interference and a lot of rules. With YouTube I will have a very small crew, and we are trying to keep focused on a single voice. There aren't any rules. There's just the artist, the content, and the audience.Note the absence of the interest of workers in the industry in the equation in that last line. This is a model for empowering and enriching a few top-level "artists" in Hollywood, while leaving the forgotten line workers out of the profit equation.
Google's Advertising Model Will Undermine Hollywood Labor Model: Even if a few of Google's allied production companies unionized, the overall thrust of Google's advertising model is likely to undermine stability of the Hollywood labor market and thus the room for unionized approaches. Its model is one of placing ads in real-time, encouraging much more short-term horizons for determining the success of failure of any television venture.
And with its Google TV Ads program, that short-term, real-time ad placement model is increasingly penetrating regular television decisions, not just the emerging online television models as with Google's YouTube channels.
Currently, advertisers commit roughly $9 billion to the following season's television shows during what's known as the "upfront" process each Spring. Many shows sell out their complete run of ads for the fall. While the exact price paid for each show's ads will rise or fall with the televisions ratings received by the show, this does represent a large commitment of resources to each studio that allows planning and, for workers in the industry, a commitment to pay and benefits.
For the big five studio broadcast networks, the total upfront money has been stagnant, with 2004 being the high-water market of total upfront dollars, even as television viewing has leaked out to cable channels and, increasingly, online viewing. In fact, the only reason revenue has not cratered is that studios have managed to impose rapidly escalating price increases per viewer even as the total broadcast audience has dropped.
But the longer-term planning allowed by the "upfront" system of paying for large chunks of coming seasons is likely to increasingly give way to short-term, real-time pricing if Google is successful. And even if a production company, existing or emerging, is willing to sign a union contract, even the best-intentioned employers may find it hard to commit to health care and pensions for their employees if a swing in the ratings immediately drains all revenue--and they face union-busting competitors promoting a low road, cut-rate production model.
Short-Termism Will be Bad for Hollywood Workers, Bad for America: Bemoaning the short-term thinking and dumbing down of Hollywood's products has been going on for generations, but amidst the dreck, quite successful and sometimes even artistic work has been produced.
The vibrancy of the product has meant that U.S. television has dominated the world -- and the economic result has been a large trade surplus in the entertainment sector. The Bureau of Economic Analysis found that between 1986 and 2005, foreign sales of U.S. motion picture and video products rose from $1.91 billion to $10.4 billion (in 2005 dollars) -- an increase of 444 percent. In 2009, exports of film and entertainment media enjoyed a trade surplus of $11.9 billion. It's notable that one of the most unionized sectors in the nation is also one of the strongest export sectors, highlighting the fact that it's a high-quality workforce, not low wages that drive economic success.
The entertainment industry has led U.S. exports precisely because of the high production values of the U.S. entertainment product, which local overseas producers could not match. There is a tight-knit community of craftspeople in the Hollywood system involved in everything from set design to editing that continue to outcompete low-wage entertainment sectors around the world.
But the real-time advertising models promoted by Google for the television industry will require incredibly short-term horizons for all entertainment productions and encourage the same kind of low-wage, low-skill models of production we've seen in so many other deunionized industries. Once deskilled, many of those production jobs will likely go overseas as so many other jobs have before.
As well, it's precisely the products sold to the broad diversity of the U.S. public that find a broad market overseas. Niche programming, even if profitable in new cut-rate production models, will likely be far less appealing to overseas markets (where local productions will probably be far more nimble in addressing local niches), so the overall economic impact will be an increasing loss of exports from the sector.
Saving the Entertainment Sector from Googlization: Some aspects of the new Google regime are no doubt inevitable, but there are countertrends such as high-quality pay channels that can be encouraged.
At a minimum, television watchers should demand that shows they watch sign union contracts and that Google contribute some of its television advertising revenue to the health care and pension plans for entertainment workers.
Policymakers can help by adding antitrust scrutiny of Google's actions in the television market with an eye on protecting labor rights in the sector as well.
The discussion on inequality coming out of the Occupy Wall Street protests is how we got to the point where so many workers are not sharing in the economic bounty of our nation's economy. Part of the answer is that as industry after industry faced strains from emerging technologies and globalization, counsels of "do nothing" prevailed as unions were destroyed and jobs shipped overseas.
With Hollywood, we actually have a sector that is currently economically vibrant where the bottom 99% of workers in the industry share in the wealth enjoyed by the top 1% in the industry. It faces strains on its model -- and the threat of Googlization is a top one -- but we have time for citizens and policymakers to step up and figure out what new models can sustain both new innovation AND a robust standard of living for all workers in the industry.
Follow Nathan Newman on Twitter: www.twitter.com/nathansnewman
With all due respect, what we do is not factory work--every day is different on a film set: one day we could be working on a sound stage, the next we're on a rooftop. We have to be able to do it all, and frankly, the way we learn to do it safely is by working consistently on safe sets. Without a union and its benefits that keep qualified people like me doing this job, the high quality product that our country puts out in abundance will suffer, and people will get hurt.
It may not matter to anyone outside my family and friends if I get hurt on the job, but what happens when an improperly built set wall falls on Will Smith?
First of all, our industry certainly is in flux. Advertisers are demanding more for less, pay rates are not keeping up with the cost of living, and production centers have sprung up in other countries. But as someone has mentioned, the volume of work has increased because of the explosion of media outlets in the last few decades. For this reason, I don't think the American film craftsperson will disappear any time soon. What is at stake, though, is the quality of the work done here.
The recent dramatic increase of "reality" and game show programming has been a boon for producers because these projects are really cheap to make. The game shows are one-set shows and the "reality" shows are by definition shot by small, unobtrusive crews.
But viewers demand more than just that kind of programming. The flagship shows on television are dramas, and lots of people still go see theatrical motion pictures. This is where people want to see production value, whether it be great impressive camera work, great costumes or over-the-top car chases. That requires real skill, done by professionals who know what they're doing.
Sets can be dangerous places if untrained people are in charge. They are essentially temporary construction sights, with a mass of wires, giant lights, cranes and set pieces. And that's before we add stunt drivers and explosives.
Why should the platform holder take more of the profit than the creator of the product flowing over the media. Of course, an argument can be made that the new platform greatly expands the size of the business, so the pie is bigger. Also, in the case of Hollywood, the movie studios controlled everything for many decades and set artificially low compensation for the movie stars.
It seems that unions are under assault constantly in this country. We have been convinced somehow that unions aren't needed, despite slowly falling wages and the slow but steady reduction or elimination of health insurance and retirement benefits. American workers have already given up their vacations and pay increases in this process. Expect things to get worse without some help in creating conditions for an improved labor market. Maybe post OWS this continued erosion is not inevitable.
I watch TV with Tivo, so those coveted "upfronts," "adjacencies" etc.. are missed on me.
Product placement will grow to work around the tivo problem.
But the holly grail has always been a way to track in mass who is watching what and then to market to them as directly as possible.
If Google has cracked the code then they will win.
The precious content is simple bait to sell advertising, so I cannot see quality going down if it causes significant audience lose.
But I wil say that handing over the keys to the industry to a company known best for viral cat videos and honey badger videos may not put the American TV/Movie industry in the right hands.
One main for the unionization of skilled workers in TV/FIlm is because of the inconsistency of the work. They are not guaranteed work day in day out, but on a project by project basis. The Google online partnership will offer more productions and therefore - more jobs. Even without a shift to web content, TV show and Film production has slowed down. More work is good. This is not going to kill TV shows, Studio movies, give me a break. Americans know what GOOD content looks like and it will not be completely replaced. As the unions notice the shift to web content the rules will redrafted to be enforced on this type of content as well, the WGA did a few years ago, SAG has. I expect others to follow and pressure producers to comply. This is a good thing, more content is good for everyone in the film industry, because it offers more opportunities.
Now, if you want to look at *actual* reasons to be frightened of Google, we only need to look at their new privacy policy. THAT is some scary sh*t. Maybe they are becoming too big for the common good. Just *not* for the reasons you lay out.
Still it is one of our countries last export industries.
There was a company in Los Angeles, Strand Lighting, that made television lighting equipment and the pay was very low but they worked all year round. The executives were making the big money though.
They fought tooth and nail dumping money into the laps of DC Lobbyists to slow it down.
Their last ploy, SOPA and PIPA were beaten down (for now ) They'll try to re-package it and shove it back at the consumer again.
Instead of waisting that money, they should been working to get a part of the pie by working harder to adopt these technologies themselves.
Well dinosaurs, that glow in the sky isn't just the sunset, IT'S THAT DINOSAUR-KILLING METEOR HEADING RIGHT AT YOU!!!
Wave bye-bye!
Censorship is evil.
You are missing the point. As another writer put it, much better than I will here, the constant race to the bottom in American industries always comes back to haunt us in very long term and persistently (redundant, I know) damaging ways.
Hopefully, google will revolutionize the entertainment industry, because it's in sorry shape now.
And that consolidation is bad. It means less competition, thus more derivative works, and a very messy cycle.