Month: December 2020

Independent TV network Fuse Media’s current pay-TV distribution dispute with AT&T appears to crystallize the issue. On Dec. 11, the media company filed a complaint with the Federal Communications Commission against AT&T, which owns traditional pay-TV providers DirecTV and AT&T U-Verse as well as streaming pay-TV service AT&T TV Now. In the complaint, Fuse alleges that the telecom giant is discriminating against the TV network owner and favoring AT&T-owned WarnerMedia’s cable TV networks, like TBS and Cartoon Network, that Fuse claims carry similar programming and appeal to similar audiences as Fuse’s network. 

Fuse claims that its distribution negotiations with AT&T had been amicable before the latter company acquired WarnerMedia (née Time Warner). Fuse has tried to renew its distribution deal with AT&T since August and claims AT&T has been unresponsive at times and that its eventual counteroffer “was insultingly hollow,” according the complaint, which redacts many details, including specifics regarding Fuse’s offer and AT&T’s counteroffer.

“Fuse is the only remaining cable network that is Latino-owned, controlled and managed, and since January, the only English-language network serving Latinos carried by AT&T. If AT&T truly values minority voices, then their words must match their actions, especially at this time in our nation’s history.  We are hopeful that AT&T will reverse course and negotiate in good faith moving forward,” said a Fuse spokesperson in an emailed statement.

“We treat all programmers fairly, including Fuse.  They want the FCC to order us to carry programming our customers don’t want or value. We look forward to responding,” said an AT&T spokesperson in an emailed statement.

However, AT&T’s motivation may be less a matter of propping up its own TV networks and more a matter of cutting down its affiliate costs. “It’s hard to argue that it’s anything but an economic decision,” said Michael Hodel, director of telecommunications and media research at Morningstar.

With the acceleration in cord cutting and audiences tuning into streaming service, pay-TV providers are losing customers. To keep them, they need to retain the programming that people will pay to watch on traditional TV, like live national sporting events. That makes TV networks like Disney’s ESPN and WarnerMedia’s TNT especially valuable, allowing these network groups to demand higher affiliate fees to offset the pay-TV subscriber losses and to bundle other networks they own into these deals.

Because the pay-TV providers cannot afford to lose the likes of ESPN and TNT, they are put in position to pass on the additional fees to their customers in the form of price hikes and/or to reduce the affiliate fees paid to smaller TV networks.

“The bottom line is if you look at the ratings on [Fuse], it’s terrible. So they’ve got a really weak position going in. Their average rating over the last six years has been only a 0.03, so it’s really, really minuscule,” said Derek Baine, research director and senior analyst for media and communications at S&P Global Market Intelligence. He added, “They’re asking for a license fee that’s pretty significant — over 10 cents a sub a month — and that’s just not justifiable based on their ratings.”

Fuse is not the first nor will it be the last TV network to see its bargaining position diminish. As the pay-TV subscriber base continues to shrink, pay-TV providers will continue to attempt to cut the costs of their services by reducing networks’ affiliate fees or removing networks altogether. In fact, this isn’t even the first time Fuse alone stands to lose distribution. In December 2018, Comcast and Verizon decided to drop the network from their respective pay-TV services. Fuse filed for bankruptcy four months later before being taken over in a management buyout in November.

Networks will understandably push back against such losses of profitable affiliate revenue, as Fuse is doing in its complaint and as AMC Networks did in a similar FCC complaint filed against AT&T in August. For the networks, such losses can result in the loss of entire companies. “Termination of carriage on AT&T does indeed threaten Fuse Media’s very existence — its ability to continue as an independent programmer, providing unique and diverse content to underserved demographics,” Fuse wrote in its complaint.

AT&T had 17.8 million subscribers across its various pay-TV services at the end of the third quarter, according to the company’s most recent earnings report.

However, the trend of pay-TV providers cutting their programming costs appears irreversible. TV network owners of all sizes — including the likes of Disney, NBCUniversal and WarnerMedia — are having to make changes to their businesses, including reorganizations and layoffs, in order to make the transition from linear TV to streaming. NBCUniversal, which shut down three of its cable networks in 2017, is even considering further cuts to its cable network portfolio, according to The Wall Street Journal. Unfortunately for companies like Fuse, the effects of this trend are likely to be felt sooner and harder.

The AT&T-Fuse dispute “really shows that if you’re a small content owner, you’re in a really tough place if you want to go through a traditional distributor today. In my view, you’re much better off trying to go direct to consumer if you’re a small content owner and carving out a niche audience that way,” said Hodel.

Of course, even going direct to consumer in streaming has its pitfalls. Connected TV platform owners like Amazon and Roku are increasingly acting like pay-TV providers. Both platforms have been involved in CTV app distribution standoffs with NBCUniversal and WarnerMedia this year but eventually reached agreements, except in the case of Amazon-NBCUniversal.

Free, ad-supported streaming TV services like ViacomCBS’s Pluto TV are another option. But even that requires some negotiation and a reduction in revenue compared to traditional TV’s dual revenue stream of advertising and affiliate revenue. What does that mean for smaller TV networks? They may need to become even smaller.

Condé Nast runs 11 owned-and-operated Vogue titles, including the editions in the U.S., France, Japan and Italy. Beyond that, there are three editions that the company publishes with joint support from other corporations and 15 international editions that are licensed out to other publishers.  

Traffic to Vogue’s 11 endemic sites is up 40% year over year from November 2019 to November 2020, according to Marshall, reaching a record high of a combined 58 million unique visitors last month. On its own, the U.S. title accumulated 16 million unique visitors that month.

One of the biggest changes in audience behavior that Marshall said she found was the initial two-week decline in readership in the evenings for all of the Vogue sites.

“In the backend of 2019, we found that for every single Vogue [site globally], they had peak traffic in the evening for both loyal audiences [those who visit the same Vogue site four or more times per month] and fly by audiences,” said Marshall, with a peak at 10 p. m. local time.

But in the 12th and 13th weeks of the year (weeks of March 16 and 23), there was a significant drop off of people who came to Vogue sites, likely due to people being glued to news outlets to get updates on the coronavirus crisis.

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Courtesy of Condé Nast | How Vogue Spain’s readership dropped off in evening hours during the 11th, 12th and 13th weeks of 2020 and started rebounding in the 14th week.

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Courtesy of Condé Nast | The average number of sessions spent on 10 Vogue sites sees decreases in the evening during March through August 2020.

“We had Italy, Spain and France in severe lockdowns and by the time the U.K. and U.S. went in, we knew we could expect these behaviors. A couple of weeks later, we also had a much bigger picture,” she said.

The daily communications that Marshall said she had at that time with the digital editors of the international Vogue editions focused on “setting expectations of audience behaviors,” and reassuring that these audiences would come back in two weeks.

Since May, Marshall said there was a notable shift in readers looking for “escapism” content after being engulfed by breaking news coverage on the pandemic for a month-and-a-half prior to that, which led to a bump in traffic. 

American Vogue reported similar traffic patterns as its fellow international sites in May, according to Anna-Lisa Yabsley, executive director of content strategy. While she said that May usually tends to be a record-setting month for traffic because of the Met Gala, it was a “highly successful” month despite the gala not happening. Around the time of the event, Vogue published retrospective and historical content packages that were built out of previous galas, setting May 2020 up to be record-breaking month as well. 

Marshall also said her team began tracking what content readers wanted to consume at different times of the day. By monitoring social engagement and search keywords, they found, readers wanted industry updates in the morning and in the evening wanted to unwind with more lifestyle items.

Stories about altruism, culture, fashion history, sustainability and ethical production became top topics that readers were reading and searching for. And knowing what audiences were interested in, Marshall said, the audience team was able to relay the information to editorial, which was then able to strategize their content programming on social media and other channels to heighten readership at key times.

While the use of international editions to inform audience strategy for editions in other countries is not a common practice, Vogue has a unique global influence, according to Ava Seave, principal and media consulting agency Quantum Media. That’s because the coverage topics of luxury and fashion that Vogue primarily focuses on have very similar customers and consumer behaviors in all areas of the world.

With that advantage, Seave said that there is the ability to test these learnings against more audiences without needing to filter much beyond language.

“I think all of these countries are so different, yet the audiences are so global now that the patterns were similar. It was reassuring in many ways so we could have some sense of learning from this global data set and constantly sharing,” said Marshall.

Marshall said that she’s been able to share these audience insights with Vogue’s top advertisers, including major fashion houses as well.

“They want to know what it means for consumer behaviors. And it’s interesting for them to understand what audiences care about from an audience research point of view, but also from what we’ve learned from reading habits and behaviors,” she said. 

Megan Jones, a partner at digital media consultancy January Digital, said that for the clients she works with and represents, including David’s Bridal, The Honest Company and TUMI, any type of publisher insights they can get ahead of making a media buy is a positive.

“With real-time buying taking up so much of advertisers budgets, it’s difficult for publishers to find ways to differentiate their direct buy inventory and breaking down their user behavior in detail is a competitive edge when it comes to selling ad inventory,” Jones said.

This conversation has been edited and condensed for clarity.

Are you talking to clients about the Google and Facebook lawsuits? 

A majority of my clients don’t pay close enough attention to the news to know about the suits. It’s the holiday season and they’re focused on getting more sales — a lot of our clients are founders and business owners who have businesses to run. The Google suit is interesting. Whether it’s Google versus the states or the EU or anyone trying to sue Amazon or Facebook. It’s a great idea in theory but what is it in practicality? People who make those laws don’t even truly understand how the internet works. I’m worried people who make rules or laws that get passed sound good on a surface level but don’t understand the effects.

What about the Apple and Facebook brouhaha?

I’ve emailed clients to make sure their domains are verified for Facebook. With the latest iOS 14 update from Apple, things are only going to get worse next year [when it comes to tracking]. It’s going to happen so we might as well [be prepared] for the update. We haven’t had a talk about it because, from our perspective, clients are busy with something else. It does seem like [news of this update and the potential effects] is coming out this time of year because they know people can’t really pay attention to it with everything else going on.

It sounds like you’re not worried about these changes.

Being in the industry for as long as I have been, everyone talks about these updates as new, but we’ve been talking about updates for years now. Big tech companies have always had these petty little fights where they push or pull other platforms because they want to create a walled garden. For [Facebook] now to say they want to help small businesses is bullshit. They only care about their shareholders and making them rich. They don’t care about me, you or any small business. They only care to the point that they can get a buck out of you. After that you’re just a rounding error on their balance sheet. What we all want to figure out is to what degree will there actually be changes. Will it be small? Big?

As for the Google suits, I imagine they’ll take years. It’s not going to be resolved immediately. So let’s call it a 2022 or 2023 issue. Whatever the decision is will be litigated because they’re going to fight it. It’s Google. They’ve got billions to contest it. So our focus should be more on what is Apple going to do with this update and how will that affect Facebook, Snap and all these other platforms. It’s not just going to affect Facebook — it’s going to affect any platform that has someone go from an Apple product to a platform to a website.

Do all of these platform changes and privacy issues keep you up at night? Seem like it’s been a rough year for buyers.

It’s always a hard time to be a media buyer. We have a thankless job that no one understands and they don’t think they should pay us very well for. Has it been more challenging the last four to six years? 100% because of more changes on ad platforms, more petty fights between tech titans and no one wants to get along. Does it keep me up at night? No. I can’t control what Google, Amazon, Apple and Facebook do. I can only control what I can do, shield clients and prepare them when I have to. You can’t control the states suing Google or the EU suing Facebook. We just have to see the news as it unfolds and react, which is very much 2020. No one knows what’s going to happen. It’s all conjecture and hot takes.

What do you wish you could say to execs at these tech companies about these changes and how it affects your job?

As for the Googles, Facebooks, Amazons of the world, if they truly care about small businesses they need to start to work together so we can share data across platforms, make it easier to connect things and not only [say they are going to help small businesses] when their bottom line is hurting. If they only do it when their bottom line is hurting then it’s clear they don’t care about small businesses they only care about their share holders. That’s fine. That’s what their fiduciary duty is. But don’t slap me in the face and tell me you didn’t slap me in the face.

The petty fighting [between the tech giants] is like we’re back in high school and I have no time for that. Don’t say you’re going to help small businesses when you got rid of organic reach on Facebook and then put an article in The New York Times saying you’re helping small businesses. You’re the Walmart of digital marketing. You aren’t saving small businesses today, tomorrow or any day.