The Data Show: #NBCFail, or What Happens When an Industry Faces Digital Disruption

Like it or not, NBC must accept the fact that its monopoly on broadcast content has been disrupted by the emergence of new technologies, most notably the Internet and the DVR. Instead of creating a business model that leverages and monetizes on this new reality, they’ve instead tried to ram an old business model down the throats of consumers across the U.S., essentially missing the forest for the trees. As a result, they’ve pissed off millions of people, devaluing their brand in the process.

Like most Americans, I’ve spent a lot of time watching the Olympics during the past couple weeks. Probably way more than I should. To be totally honest, I haven’t been the biggest fan of NBC’s coverage, and on this I’m definitely not alone. Look, for example, at the #NBCFail Twitter campaign that erupted online during the past couple weeks. Led mostly by bloggers and new media pundits, the campaign has relentlessly lambasted NBC for its poor coverage.

A major criticism by the #NBCFail folks has centered on topics ranging from showing only American competitors, to endless and annoying human interest stories, from snarky banter with condescending hosts, to strangely jingoistic flag-waving commentary. I must say I agree that it’s generally been an unpleasant experience. But, beyond poor coverage itself, NBC has also been taking a ton of flack for its new media “strategy”—if you can call it that—that includes no live streaming content on the Web. They have an App with some live coverage, but it’s only available to those with an active paid cable subscription that includes NBC already.

Now of course many in the industry have rushed to NBC’s defense. In his recent article in Ad AgeThe Truth About #NBCFail,” Simon Dumenco states quite correctly that “NBC is not a charity.” He then goes on to explain that NBC paid about $1.2 billion for the rights to broadcast the games. That’s a lot of greenbacks. Dumenco’s point is that because NBC is not listed as a 501c3 (non-profit) organization, it has every right to run in the Olympics in a manner it sees fit in order to recoup and hopefully make a profit on its hefty investment. Fair enough.

While on one hand I tend to agree with some of the points made by Dumenco and other critics of #NBCFail, on the other I really do feel that NBC has completely bungled its new media strategy. Like it or not, NBC must accept the fact that its monopoly on broadcast content has been disrupted by the emergence of new technologies, most notably the Internet and the DVR. Instead of creating a business model that leverages and monetizes on this new reality, they’ve instead tried to ram an old business model down the throats of consumers across the U.S., essentially missing the forest for the trees. As a result, they’ve pissed off millions of people, devaluing their brand in the process.

This is eerily reminiscent of what happened to the recording industry a little more than a decade ago. Remember Tower Records? Sam Goody? Virgin Megastores? All gone. And I could continue and list off dozens. Well, guess what happened? The world changed and the recording industry lost its monopoly on distribution of its primary product. What was their master plan? Suing Napster. And all that accomplished was putting off the inevitable by a couple years at most. Today, all the old players are gone and iTunes is the world’s largest retailer of music worldwide, and has been since 2009. The craziest part is that it was only launched by Apple in 2001. It happened so fast.

Well, why was Apple, a company with no experience selling music, able to swoop in and within a few years totally dominate a legacy industry, displacing existing firms? Two words: Disruption and Innovation. Disruption caused by the emergence of new technology—namely, the Internet as a means of Distribution—enabling firms with the best new ideas to unleash Innovation on an industry ripe for transformation.

NBC and the other legacy broadcast networks are now facing similar dilemma. With the emergence of the Internet as a viable distribution channel for broadcast media, their monopoly is over. Don’t like NBC’s coverage? Well, all you need to do is locate a proxy and you can watch awesome uninterrupted streaming coverage on BBC, or China’s national network CCTV, among many others. And as if this ignominy weren’t enough, Digital Video Recording (DVR) boxes in most homes mean that almost no one is watching commercials anymore. Sure, NBC can crow about its impressive ratings while it blacks out live coverage and force millions of people to watch their broadcast in primetime. But how many of these people are tape-delaying coverage by an hour and skipping the ads? Way more than they want the advertisers to think.

What this all means is that the landscape has radically changed for the networks, though they don’t seem to realize it. How long is it before most advertisers realize that the 30-second commercial is functionally obsolete? My guess is it can’t be too long. And when they do, guess what will happen? No more 30-second ads. That will mean a HUGE revenue stream dries up for the networks as the advertisers pull their campaigns en masse. In my estimation, because the networks seem completely unprepared, this shock will be even more devastating than the loss of classified ad revenues was for newspapers.

The only solution for networks, of course, is instead of fighting change and pissing off your customers with inane blackouts and insulting restrictions that don’t work, to be the harbinger of transformation and change instead of the victim. Can they do it? It’s certainly possible. Take, for example, this past year’s absolutely brilliant Final 4 strategy by CBS/NCAA. While the tournament was broadcast on regular TV by CBS without blackouts or restrictions, there was also an amazing App you could buy that offered uninterrupted access to all the games. Sure the App needed to be purchased—but the user experience was so awesome I sure didn’t mind ponying up a few bucks to install it on my iPad.

Experience after experience has shown in an effort to prevent cannibalization of their existing business model, legacy firms miss the forest for the trees and fail to innovate in time, allowing new competitors to swoop in and change the rules of the game for them. By that time, of course, it’s way too late and they’re toast. Ask Kodak about digital photography. Bet they now wish they had started the transformation to digital a few years earlier, don’t they? Or ask Borders about eBooks? I could go on and on …

So, do you think the networks will figure it out? Let me know in your comments.

—Rio

Author: Rio Longacre

Who’s Your Data? is a blog that aims to disseminate thought-provoking tips and techniques involving the use of data and database marketing to direct marketing professionals. Why should you care? Because implementing data best practices has been shown to lift response rates, improve analytics and enhance overall customer experience. Reader participation is encouraged!

Rio Longacre is a Sales & Marketing Professional with more than 10 years of experience in the direct marketing trenches. He has worked closely with businesses across many different vertical markets, helping them effectively leverage the use of data, personalization technologies and tracking platforms. Longacre is currently employed as a Managing Consultant, Marketing, Sales & Service Consulting at Capgemini Consulting, a premier management consulting firm. He is based in the company's New York City office, which is located in Midtown Manhattan. He has also previously worked as an online media buyer and digital marketing strategist.

Email Longacre below, or you can follow him on Twitter at @RioLongacre. Any opinions expressed are his own.

15 thoughts on “The Data Show: #NBCFail, or What Happens When an Industry Faces Digital Disruption”

  1. A little Colombo type question here… let me get this straight. NBC paid 1.2 billion to whom? Who owns those rights to sell them? Because if something as benign as Olympics coverage can be monopolized, then CENSORSHIP can be bought.

  2. Your editorial is breathtakingly narrow. Criticizing is easy. Finding viable models that monetize the social side of the Olympics; that’s hard. For ever success, there are thousands of failed disruptive technology corpses. Disruption to established business models require time to be either fatal, or for companies to transform. Time allows market examination, competition, adoption and acquisition to find viable business strategies. The same is true for consumer adoption and behavior.
    I didn’t need Twitter to enjoy the Olympics. Satellite, my tablet and DVR provided more programming hours than I could handle. And yes, I fast forwarded through Olympic programming not of interest. I expect that NBC will continue to transform access and socialization. Just remember “there is no such thing as a free lunch.”

  3. I don’t think the issue most people had with NBC’s coverage was the advertising, and that’s where the Dumenco article goes wrong. Americans today have said loud and clear they get that ads have to come with free content; the entire Web is ad supported.

    American viewers get it, they’re not whining because NBC had advertisers. What they are whining about–and what you can’t do today–is that NBC served worse programming because of its ads and other NBC-first considerations. The lowest moment was the closing ceremony, which they actually put an hour-long break in to run a full episode of one of their new shows. You had to wait an hour to see the rest, including the Who reunion. I wasn’t too upset about most of NBC’s programming (although I thought they made some bad decisions) but I thought the closing ceremony break was classless. We turned it off and made a point of not checking out the new show because of that.

    One thing I don’t agree with RIo on in this post is that I thought NBC actually had a lot of live streaming coverage on the web. I watched some soccer and fencing that way, and I was pretty happy with that whole experience. But I have NBC on my TV, which is optimized for this kind of viewing, so I’d rather watch a good Olympics telecast on that than try to stream everything and deal with a smaller computer screen and spotty connections.

  4. I think NBC had three primary objectives: (1) sell prime time ads, (2) drive viewers to cable, and (3) use the Olympics as a means of promoting their fall line up. I don’t even include "covering the Olympics" as a distant (4).

    None of these are consistent with anything other than the status quo of a "big audience / cable package" model. Given NBC huge financial commitment to the IOC through 2020 and the inertia that will continue for the next few years, no I do not think "the networks (well at least not NBC) will figure it out." Even if they do, they may be locked into structures (IOC contract and Comcast ownership) that limit what they can do. All I know is that they need much better leadership team to make this work for 2016 much less 2020. The world is changing very rapidly and they way behind the curve.

  5. I hope they will get it – but I have my doubts. I, for one, refused to watch ANY NBC Olympic coverage after they replaced the – very moving – 7-7-05 memorial (or whatever else you want to call it – it was moving and they cut it) with a bland, prerecorded Michael Phelps interview during the opening ceremonies. And then – after a huge outrage – they just dropped Muse in the closing ceremonies. And delayed the performance by the Who for an hour and broadcast an entire (commercial-free, so it IS possible) episode of some new show. The fact that they did not learn from the opening ceremonies #NBCFail gives me little hope they will learn now.

  6. I didn’t like the Olympic coverage either. On the other hand, to criticize NBC by launching a campaign on Twitter is kind of ironic, since Twitter itself produces electronic bumper stickers that are seldom profound. BTW…we are now just getting to the point where there are 50% smart phones, even capable of downloading apps. It would be pretty dumb to abandon the other 50% of traditional viewers. Too bad this article was not limited to 140 characters as well.

  7. Let’s say you are correct and balkanized online distribution is destined to replace broadcast, you haven’t hinted at how networks are to monetize their content. Yes, selling an occasional app might work for limited high-profile sporting events, but pay-per-view as a replacement income model for typical programming will never replace the huge amount of advertising that allows quality coverage.

    You might look at this as a problem in trying to fund the Olympics. Without advertising revenue, the cost of athlete training and funding the spectacle we have come to expect of the Olympics is no longer feasible. Rather than asking your proposed distribution model for NBC alone, I’d ask you for a new-media business model for funding the Olympics in the absence of advertising. The app-based model might work using an existing legacy-built audience, but I guarantee the general interest and public awareness will wither over the long term without benefit of a broadcast component.

  8. Due to the DVR, I didn’t see a a single commercial during the Olympics. And, since I knew the ending, I just watched the parts that interested me–and I got to skip EVERYTHING by Bob Costas. Because, really, how annoying can a commentator be?
    Mary, the swing shift commentator, was at least witty and her side stories about the UK were *fascinating*. I watched those religiously.

    But commercials? Ha ha ha ha ha!

  9. I’m not sure how NBC "failed" here… they had record viewership, even more than the Beijing games, 31.1 million viewers per night. People, if you don’t like their coverage, don’t watch it!

  10. Great comparison and contrast between NBC and the Olympics and CBS and the NCAA — although I still wish ABC/ESPN had both. They "get" sports.

  11. Even if you pulled an Apple with the distribution channels, it would be like putting lipstick on a pig. You can’t expect any of the MSM to ‘get it’ in the balkanized state we are in. When I view NBC, everything is PC and snark. Why does anyone even bother with it? Pat Weaver is doing 360s wherever he is resting….

  12. Whenever I have read about issues with NBC’s coverage I have this image in my head of 3 year old little girl with her fingers in her ears, stomping in place on a toy aisle when she doesn’t get her way. What a bunch of whiners we have become. I watched every second of prime time Olympics coverage and even though I’m on FB & Twitter throughout the day I managed to miss all spoilers. Like someone said below, aside from an app what is your idea to replace revenue?

  13. NBC is obviously bothered by the #NBCfail tag because they put our a press release belittling the twitter meme as only 0.5% of tweets about the Olympics.. Which comes out to 750,000 angry tweets. Only in brain-dead corporate America would 750,000 angry tweets from customers be considered acceptable or dismissed.

    One wonders if Comcast’s cable TV genes are showing — they are used to being hated by their customers for poor service.

    I have a 50mbps connection at home and the online coverage was glitchy. Nothing like the March Madness feed online that allowed me to watch a game while smoking a stogie out on the porch.

    I finally decided it wasn’t worth getting mad about or bothering to get a vpn/proxy to the Beeb. I just watched the Braves games instead.

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