Lost Revenue? Nope ... Just Lost Opportunities

from the really-red-herring dept

Whenever we hear about established industries whining about how much money they're losing from alternative forms of media consumption, we just shake our heads. If you do too, then brace your neck before reading on. A new study by Accenture says that TV networks will "lose" $27 billion in the coming five years because of ad skipping by DVR users. Not being able to read the full story on AdAge, we can only assume that Accenture thinks advertisers will pull back from the networks to the tune of $5-plus billion per year, simply because DVR watchers can skip ads. Not likely. The connection is highly dubious and the figures are entirely far-fetched. Yet even more troubling is the age-old "lost money" methodology. Each ad skip does not proportionally diminish the network's coffers -- no money is being subtracted from their bottom line. Rather, any "losses" from ad skipping would come from the network's inability to adapt to new trends and attract those dollars elsewise. The networks are losing money to ad-skipping no more than record companies are losing money to downloads. The quicker they see these as lost opportunities, instead of lost dollars, the better for them.


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  1.  
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    Old Droid, Apr 15th, 2005 @ 8:48pm

    Accenture...bunch of lamos

    What a bunch of nonsense.

    Accenture is a "has been" with a very stupid name. How can you take anything they say seriously?

     

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  2.  
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    Rob Henderson, Apr 16th, 2005 @ 8:50am

    Bad comparison

    I completely agree that 'losses' from downloading are not true revenue losses. Someone is guessing at a potential, unrealized market, and counting the revenue it might create as a loss, which it is not.
    This case is very different. A network that has revenue today from advertising, and lower revenue tomorrow from that same customer base, is truly showing a loss. I agree that the reason for the loss has to do with an inability to adjust to a changing market, but that is true of most losses in most industries.
    A decrease in established revenue is a true loss. A failure to derive revenue from a potential market is not a loss.
    Criticizing the ad industry's vision and planning is appropriate. Criticizing their statement that ad-skipping might cause losses is not correct.
    Conflating the two 'loss' scenarios incorrectly has the effect of reducing your standing when you correctly criticize the use of the term 'loss' in the downloading arena.

     

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  3.  
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    Tim, Apr 16th, 2005 @ 9:20am

    No Subject Given

    The question is where will they go? One thing I really do *not* want is more gratuitous product-placement in movies - leave the giant Virgin Atlantic ads in Austin Powers where they belong...

     

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  4.  
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    Mike (profile), Apr 16th, 2005 @ 11:52am

    Re: Bad comparison

    Rob,

    I disagree. The comparison does hold. It is not a "loss" at all. It is simply a market choice in all cases.

    The market is choosing to go elsewhere in each of these cases, and the inability of the industry to capitalize on it is a lost opportunity, rather than lost revenue.

    No one "loses" revenue. It just that you failed to capture it. Suggesting it's lost revenue places the blame on the customer, not the company -- and that's what's true in all of these cases. They're all examples of the blame being shifted.

    It's the same thing as if the pizza shop down the street said I lost them $3 when I bought a sandwich at the deli next door instead of a slice of pizza.

     

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  5.  
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    Rob Henderson, Apr 16th, 2005 @ 9:34pm

    Re: Bad comparison

    Ok, if you want to remove the word 'loss' from the business lexicon, I can deal with that. We are still left with a fundamental difference between a failure to capture imaginary revenues that could never exist and a reduction in an established revenue stream.
    Two pizza shops have constant revenues in two separate static markets. A competing pizza shop opens next door to shop1. Shop1's revenues fall by 30% due to the competition. The market changed, and shop1 must find a way to deal with it. On their annual report, shop1 notes a 'reduction in revenue compared to plan' due to increased competition. Shop2 does some market surveys and determines that some people make their own pizza at home. Shop2's annual report indicates that it met its original revenue target, but falls far short of a revised target which includes an imagined value of all homemade pizza. Shop2 reports a loss based on its inability to pass anti-homebake legislation.
    Shop1 is facing a changing market, and must learn to deal with it somehow. Until they do, their shareholders will see a reduction in company value. Shop2 is living in fantasyland, and is applying these fantasies to their bookkeeping. The two situations are not similar.

    After writing this, it occurs to me that maybe we are talking past each other, referring to two different versions of the 'loss to downloads' issue. I assumed you were speaking of the 'songs equivalent to 1 billion CD's were shared, therefore we lost $15 billion in revenue' type of statement. If, instead, you were speaking of the 'our gross revenue fell 5% last year and it must be due to downloading' type of statement, then your comparison is more valid. The fact that record company revenues actually seem to have risen over the period in question just confuses the issue. ;)

     

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  6.  
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    thecaptain, Apr 18th, 2005 @ 5:06am

    Re: Bad comparison

    I think you are correct, you and Mike are talking about 2 closely related situations but slightly different.

    My comment on what you're saying however is from a purely emotional/consumer related point of view:

    If an ad-company makes X dollars per year because I watch X amount of ads, then I decide I'm fed up this year and I watch less ads (by whatever means), what you're saying (if I understand you correctly, and I may not, its early and I don't have any coffee yet) is that its valid to say "ad-company lost X amount of revenue"

    That's all well and good...however, when you look at it from my perspective its indicative of the hubris of the business sector these days because it implies (As Mike stated) that somehow I am at fault for this and that said company has a RIGHT to my wallet.

    All in all, I prefer seeing it as a lost opportunity...too many businesses these days (and analysts, CEOs everyone) seem to act as if they can dip their hands into my bank account with impunity and get insulted, indignant and litiginous when I don't want them to (online music is a good example perhaps).

    I think business in general needs to be SERIOUSLY reminded that money comes from fulfilling a customer's need...not from some god given right to have people throw money to them (that's reserved for the IRS lol).

     

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  7.  
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    Anonymous Coward, Apr 18th, 2005 @ 12:11pm

    Re: Bad comparison

    Yea, in these situations I'm reminded of "Coupon: The Movie" from Mr. Show.

    - "I find the American people guilty, and sentence them to one showing of 'Coupon: The Movie'"

    Pick up a copy of the Second season (I do believe that's the one that contained this sketch, but I may be wrong) and see the comparison for yourself.

    ATA

     

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