["Yes, our company is at risk because we cede control to the users, but
that's how we do our business. If the community decides to kill the
business, maybe it deserves to die." -Jeffrey Kalmikoff, Designing for
Community with Zero-Advertising Brands, SXSW 2006]
We
All Hate Advertising, But We Can’t Live Without It
By Adam Thierer, Contributor
Advertising plays the same role in your media diet that vegetables play
in your regular diet; most of us would prefer to skip that course and go
straight to dessert. But, just like veggies, advertising plays an
important role in sustaining a body; in this case, a diverse body of
content.
Advertising is the great subsidizer of the press, entertainment, and
online services. “It’s
possible that no single industry – not newspapers nor search engines nor
anything else – has done as much to advance the storehouse of accessible
human knowledge in the 20th century as advertisers,” argues Washington
Post columnist Ezra Klein. As
I noted in a recent law review article on
the importance of advertising, media economists have found that
advertising has traditionally provided about 70% to 80% of support for
newspapers and magazines, and
advertising or underwriting has entirely paid for broadcast TV and radio
media. Similarly, the vast majority of online sites and social media
services we enjoy today are almost completely ad-supported. Without
advertising, we’d all be stuck picking up the tab for our media content
and online services by either paying higher prices or higher taxes
(assuming public subsidies are used to sustain media when other revenues
are unavailable). Whenever advertising comes under attack, therefore,
the proper question to ask is: If not advertising, then what else? After
all, there is no free lunch. Something must sustain content and culture
and that something is typically advertising.
The
reason this issue is ripe again this week is because, in an effort to
remain relevant in today’s vibrantly competitive video marketplace,
satellite video
operator DISH Network is
offering its customers a new “Auto Hop” capability for its Hopper
whole-home HD DVR system. It will give viewers the ability to
automatically skip over commercials for most recorded prime time
programs shown on ABC, CBS, FOX and NBC when viewed the day after airing.
“Viewers love to skip commercials,” said Vivek Khemka, vice president of
DISH Product Management. “With the Auto Hop capability of the Hopper,
watching your favorite shows commercial-free is easier than ever before.
It’s a revolutionary development that no other company offers and it’s
something that sets Hopper above the competition.”
Khemka is certainly right about consumers loving to skip commercials,
but his product isn’t that revolutionary. As
veteran technology reporter Steve Wildstrom reminds us, back in
2001, ReplayTV introduced a similar feature in its DVRs. The company was
quickly sued by content companies and went bankrupt before the case was
decided.
The sort of commercial-skipping technology ReplayTV introduced back then
and that DISH is adopting today with “Auto Hop” shouldn’t be illegal. Making
video ad-skipping a crime is like saying it should be illegal to cut the
ads out of newspapers or magazines before you read what’s inside. Of
course, a legal challenge to Auto Hop is still likely. But set
aside the legal question and get back to the real issue here: What is
going to pay the bills for content when ad-skipping becomes automated
and effortless? That question is relevant across the entire information
ecosystem today since it’s never been easier to use technology to block
ads for television or online services. Just about every DVR now allows
commercial skipping. And ignoring online ads is even easier. Adblock Plus, which lets users
blocks all advertising on most websites, has long been one of the
most-downloaded add-ons for both the Firefox and Chrome web browsers.
Such free-riding can’t go on forever, no matter how much we all enjoy
it. Content creators will either have to find alternative ways to pay
the bills or else we’ll just lose access to much of that content. And
the alternatives to traditional advertising support all have downsides.
One possibility is that advertising continues but it becomes far more
annoying and intrusive. That’s already occurring to some extent with the
increased prevalence of product placement in TV shows. If ad-skipping or
blocking during designated commercial breaks become even easier, you can
expect to see you favorite characters doing more awkward
product-pitching directly within the program. Most of us would agree
that degrades the quality of programming, but it will become
increasingly likely.
Another variant of this is model is program sponsorship and content
underwriting. We could see a lot more “Texaco Star
Theaters” in our future, with major companies essentially owning
specific shows or networks. But it will be challenging for every show or
website to find its own corporate benefactor, and it will also raise
issues about undue influence and bias.
The other alternative is higher prices across the board. When video
distributors cut deals with content creators, the contractual
negotiations can get quite heated. The “retransmission
consent” process for TV programming, which is governed by an arcane
body of federal law, is already a mess but it promises to become even
more contentious if distributors like DISH make ad-blocking even easier.
Content owners will demand a higher premium before they cut deals and
those costs will be passed along to consumers. The same phenomenon could
play out for online services if ad-blocking becomes more ubiquitous.
Of course, there’s the possibility that philanthropic support – either
from individuals or foundations – can sustain some media content, but
such support has proven quite limited in the past. And
government support for news and entertainment content will be hard to
come by and incredibly contentious politically, especially in tight
fiscal times.
So, no matter how distasteful we might find ads, like our veggies, we’d
be wise to keep them in our diet. Or else there will be a price in the
long run



