How the Googlization of Television Will Destroy High Wage, Union Hollywood

Photo by capl@washjeff.edu

Google dominates Internet advertising, with 44.1% of the $113 billion per year global online advertising market, but it’s quietly gunning for control of the even larger television advertising sector. As Robert Kyncl, a senior manager at Google’s YouTube operation, said in a recent New Yorker interview, “[T]his industry [i.e. TV] is worth three hundred billion dollars, worldwide, and we hope to see value shifting hands.”

“Value shifting hands” sounds like a feisty challenge to entrenched interests, but in practice it’s likely to mean one more step in dismantling the middle class in this country. In industry after industry in the last forty years, we have seen “value shifting hands” from working families into the hands of corporate shareholders promoting “globalization” or the next “disruptive technology.”

And here’s the thing about Hollywood: while the name stars get a lot of attention, the reality is that line workers in the television industry, from the people working the cameras to those delivering the food, are part of one of the last union town bastions. With auto, coal, steel and other major unions a shadow of their former selves, the Hollywood unions largely formed in the 1930s are actually one of the last thriving representatives of that historic surge of working class power.

The danger is that a Googlization of the television industry could mean the end of a living wage industry there as well.

So What is Google doing in Television?

In a typical multi-front approach, Google is taking on the television industry by trying to control the television software in the homes, remaking the television advertising industry to suit its strengths and funding alternative television content in competition with the major studios.

Taking Control of the Remote: A key goal for Google has been to make watching television more like surfing the web — with all the opportunities that implies for inserting Google advertising throughout the user experience.

Google has been promoting its Google TV technology for a number of years, and now seems confident that the combination of alliances with manufacturers to install its software directly into televisions and the popularity of its Android handset software — which now powers Google TV — can put the company firmly at the center of the television watching experience for home viewers. Google’s Eric Schmidt predicted at a conference in December that by this summer, a majority of televisions sold in stores would have Google TV — the company’s interactive software system — embedded in the hardware.

A number of analysts have questioned the likelihood of Google’s software moving that fast into consumer hardware but sources told tech website Neowin that Google was making payments to multiple vendors to ensure they included Android in their television hardware. While Google denied the report, a few dollars per television from Google would, in Neowin’s words, “go a long way for vendors who have been seeing diminishing margins over the past few years.”

The benefit for Google of sitting in user remotes will be clear. The company will have more data to track user references for advertisers and the ability to promote alternative content channels where Google advertising is prominent.

Remaking the Television Advertising Marketplace: However, Google is not waiting for television to come to it; its been aggressively entering the traditional television advertising market — albeit with its own twist that could upend how television production is paid for.

Google has a whole Google TV Ads service for placing ads on television, much as it places ads on websites through its AdWords service. By cutting deals with Direct TV, Verizon FioS, Viamedia and, just this month, Cox Media, the third largest cable operator, Google can place ads reaching 48 million US households on over 100 channels. In the last year, Google claims a six-fold increase in the number of ads aired each day.

What is most radical about Google’s service is not that a new player is grabbing a share of the television ad market; it’s the way those ads are being sold. Most television advertising is often sold before a show’s season even starts in what is called the “upfronts,” where top advertisers lock up prime advertising spots on most shows. Traditionally, those advertisers who failed to make those bulk advertising deals were stuck buying overpriced remaining slots from a handful of advertising brokers in what’s known as the “scatter” market.

Google is creating an end-run around the networks in cobbling together a “national inventory pool” of ad slots available over multiple cable and satellite operators. Those operators can now easily put slices of unsold ads into the inventory pool, while advertisers can buy ads reaching a large national audience, in what Jim Edwards at Business Insider describes as “a model for killing the broadcast TV business as we know it.”

And the advantage of Google TV Ads will be that, with Google’s tracking of consumer behavior — online and in their television watching choices — advertisers will be able to target their ads to particular households based on a range of behavioral profiling.

Exploding Niche Channels for Advertisers: The holy grail for advertisers is to have a show with viewership specifically attuned to their product. Google Ads can help advertisers find the households they want but to ensure there are more channels serving the exact niche market an advertiser may want, Google is funding an explosion of new television channels that will begin broadcasting this year on YouTube (which will be easily accessible on any television with Google TV installed — see how the pieces all come together?).

YouTube is currently streaming 4 billion online videos a day — with three billion of those videos each week delivering advertising revenue. But the problem is most of these are watched in short bursts without users plopping down to watch for hours on end.

So Google is currently handing out $100 million in upfront production money to partners to create professional long-form content that will air throughout the week on 100 new specialized television channels broadcasting on YouTube. These partners include Madonna producing a dance channel, Amy Pohler making a comedy channel, The Wall Street Journal and Reuters producing news channels, and Jay-Z, Shaquille O’Neal, The Onion, Slate and a range of other entertainment and media players delivering content for particular taste and demographic niches.

Google will supply the advertising, of course, for these shows and split the revenue with the partner channels (recouping its upfront costs from the partner share of advertising revenue). With online delivery of content, Google will be able to tell advertisers exactly who is watching their shows, their demographic and taste preferences and pretty much anything else those advertisers want to know to more effectively push their products.

With the ability to track consumer preferences and with Google TV direct a chunk to its specialized channels, Google will be able to sell television ads in real-time for any niche audience an advertiser wants at any time.

So How Will this Hurt Workers in the Entertainment Industry?

Producing for niche audiences inevitably means fewer resources — and production companies will likely make up the difference in lower wages for many production workers.

This threatens the current production system, where entertainment unions in Hollywood have built an amazing machine to share the profits of the entertainment companies with the line workers in the industry, not just with the name actors but also with the people who work the cameras, build the sets and deliver the food to the set.

While actors and top-line talent benefit from residual (repeat) payments from shows they directly worked on, the broader workforce in the industry receive residuals essentially from all shows — hits or stinkers — to a shared health care and pension fund, the Motion Picture Industry Pension and Health Plans. And those residuals are a majority of the funding for the health and pensions of those “below the line” workers. That integrated system means that the health care and pension of those workers doesn’t depend on winning the lottery of being on a hit show; as long as they work, whether consistently on one hit show or on a bunch of shorter-lived ones, they and their families are taken care of. For those “below the line” workers, the union benefit plans paid out over $500 million in health benefits alone last year.

Likely Union Busting in Cut-Rate Google Productions: As with other industries “transformed” in recent decades, a fragmenting of the industry will likely mean a disintegration of an integrated delivery of health benefits for those in the industry and the destruction of long-term pension benefits.

If all Google YouTube production outfits signed up with the existing unions and their benefit plans, that might mediate the damage. But every indication is that these productions are likely to try to evade unionization; Anthony Zuiker, who created the crime show C.S.I., is developing a channel called BlackBoxTV for Google and is enthusiastic about the chance to avoid traditional rules — including presumably union rules — in production:

[On traditional television] there is a lot of interference and a lot of rules. With YouTube I will have a very small crew, and we are trying to keep focused on a single voice. There aren’t any rules. There’s just the artist, the content, and the audience.

Note the absence of the interest of workers in the industry in the equation in that last line. This is a model for empowering and enriching a few top-level “artists” in Hollywood, while leaving the forgotten line workers out of the profit equation.

Google’s Advertising Model Will Undermine Hollywood Labor Model: Even if a few of Google’s allied production companies unionized, the overall thrust of Google’s advertising model is likely to undermine stability of the Hollywood labor market and thus the room for unionized approaches. Its model is one of placing ads in real-time, encouraging much more short-term horizons for determining the success of failure of any television venture.

And with its Google TV Ads program, that short-term, real-time ad placement model is increasingly penetrating regular television decisions, not just the emerging online television models as with Google’s YouTube channels.

Currently, advertisers commit roughly $9 billion to the following season’s television shows during what’s known as the “upfront” process each Spring. Many shows sell out their complete run of ads for the fall. While the exact price paid for each show’s ads will rise or fall with the televisions ratings received by the show, this does represent a large commitment of resources to each studio that allows planning and, for workers in the industry, a commitment to pay and benefits.

For the big five studio broadcast networks, the total upfront money has been stagnant, with 2004 being the high-water market of total upfront dollars, even as television viewing has leaked out to cable channels and, increasingly, online viewing. In fact, the only reason revenue has not cratered is that studios have managed to impose rapidly escalating price increases per viewer even as the total broadcast audience has dropped.

But the longer-term planning allowed by the “upfront” system of paying for large chunks of coming seasons is likely to increasingly give way to short-term, real-time pricing if Google is successful. And even if a production company, existing or emerging, is willing to sign a union contract, even the best-intentioned employers may find it hard to commit to health care and pensions for their employees if a swing in the ratings immediately drains all revenue–and they face union-busting competitors promoting a low road, cut-rate production model.

Short-Termism Will be Bad for Hollywood Workers, Bad for America: Bemoaning the short-term thinking and dumbing down of Hollywood’s products has been going on for generations, but amidst the dreck, quite successful and sometimes even artistic work has been produced.

The vibrancy of the product has meant that U.S. television has dominated the world — and the economic result has been a large trade surplus in the entertainment sector. The Bureau of Economic Analysis found that between 1986 and 2005, foreign sales of U.S. motion picture and video products rose from $1.91 billion to $10.4 billion (in 2005 dollars) — an increase of 444 percent. In 2009, exports of film and entertainment media enjoyed a trade surplus of $11.9 billion. It’s notable that one of the most unionized sectors in the nation is also one of the strongest export sectors, highlighting the fact that it’s a high-quality workforce, not low wages that drive economic success.

The entertainment industry has led U.S. exports precisely because of the high production values of the U.S. entertainment product, which local overseas producers could not match. There is a tight-knit community of craftspeople in the Hollywood system involved in everything from set design to editing that continue to outcompete low-wage entertainment sectors around the world.

But the real-time advertising models promoted by Google for the television industry will require incredibly short-term horizons for all entertainment productions and encourage the same kind of low-wage, low-skill models of production we’ve seen in so many other deunionized industries. Once deskilled, many of those production jobs will likely go overseas as so many other jobs have before.

As well, it’s precisely the products sold to the broad diversity of the U.S. public that find a broad market overseas. Niche programming, even if profitable in new cut-rate production models, will likely be far less appealing to overseas markets (where local productions will probably be far more nimble in addressing local niches), so the overall economic impact will be an increasing loss of exports from the sector.

Saving the Entertainment Sector from Googlization: Some aspects of the new Google regime are no doubt inevitable, but there are countertrends such as high-quality pay channels that can be encouraged.

At a minimum, television watchers should demand that shows they watch sign union contracts and that Google contribute some of its television advertising revenue to the health care and pension plans for entertainment workers.

Policymakers can help by adding antitrust scrutiny of Google’s actions in the television market with an eye on protecting labor rights in the sector as well.

The discussion on inequality coming out of the Occupy Wall Street protests is how we got to the point where so many workers are not sharing in the economic bounty of our nation’s economy. Part of the answer is that as industry after industry faced strains from emerging technologies and globalization, counsels of “do nothing” prevailed as unions were destroyed and jobs shipped overseas.

With Hollywood, we actually have a sector that is currently economically vibrant where the bottom 99% of workers in the industry share in the wealth enjoyed by the top 1% in the industry. It faces strains on its model — and the threat of Googlization is a top one — but we have time for citizens and policymakers to step up and figure out what new models can sustain both new innovation AND a robust standard of living for all workers in the industry.

Nathan Newman, a lawyer and Ph.D., has an extensive history of supporting local policy campaigns, from coalition organizing work to drafting legislation. Previously Executive Director of Progressive States Network, an Associate Counsel at the Brennan Center for Justice, Program Director of NetAction’s Consumer Choice Campaign, and co-director of the UC-Berkeley Center for Community Economic Research, he has also been a labor and employment lawyer, freelance columnist and technology consultant. This post originally appeared on Huffington Post and appears here with the authors’s permission.

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