In this issue
Issue #24 August 29, 2013 Aug 29, 2013 Aug 29
Issue #9 January 31, 2013 Jan 31, 2013 Jan 31
Issue #1 October 11, 2012 Oct 11, 2012 Oct 11
From Issue #4 November 22, 2012

Advertising On Demand

How much would you pay not to have a fondue fork stuck in your ear?

By Watts Martin Twitter icon 

I attempted to listen to commercial FM radio today. As you can predict, I didn’t last long. The same litany of complaints dating back decades remains the same: small playlists, phony DJs, and incessant, screeching commercials. I can’t help but wonder if it was better before the Clear Channel era, or if that’s just wishful thinking. Maybe it’s just something you tolerate more easily when you’re young.

What’s worse is that I can’t even remember how long it’s been since I last tried. In the car, I’m usually listening to podcasts, my own music, or an Internet radio station. Same at home, just in reverse order. (Great Big Radio is playing in the living room right now.) My alarm clock’s set to KQED, the local NPR station, but I only listen to it for as long as it takes me to drag myself out of bed. Sometimes, when I’m stuck in traffic, I tune in one of those AM stations that does news every ten minutes so I know how much I’m screwed.

I’ve lost my tolerance for plastic commercial radio, but one of its defining and seemingly negative features is exerting a strong force on Internet-driven youth culture. The coveted 18–34 demographic may not be interested in FM, but, as it turns out, they’re just fine with commercials — or at least they accept them as a necessary evil. According to a recent report, teens get a lot of their music on YouTube — which, of course, splatters ads and clickable messages all over videos as they play.

What commercial radio always offered in exchange for ads was no-cost exposure to music that you don’t own. YouTube offers that, too, but unlike radio, you choose the songs and follow recommendation links, or even listen to user-created playlists. YouTube has been pretty savvy in making licensing deals with both advertisers and record labels. The music industry, for as often as it gets accused of Not Getting It, has been equally savvy in offering them.

But if YouTube and other ad-supported services are replacing radio, what’s replacing CDs? Do people still want to own their music — at least in the sense of having their own digital copies, not just streaming — and is the RIAA right that pirating music is the ownership method of choice? The Nielsen report has more figures that suggest some answers:

Only 17% of teens said they use music filesharing software. 72% said they had purchased music in the last 12 months, more than the average across all age groups. Almost half of them said they had used an iTunes gift card in the past year.

The supposition that most people will choose to be honest when sellers don’t go out of their way to make honesty the more difficult choice used to strike me as an optimistic article of faith among the Internet hopeful, but the numbers keep backing them up.

This makes me wonder if “advertising-supported versus direct pay” is truly the battleground I thought it was. The defining difference between YouTube and radio — or whatever equivalent of MTV still actually plays music videos — isn’t the presence of ads, or even the frequency of them. The difference is who’s in control. Advertising on demand turns out to be an acceptable price for content on demand.

Are there any comparable video services that charge users rather than showing ads? Netflix doesn’t count; its forte has become delivering old-to-recent (but not current) TV shows. It’s not out to disrupt first-run television as much as it’s out to destroy the market for syndicated reruns. And Hulu? We wish. It’s so hamstrung by content providers that it doesn’t come close to being a replacement for cable and charges users for the Hulu Plus service necessary to use it with dedicated devices like the Apple TV.1

For music, though, other services offer ad-free, on-demand listening for a fixed price: Spotify and Rdio. In Spotify’s case, we have numbers, and they’re dismal. They have about four million paying subscribers, and most of their growth is from people choosing the free version with ads. While Rdio doesn’t release comparable statistics, everything I’ve read suggests they’re well behind Spotify.

The new generation of consumers values on-demand programming more than they value ad-free programming. As a consequence, discovery is going to be driven more by recommendation engines and social graphs — algorithms or your online friends telling you what to watch next — than by airplay or “lead-ins” (the old TV trick of scheduling new shows right after big hits).

Imagine a service like this: all (or at least most) current TV shows, plus their back episodes, available on demand the day after airing — still with ads, but at half the frequency and duration of broadcast TV’s ads, priced much lower than cable or satellite TV service. This is not the Hulu we have, but it’s the Hulu we want. It fulfills all the pipe dreams above, and the technology’s already there; it’s just a matter of working out the contracts.

Sadly, that’s a hell of a big asterisk. Existing contracts range from network deals with their local affiliates — the reason that cable and satellite subscribers need to watch NBC shows on their local NBC stations — to the deals that guarantee that HBO makes a ton more money by keeping Game of Thrones exclusive than if they made it easily available online. (Yes, even factoring in The Oatmeal’s pirated copies.)

It may only be a matter of time before this “Super Hulu” service arrives, but that time probably isn’t soon. Ads on Internet streams may never make enough money until they become as frequent or annoying as ads on broadcast media — or become very precisely targeted — and may still have to be supplemented by flat-rate user fees.

Yet once you become accustomed to ad-free video and audio, ads aren’t just minor annoyances: they’re fondue forks jammed in your eardrums. How much would you pay each month not to have a fondue fork jammed in your eardrum? $20 a month? $40? $50? Great! So would I! But the cable/satellite model proves that most people are willing to pay two or three times that each month, forks included. The future will very likely remain a choice: advertising on demand, or iTunes, Netflix and the occasional long wait.

  1. This only reveals further limitations, as some shows are only licensed for display on computers, rather than your television, and are barred from Hulu Plus via TV connections. 

Watts Martin is a web developer and writer living in Silicon Valley. He has worked for several major technology companies, is the author of the short story collection Why Coyotes Howl and blogs erratically at Coyote Tracks. He likes rum.

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