Business Models: Television

Most people know how the TV business model works so I'm just going to make a quick and basic explanation in order to set the grounds for future posts on my views of what I believe will be the future of Television and I call PersonalTV.

I will concentrate on the spanish free-to-air TV model.

In the (free-to-air) TV business model there are 4 main actors: TV Broadcaster, Producer/Distributor, Advertisers and us, the Audience.

• TV Broadcaster: The Broadcaster is the TV channel itself. It buys programs from the Producer with the money the Advertiser pays him and it broadcasts it for the audience to watch through the TV screen.
• Producer: The producer is the company that creates the content that you watch on TV. Sometimes it is the same TV channel that produces that content (news programs, for example) and sometimes there is also a Distributor involved, that brings the content from some other country and sells it to the local TV stations.
• Advertiser: The advertiser is the guy that is paying for everything. What does he get in exchange? He gets its advertisments or spots shown in the TV channel to the audience.
• Audience: The audience is us, the people that watch the TV. One thing we must understand is that we are not the client... we are the resource of the TV Channel. So don't expect to be treated as a client.

Summarizing: The Advertiser pays the TV channel depending on the cuantity and quality of the audience it has. The TV channel pays the Producer for its programs (movies, series, documentaries). 

How much do the Advertisers pay?

Basically advertisers pay depending on the number of people that will watch the advertisment (or TV spot). So, ideally, it there are 2 million people watching channel A and 200.000 people watching channel B right now and ads are shown in both... channel A will get, for example, 1.000€ and channel B, 100€.
However, this isn't true and small audiences are usually worth less than big audiences.
There is also a quality variable. There are channels that have better audiences than others... people with higher purchasing power (in theory), or people closer to the target audience the advertiser is looking for. These channels may charge more for the same amount of audience than a different channel.

How do Advertisers and TV Broadcasters know how many people are watching?
That is a very important issue that needs a whole post to describe (and criticise) the way it is done. In essence there are several thousand devices in several thousand homes throughout the country that know how many people are watching the TV and the channel it is being watched in that home. From the data gathered from those devices and using statistic maths, there is a company that tells everyone how many people was watching.

If it is such a simple model why have I bothered to write his post describing it?
It is a good exercise to understand it better and will help us look deeper into the reasons why the TV market is changing and, as is my belief, will make the current TV channels disappear as they are now if they don't take the appropriate measures (which they aren't doing at the moment).

Do you have any more questions you think that should be answered here? Ask them!

On privacy, cookies and behavioral targeting

Every time I read an article such as this one (Privacy Groups: Behavioral opt-out system "insufficient and ineffective"), on this or that group talking about online privacy, tracking, cookies and all related to online tracking, I cant help but laugh.

We're living an era where cross-referencing the most diverse information across different systems to generate knowledge on any given issue is commonplace. That is, for example, what CRM systems do. And we have dozens of them around us every day.

However, people complain continually about online tracking and, even though in an ideal world I'd support them. We must all understand the reasons why this kind of tracking systems have been developed and why they are running almost in every website.

There are two issues here, as I see it:

1. Why are people tracked across websites?
2. Why are people concerned about being tracked across websites?

Very similar questions but in the first one the actor is the website, in the second one is the individual.

Why are people tracked across websites?

First of all, forget about Big Brother and any other Orwellian concept. People are not tracked because of a deep necessity of control by the webmasters, in fact the two main reasons why any site tracks its users: improving usability for the users and keeping the site running for free (or as cheap as possible) for the user, through advertising.

Improving usability for the users
When you go to a restaurant several times you like the waiters to recognize you, to start giving you your favorite table, to offer you the kind of dishes you like…. same happens in a website. The idea is to make it as friendly, attractive, usable, and useful as possible in a more-or-less "invisible" way, without you noticing. In order to do that the system needs to learn about your interests, the sections of the website you visit and such.

Or did you think that in Amazon they have a seer that guesses the books you might be more interested in each time you open their site?

Advertising
Moreover, any website has costs, the bigger, better and more sophisticated the site is, the higher the costs are. And if you can use it for free then someone must be paying for it somehow. That is where advertising comes in and where most of the bad tracking appears as well.

I call it bad tracking because it seems it is the one people don't like. But you must understand that there is a 3rd party involved in all of this: the advertiser. Advertisers want to reach as many people as possible with the least cost for them. One way to do that is to get only to the group of people that might be interested in their product… and in order to do that he needs to know what group the audience of the website belongs to. Tracking in different websites allows the advertising network to "learn" about your interests and, in that way, provide you with the advertising suited to your profile.

1. You win as you get advertising most suited for you.
2. The advertiser wins because he gets to someone that may be a potential client.
3. The website wins because he gets income to continue running.
4. You win again because you can continue to use that website's service for free.

Why are people concerned about being tracked across websites?

The answer to this one is very easy: ignorance.

With this I don't mean that you are an ignorant for being concerned, what I mean is that you really don't know half of what is happening so you blame all on the traking cookies and such.

Just think about it. How many people are publishing every day, every hour, pictures, updates, comments about their daily life in Facebook or Google+ or wherever? Pictures of their kids, comments on when they're leaving on holidays and where they're going. And how many of those people hace their privacy settings in Facebook set up correctly?

How many people use games and applications in Facebook that request access to most of your data?

How many people accept as friends in these social networks people that they don't really know?

How many people know that any mobile carrier knows (in a city with a 25m precision) where you always are? 

How many people know all the information that Google gathered when taking the pictures for Streetview? (which has already given them some problems in certain countries)

How many people's private data was stolen from the PlayStationNetwork? (mine included, as far as I know)

People don't realise that they are leaving lots of personal information in Internet…. information that will stay there forever.

Asking for a reasonable control on the companies that track your information for advertising is something we should do… but forcing them to leave aside online tracking is bad… very bad. Bad for them because one their revenues  from advertising will drop as advertisers won't want to pay as much as they do today in that new "uncontrolled and untracked" environment. And bad for all of us as users, as many websites will disappear or stop to be free.

I'd be happy to hear your thoughts on this issue as it affects us all.