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The Economist Corner – essential readings V

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A special report on television

Changing the channel

Television is adapting better to technological change than any other media business, says Joel Budd.  Apr 29th 2010 – From The Economist print edition.

ONE evening last year Steve Purdham noticed something odd. The flow of data into and out of We7, a British music-streaming website he runs, had abruptly slowed. An hour later it returned to normal. Such a sharp fluctuation usually means a server is malfunctioning—a potentially ruinous problem. But when engineers checked the computer system they found nothing wrong. So what could have happened between 8pm and 9pm on a Saturday night to cause such a sudden drop in use? Suddenly it dawned on Mr Purdham: “Britain’s Got Talent” was on television.

At its peak that show drew 68% of all British TV viewers and notched up the biggest audience for any programme since 2004, when the English football team played Portugal in the European championship. It also turned Susan Boyle, a middle-aged Scot, into an international star. Video of Miss Boyle singing “I Dreamed a Dream” ricocheted around the internet and caught the attention of news outlets. The singer became a fixture of talk shows and tabloid newspapers, which dubbed her “SuBo”. Her first album sold more quickly in America than any other by a female artist since Nielsen Soundscan began tracking music sales in 1991.

When it comes to mobilising a mass audience, nothing can touch television. On February 7th this year 106m Americans watched the New Orleans Saints defeat the more favoured Indianapolis Colts in the Super Bowl. The nation spent more time glued to that one match than it spent on YouTube, the most popular video-streaming website, during the entire month, according to ComScore. Remarkably, television can deliver these huge audiences even though it provides more choice than ever.

In 1992 Bruce Springsteen, a rocker from New Jersey, released a song called “57 Channels (and Nothin’ On)”. There are now hundreds of channels. A quick channel-surf through a basic cable-TV package in America turns up a weighty history of the civil war, a South Korean melodrama, a college basketball game, a Hispanic talent show, a congressional hearing, a zombie film, European football, an evangelical sermon and a documentary about a “half-ton teen”. Many more options are available on demand with a few clicks of the remote control. The offerings are decidedly mixed, but there is always something on.

“There are not many genres that are not addressed any more,” says Philippe Dauman, CEO of Viacom, a media conglomerate. “We try to think of new ones all the time.” And where America has led, others have followed, often much more quickly. Until the early 1990s India had two state-run television channels, Doordarshan 1 and Doordarshan 2, which were best known for their amateurish dramatisations of Hindu epics. It now has more than 600. In Britain the proportion of homes that receive multi-channel television has risen from 31% to 89% in the past ten years.

The box that delivers all this stuff has evolved, too. Televisions used to be squat cubes. Gradually they have flattened and turned into panels, and their screens have become sharper and brighter. They have spread to bedrooms, kitchens and even bathrooms (with heated screens to ward off condensation). The latest devices from Samsung and Sony are as thin as laptop computers. Television has gone online and become mobile. This year it will expand into the third dimension.

Predictions of TV’s imminent demise have come and gone like fast-forwarded advertising breaks. In 1990 George Gilder, an American writer, claimed that by the end of the 20th century traditional television would be extinct because technology would enable consumers to track down programmes that catered to their particular interests. Bass fishermen would watch endless shows about bass fishing. Even the technological futurists found it hard to imagine the explosion of websites, social networking and mobile phones that was to come. Yet these things have not displaced television. Rather, they have squeezed around it.

More of everything

Look at Japan, a country that leads many technological trends. Last year Tokyo residents spent an average of 60 minutes a day at home consuming media on the internet or a mobile phone, up from just six minutes in 2000. But they also spent more time in front of the television: an average of 216 minutes, up from 206 minutes. Among young women, the group that advertisers most want to reach, television-watching went up more steeply. Admittedly their attention was not always fixed on the box. Many teenage girls send text messages on their mobile phones while watching television. “In Japan we like to do two things at the same time,” explains Ritsuya Oku of Dentsu, an advertising agency.

Or take American teenagers. In 2004 the Kaiser Family Foundation reported that the average person aged 8-18 was spending almost six-and-a-half hours a day taking in some kind of media—television, films, music, video games and so on. By multitasking, they were able to cram eight-and-a-half hours of media consumption into that time. The researchers concluded that young people were “filled to the bursting point” with media. Whatever, responded their subjects. When the study was repeated in 2009, young Americans were spending more than seven-and-a-half hours with media each day, an hour more than they had done five years earlier (see chart 1). Into that space they packed an astonishing 10 hours and 45 minutes of consumption. Among other things, they were watching more television.

Report: 90% of waking hours spent staring at glowing rectangles,” read a headline in the Onion, a satirical newspaper, last year. The joke contains a profound truth. Distinctions between glowing and rectangular television sets, computers and mobile phones are gradually disappearing. Televisions have long doubled as monitors for video-game consoles. More recently they became digital radios. Now they are turning into gateways to the internet. People who buy high-end televisions this year will discover that their new toys can obtain all sorts of things, from stock quotes to weather forecasts.

At the same time TV is moving beyond the living room. Many programmes can be viewed on computers, mobile phones and tablet devices like Apple’s iPad. Video-streaming websites are becoming more professional, meaning they are both better designed and contain more proper television. Services like iPlayer, which carries BBC television shows, and Hulu, which distributes programmes from America’s ABC, Fox and NBC, have grown in popularity. At first this success delighted people who earn their living from TV. Gradually they have become more alarmed.

Every media business that the internet has touched so far has come off badly. Recorded music sales have fallen steeply in value since Napster, a file-sharing website, appeared in 1999. The internet has drawn classified advertising away from local and regional newspapers, turning once highly profitable businesses into basket cases. Book publishers have watched helplessly as online retailers and e-readers have driven down prices.  Read more in The Economist

The Goldman hearings

Grilled squid

A ghastly day on Capitol Hill for Goldman Sachs’s top brass. Apr 28th 2010 – From The Economist online

ONE of the worst days of my professional life” was Lloyd Blankfein’s characterisation of April 16th, when the Securities and Exchange Commission (SEC) filed civil fraud charges against Goldman Sachs. The bank and an employee were accused of failing to disclose that a hedge fund that had influenced the composition of a complex mortgage-debt transaction was also shorting it. April 27th was surely not much better, either for the Wall Street firm’s boss or any of the six other current and former Goldman investment bankers who testified before the Senate Permanent Subcommittee on Investigations. The roasting, which lasted more than ten hours, was as dramatic as any hearing focused largely on synthetic collateralised-debt obligations (CDOs) could be.

Goldman’s persecutor-in-chief was the panel’s chairman, Carl Levin. The gruff Democrat went beyond the SEC’s complaint, accusing the firm of having concocted several deals, not just one, to profit from the collapse of the housing market, and also of being riddled with “inherent conflicts of interest.” Not content merely to skewer America’s pre-eminent investment house, the senator harrumphed that its conduct “calls into question the whole function of Wall Street”—a market that, while supposedly free, “isn’t free of self-dealing.” His attack rested, in part, on internal Goldman e-mails. In one, a senior executive described a Goldman-underwritten CDO as “one shitty deal”. In another, a colleague applauded the structured-products team for making “lemonade from some big old lemons.”

The team’s representatives at the hearing squirmed in the spotlight. Fabrice Tourre, the employee charged by the SEC, firmly denied misleading investors. But he and his colleagues, coached by lawyers in light of the SEC case and clearly fearful of committing a legal faux pas, came across as evasive. At times the dialogue resembled a Pinter play: a question, then a long pause, followed by a spare, cryptic response.

The firm’s senior executives put up a stronger, clearer defence. In response to Mr Levin’s assertion that Goldman had profited from others’ misery with a “big short”, David Viniar, the bank’s chief financial officer, pointed out that its net revenues in mortgages were a mere $500m in 2007, with a loss of $1.2 billion in 2007 and 2008 combined. Read more in The Economist.


Written by Theophyle

May 1, 2010 at 9:03 am

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  1. […] This post was mentioned on Twitter by Barbra Wheaton. Barbra Wheaton said: The Economist Corner – essential readings V « Politeía Digest: The bank and an employee were accused of failing to… http://bit.ly/beQ0kt […]

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