As ad dollars erode, tech investments point the way forward for networks

There’s no doubt that linear advertising revenues are going to decline in the coming years for big networks.

Squeezed by Facebook and Google on one side, and impossible consumer expectations created by Netflix, Amazon and other streaming services on the other, the idea of an ad-supported entertainment business is under siege.

This chart from the analyst firm Moffet Nathanson shows just how grim the situation is for companies not named Google or Facebook.

But in a wide-ranging conversation at the Code Media conference in Huntington Beach, Calif., the top executives of Turner and A+E Networks elaborated on how their app businesses and investments in startups are driving new growth.

While it’s not a revelation that apps are a great way to make money and build a deeper relationship with consumers, and that technology is the future for networks (frankly the tech companies that have overrun Hollywood in the past few years are a stark example of this new reality), the success of Turner’s Boomerang service and the investments that A+E have made in companies like Atlas Obscura and Vice highlight alternative ways to make money (I’m also looking at you, Vox and Recode).

Turner launched Boomerang last year as a subscription service for cartoons in a joint venture between Cartoon Network and Warner Brothers. The app now counts roughly 150,000 subscribers, according to Turner chief executive John Martin. Martin also said the company was seeing success with its Filmstruck service, which leverages the Turner Classic Movies brand to offer a curated slate of movies to watch.

Martin said Filmstruck “provides a learning experience into what the future of this business is going to be which is tapping into fandom.” 

For Martin, the idea of curation is going to be increasingly important as the amount of available distractions and stories explodes across different media properties. If the future of Turner is, as Martin says, “being responsible for controlling the consumer experience from start to finish,” then guiding people to apps where Turner can control that experience just makes sense.

Meanwhile, A+E has leveraged its investments in Atlas Obscura and Vice to provide new types of marketing dollars and open the network to an entirely new audience, according to chief executive Nancy Dubuc.

Dubuc pointed to the company’s investment in Atlas Obscura as being a great way to move its audience from television at the History Channel, through Atlas Obscura to experiential marketing campaigns for a credit card company like American Express that would give benefits to new applicants.

Dubuc also said that Vice Media has been a success for the company. “Vice came to be around converting a channel so that you can reach a millennial audience,” Dubuc said of the A+E decision to convert its H2 channel over to Viceland.

“They have the second most upscale audience to Bravo,” Dubuc says of the Viceland channel. While the channel hasn’t seen tremendous subscriber growth, it’s reaching an audience of 18-34-year-old males with household incomes over $60,000, she said.

Those numbers will appeal to any marketer.

Nor are the two networks alone in looking to technology for returns. According to people with knowledge of the situation, that’s one of the reasons why Fox bought TrueX four years ago — to improve the experience for consumers watching ads online.

“Putting aside the investments in other companies, it’s about having deep relationships with consumers however you get there,” says one technology exec at a major studio. “Having an app on somebody’s phone is perhaps the best way to get there… There’s a fundamental thesis there. In today’s world you not only have to think about being broad you have to think about being deep too.”

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Vice founders apologize for allowing a “boy’s club” culture at the company

Vice Media founders Shane Smith and Suroosh Alvi say they are “truly sorry” for not doing enough to stop inappropriate behavior at the company. In a public statement issued shortly before The New York Times published an article on Saturday that described multiple accounts of sexual misconduct by Vice employees, Smith, its chief executive officer, and Alvi said they are taking several steps to improve Vice’s workplace culture, including new harassment reporting procedures.

Founded in 1994 as a magazine about Montreal’s punk scene, Vice eventually relocated to New York City to expand its coverage of counterculture issues. A decade ago, Vice began building its reach considerably with a digital empire that now includes multiple websites and an international TV channel with original reporting and documentaries. It has raised about $1.4 billion in funding, including a $450 million round in June that put its post-money valuation at $5.7 billion, and is currently exploring a public offering. Despite its edgy editorial tone, Vice’s investors include The Walt Disney Company, 21st Century Fox and A+E Networks.

The New York Times’ article, headlined “At Vice, Cutting-Edge Media And Allegations of Old-School Sexual Harassment,” alleged that Vice’s forward-thinking did not extend to its treatment of female employee and put it among many other companies, including Uber, Netflix, Amazon Studios, NBC and Fox News, that have been rocked by sexual harassment charges. The newspaper uncovered four settlements paid by Vice over allegations of sexual harassment by its employees, including current president Andrew Creighton. The New York Times also spoke to more than two dozen women who said they had either experienced or witnessed sexual misconduct at the company.

“The settlements and the many episodes of harassment the women described depict a top-down ethos of male entitlement at Vice, where women said they felt like just another party favor at an organization where partying often was an extension of the job,” wrote New York Times reporter Emily Steel.

In their statement, which was originally sent as a memo to Vice’s staff, Smith and Alvi apologized for enabling a sexist workplace culture and voiced “extreme regret for our role in perpetuating sexism in the media industry and society in general.” A shorter version of the statement was also provided to the New York Times ahead of publication and quoted in the article.

Neither Smith or Alvi were accused of sexual harassment in the New York Times piece, but several former or current members of Vice’s management were, including Creighton, chief digital officer Mike Germano and former Vice News head Jason Mojica, who was fired last month.

“Listening to our employees over the past year, the truth is inescapable: from the top down, we have failed as a company to create a safe and inclusive workplace where everyone, especially women, can feel respected and thrive,” Smith and Alvi wrote. “Cultural elements from our past, dysfunction and mismanagement were allowed to flourish unchecked. That includes a detrimental ‘boy’s club’ culture that fostered inappropriate behavior that permeated throughout the company. It happened on our watch, and ultimately we let far too many people down. We are truly sorry for this.”

The two wrote that Vice has already fired three employees over “unacceptable behavior” and outlined other steps the company is taking to change its culture. These include a new chief human resources officer, Susan Tohyama, a former HR exec at the National Basketball Association who has been given “broad authority” to make changes at Vice. Chief financial officer Sarah Broderick is now also Vice’s chief operating officer, giving her more power to change its work environment.

Smith and Alvi also said Vice will no longer make employees sign its “non-traditional workplace agreement,” a contract that was meant for them acknowledge they might deal with “offensive, indecent, violent or disturbing content” while in the course of their work, but which some interpreted to mean they could not complain about harassment.

Other measures promised include revised policies on consensual relationships and sexual harassment; a third-party employee hotline for reporting misbehavior; a diversity advisory board that will be chaired by lawyer Roberta Kaplan and include Gloria Steinem and other prominent women; pay parity by the end of 2018; diversity training; and extended maternity and paternity leave benefits for all employees.

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