What Silicon Valley can learn from NBC and the Olympics

The 2012 London Olympics are over and in this age of instant global communications and mobile computing, the time delayed, traditional television broadcast of the Olympics on NBC has the best ratings ever.  This flies in the face of all the “old media is dead” prognostications.  How could this have just happened? What can Silicon Valley and the puzzled VC crowd takeaway from this?

Huge amounts of people watch traditional television and like it.  – The producer of the NBC Olympics was the producer of the Today show. NBC wanted the Olympics to have all the insipid commentary, celebrity focus, and stories of hard struggle that fill morning television.  All the stuff people hated on Twitter?  Yeah, America ate that up and asked for second helpings.  Averaging over 31 million television viewers a night and serving up almost 160 million video streams, the audience was monstrous. The echo chamber of cable cutters and tech pundits is small. The experience of the web saavy and cutting edge viewers is not shared by the vast majority.

Takeaway – Take a good hard look at the reality of what’s popular in America, not in your social graph.

Hashtags aren’t magic bullets. -  All the twitter fury in the world about #nbcfail, and NBC didn’t change a thing.  Their reward?  Highest ratings ever and huge profits.  Sure it was enjoyable reading people trying to make the wittiest post, but even a Tweetstorm of that magnitude had little effect on the vast majority of the television audience who kept watching. NBC pushed out a one paragraph quote to dampen the whole thing and never addressed it again.  Even with strikingly bad decisions to cut swathes out of opening and closing ceremonies, inane commentary, and bad promo coordination, NBC simply marched onwards according to plan and is reaping huge benefits such as high ratings and ad revenue, extreme promotion of other NBC shows, and validation of it’s deal with cable and satellite companies to paywall the video streams, all from sticking to plan.

Takeaway – Social media can hurt smaller brands to a degree, but large brands can still shake it off like water on a dog after a bath. Yes, social media can still highlight truly outrageous behavior and push change, but it’s not as effective for fixing all grievances.

Traditional media companies are learning to use the Internet. – NBC made every event available online and in realtime, on the web and on most mobile devices.  Yes, it was awkward and difficult to use. Yes, the authentication was shaky.  Yes, you couldn’t buy it ala carte.  Yes, the commentary was missing.   Yes, the BBC did it much better.  But the fact is that they pulled it off.  It only gets better from here.  Remember the story of the tortoise and the hare.  They are a couple revs away from the being as good as the beloved HBOGo system. The people inside the big media studios are well funded, take a long view, and have the most to lose by getting disrupted.  They are going to cannibalize themselves and ride though the disruption at this pace while the distribution companies have a war for viewers.

Takeaway – Traditional media will continue to improve slowly and continuously, so expecting them to stand still is a mistake.

People want new options for distribution, but the same content that they enjoy now. – No question that even traditional television viewers wanted more options to watch the Olympics.  The content is what they want and they are loyal to it. It is the distribution providers that don’t allow or offer them what they want that put their undies in a bunch.  People are willing to pay for content. Not everything has to be free.  Find ways to work with the major media studios instead of against them. For new, disruptive companies and viewers at home, the common enemies are the companies with strangleholds on distribution.

Takeaway – Technology solves distribution issues, not content issues.

Access to good content is critical to success in the online video business – Viewers are not going to give up sports, news, and high production value film and TV simply because VCs like the business model of YouTube content better.  Trying to bend an industry to a technology is tough to do.  It was only done by Apple after file sharing literally crushed the music industry. Steve Jobs walked in and set up camp on the rubble.  Television has not suffered the same fate and like Stalingrad is hunkered down for the long siege.   New businesses need to walk up the gates and see how to work with the defenders, not against them.

Takeaway – Understanding the world of media rights and licensing is crucial to building a disruptive business.

There is plenty of opportunity for new ideas and businesses to be successful in the digital media marketplace, but it would be a mistake to underestimate the incumbent media giants or to overestimate the change of pace of viewer behavior.  Innovators and investors need to balance vision with reality and learn from the existing world of television rather than mock it.  The Olympics show the huge power of the current media ecosystem, and expecting it to fall over anytime soon is a miscalculation.  Real innovation and new products that appeal to the mass audience are needed, not subtle variations that can be adopted by the current players.