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How the Fourth Civilization Might Come to an End
fourth civilization, based on news and entertainment, has a tenuous connection
with commerce. People want to be entertained, yet money is needed to provide
the programming. How entertainment-industry people can get money is the
key to this enterprise. There are basically two ways: First, people can
pay for the entertainment service as when someone buys a ticket at a movie
theater. Second, the entertainment provider can sell advertising. For
example, business firms pay to place commercials within the television
The entertainment industry's unique ability to sell advertising to other kinds of businesses is what makes it a super-industry. In the age of mass media, advertising products is the key to commercial success. One should recognize, however, that this arrangement is based on an involuntary relationship with the consumer. People do not want to watch commercials; they want to watch the programming content. The providers of the entertainment slip commercials into the programming in ways that are difficult to avoid watching them. The television viewer has to watch the commercials to get the desired entertainment programming. It is generally not convenient to turn off the set or switch channels during the commercials and then go back to the programming when the commercials have ended.
Historically, the nexus between entertainment and commercial advertising began in the days of newspapers. People bought newspapers for their news content but then had to read the advertisements printed next to the articles. This concept was extended to radio and television when these new media began to broadcast. Regarding radio, a critical event took place in 1920 when a ham radio operator in Pittsburgh, Frank Conrad, began broadcasting baseball scores and recorded music to his fellow operators. A local store supplied free records in exchange for being mentioned on air.
Previously, companies such as Westinghouse Electric had thought they would make their money by selling radio receivers. They soon realized that the ability to sell commercial messages in air time had great profit potential. Commercial radio stations began to operate. Radio networks were formed beginning with RCA's National Broadcasting System. Arrangements begun with radio broadcasting were later extended to television.
For the past fifty years, the cornerstone of the television industry has been the unspoken agreement between the program provider and program consumer that the consumer could get entertainment programming without paying for it if he or she watched the commercials. Television commercials proved to be a powerful seller of products, useful in establishing brand names. "I see it, I want it" was the principle on which the salesmanship was based.
Television advertisers did not bother to explain the uses or advantages of their products during the commercials. They simply presented an image. Increasingly, the image was that of an attractive lifestyle involving use of a product. Repetitious commercials hammered the brand name into the consciousness of millions of viewers, guaranteeing brisk sales when it came time to buy that kind of product.
And so, the power of the entertainment industry is its ability to attract the attention of many viewers who are also consumers of commercial products. Once their minds are hooked upon an entertaining program, these people are involuntarily exposed to commercial messages. Advertisers then become rich. They want to continue to purchase commercials from the television networks. That means that the networks get plenty of money from which to develop future programming. The industry remains healthy so long as that process continues.
However, the television industry has started to show signs of strain. For one thing, its audience has started to shrink in the face of competition from cable television, the internet, and other media. Some say the programming quality has started to slide. There is less original programming and more copying of successful shows from the past. A second factor is technology. The remote control allows a passive television viewer to switch channels effortlessly during the commercial breaks and then switch back to the programming when the commercials have ended. Of course, there is some guess work about how long the commercials might last. Also, a device such as TiVo allows television viewers to record entertainment programming on their VCR but skip the commercial messages.
As technology increasingly allows television viewers to have the programming without watching commercials, the financial structure of the entertainment industry is undermined. Advertisers have struck back in various ways: They place their branded products in the programming itself . They purchase naming rights to sporting events or sports stadiums. Their product logos appear on the jerseys of athletes competing in events. They hook children on their products by attaching their brand names to toys.
An article in the Wall Street Journal (June 27, 2005) tells how television networks are trying to find new ways to attract advertisers. The basic idea is that advertisers can no longer count on receiving value for their advertising dollars if they assume that television ads alone will sell products. They need instead to consider other ways that consumers are exposed to entertainment products.
"The traditional TV commercial, which generates billions of dollars in ad revenue for TV networks every year, is under assault," said the Wall Street Journal article. "Technology has made it easier for viewers to zip through ads, prompting some big advertisers to scale back the money they put into TV commercials. Anxious to stop advertisers from defecting to other media, TV networks are scrambling for new ways to lure marketing dollars."
"Instead of just buying ads (to promote MTN's new show "Laguna Beach"), Pepsi will pay for Pepsi Lime's logo to appear on the wrapping of a DVD release of the show's last season. The soda maker will also sponsor text alerts about 'Laguna Beach' sent to selected cellphone users as well as a special web site that features exclusive content from the show."
Google, the giant search engine for the Internet, sells pop-up ads to providers of commercial products. These ads appear in the righthand margin along with the ranked results of a search. Such ads are quite lucrative. Advertisers know that, unlike the broadside commercials on television, their messages will reach a highly targeted group of viewers. Targeted ads are, of course, more cost-effective than the traditional kind.
Fueled by advertisements, Google's revenues rose by 98 percent from last year - to $1.4 billion. Yahoo!' revenues were $1.3 billion - up by 53 percent from the previous year. Even so, revenue from online ads account for only 3.6 percent of total advertising revenues. This is expected to increase to 4.6 percent in 2005. Gordon Crovitz, president of electronic publishing for Dow Jones, has said: "I think the industry is significantly underpricing online ads." As the technology for measuring Internet advertising has become more sophisticated, advertisers gain a wealth of information about their customers. They are able to target their messages precisely to persons who might be interested in their products, unlike commercials in the traditional broadcast media. The smart money goes where results are more certain.
In the long run, the Internet poses a challenge to the entertainment industry because it promises to sever the link between commercial messages and entertainment programming. It may be possible some day for consumers, wanting to buy a certain commercial product, to find exactly what they want on the Internet. The Internet may then contain web sites that allow consumers to search for something conveniently according to need and find the best product based on price and functionality. Why then would they ever rely on TV commercials to suggest which products to buy?
If buying decisions are made by conscious consumer decisions to find the best product, it would then be wasteful to advertise on television. The "song and dance" of good entertainment next to a commercial won't be enough to produce the sale. The entertainment industry will then be reduced to selling tickets for its product, like any other kind of industry.