The Power of Torso TV (Why Media is Racing to the Middle)

This article originally ran on TechCrunch.

Chris Anderson wrote a really influential book some years ago called “The Long Tail” that shaped how many people think about emerging Internet markets. If you haven’t read it you should consider adding it to you library.

It was especially influential in my mind in thinking about media.

At the simplest level you can think about markets in terms of the number of times media is consumed and/or purchased by people plotted against the total number of content of that media type that is available.

At the left of the graph is the “head end” of the market, where the “hits” are produced for mass audiences. This was how companies who produced media became big before the Internet.

Why is that?

When you have limited distribution, the costs of distributing media are so prohibitive that only the largest of media producers (and distributors) are relevant.

The book profiles markets like those for books. When you had physical stores selling books, the bookseller would have to stock the shelves with those books most likely to sell so consumer choice was more limited. It was by definition a hits-driven business.

This changed with Amazon because you could stock books in warehouses and ship them when ordered greatly reducing the costs of housing books and thus you could stock a much greater variety.

Now as an author you can actually publish and be able to sell only a thousand books. Even a hundred. That couldn’t happen without the advent of lower cost production & distribution. And as we know the book industry is moving fully electronic with the advent of the Kindle making the costs of production & distribution nearly zero.

Think about music as another example.

In the early days of music you had to produce records, which was expensive. You had to promote them via music venues by playing across the country to get your albums purchased. And with the rise of radio you then had to get airplay on radios to promote your music (leading to payola).

If audiences liked your music then you had to sell them physically at Tower Records or similar. That was the only way. And you would promote your music through expensive and limited media channels (radio, who had a strangle hold on market) and retail shops (who could control placement and promotion).

In the “head end” market you can make a lot of money if you’re a content producer. Mostly everybody else languishes. You also can make a lot of money if you’re a distributor to head-end markets, mostly these are monopolies, oligopolies or sometimes even mafia run businesses (for a great book on the emergence of these businesses read Lew Wasserman, The Last Mogul. Sadly, no Kindle edition).

In the “long tail” you can become enormously valuable if you’re a platform. Less so if you’re a content producer. It seems appealing at first since you can “ring the cash register quickly” and it feels good. But as every blogger, musician, novelist or YouTube emerging talent knows … it doesn’t add up to much unless you go big time.

TV was the same. You first had broadcast TV through local terrestrial broadcasting towers. The spectrum was so limited that as a child of the 1970′s we only got 4 TV stations. There were no physical forms to store the media – VHS, DVDs then DVRs have obviously changed this. Distribution strangleholds have dramatically decreased with cable & satellite (and now fiber) but distribution until recently has been very limited.

And then there’s film. It has been expensive to produce film on celluloid reels and then these had to physically be shipped to theaters (which were also, obviously, limited). When you think about “time windows” of film distribution you literally need to think about the fact that you would open a film in the US and later ship the physical reels to London then Europe to open overseas.

Physical limitations on both production AND distribution produced the hits driven business that many people associate with the media industry: Film, TV & Music.

We all know what happened with music when production costs went down (ProTools) and distribution costs went to zero (Napster). It had the effect of greatly reducing the industry size but also of allowing some less known artists to reach audiences that previously would be unthinkable due to cost constraints.

To some extent this lowering of production & distribution costs has been part of the YouTube phenomenon and more broadly of UGC (user-generated content) itself. YouTube has done a phenomenal job in aggregating audiences, which is why I have taken to calling YouTube the new Comcast and believe it will be a huge disruptor in the TV market .

To give you a sense of scale: 800 million people visit YouTube.com every month. 4 billion videos are watched daily. In 2011 YouTube had 1 trillion views, which is the equivalent of every human watching 140 videos. Put simply: YouTube OWNS the long tail. They own the audience and that is enormous asset to leverage, but more on that in a moment.

 Netflix, Hulu & HBO Go are coming from the opposite direction – the Head End. Yes, it’s true that their deep libraries are virtual and therefore fit the long-tail properties. But their core asset (other than great tech & management) has been exclusive windowing of premium content that people want to consume.

They had to negotiate these rights with the major content owners – the studios. And this makes them definitionally more vulnerable than having control over a massive audience that turns up every month regardless of “hits.”

That is why Hulu has invested so much in building its Hulu Plus subscription service. With what is rumored to be around 2 million consumers paying $8 / month that is now a $200 million per year not including their ad revenue business.

Very smart people are running these online video businesses and they know that they need to diversify by either creating or sponsoring the development of new content. Hulu announced $500 million to fund new content and Netflix has, for example, resurrected the hit / cult show Arrested Development.

Interestingly Netflix plans to release the entire season all at once. Take that traditional time windows!

So to some extent I believe it will be a race in video will eventually be to the middle. The Torso. I know the big players still think of the next mega hit. But the fact that Netflix focused on Arrested Development tells me they are likely thinking more like me.

And I believe the torso is much more valuable than people perceive because it is growing rapidly with globalization and with the breakdown of physical distribution barriers.

Several years ago I became fascinated in the “torso” part of the media market.

I became more aware of it by my friends at Viki. The company started out in South Korea by making South Korean drama available on the Internet. I have to admit I couldn’t have named a single SK drama so the team pointed me at the popularity of the show “Boys Over Flowers” in the US. Who knew?

Viki had come up with a concept of loading drama shows onto their website and built tools for “fan-subbers” to translate the show into other languages. At the time (several years ago) they were translating a 30-minute drama to something like 20 languages in less than 48 hours. Turns our there are armies of people who enjoy building status amongst their friends by translating shows better / faster.

At first this was hard to believe – that thousands of people engaged in translation as a sport / for fun. But then thinking about Wikipedia, Yelp and other UGC sites I realized that people build a sense of community through knowledge and accomplishments with like-minded people online.

Hard for most older (non digital native) people to understand. A bit easier of a leap for bloggers, Tweeters, Quora contributors.

In the early days of Viki (I don’t have current data) more than 50% of their views were NON ASIAN US viewers. That was impressive. In talking with the founding team I started to realize that this was a global phenomenon. Think about even the most obvious genre of global fans for “niche” international video media:

  • Bollywood
  • Anime & Manga
  • Spanish Novelas
  • South Korean Drama
  • British Comedy (The Office, the original version, Ab Fab) / Period Pieces (Upstairs / Downstairs), Sci Fi (Dr. Who)
  • Japanese shows (ultraman, super sentai aka power rangers, speed racer / mach go go go, godzilla)

And these are just the obvious ones I know about. I’m sure there are dozens of very large niches of content types that are particular to parts of the world that have developed followings in other parts.

You learn this in particular when you get involved with YouTube networks and find out that much of your traffic is coming from international sources – even when your videos haven’t been subtitled or dubbed. In fact, 70% of YouTube’s audience is non US and this is mirrored in most of the big YouTube networks.

But as you can tell from the graph above, I believe that total consumption of these torso shows will go up as well as the total number of these shows being created will increase – creating a much bigger market opportunity.

Why?

1. Production costs have plummeted. You can produce very high quality & compelling video for around $500 / minute versus more than $50,000 / minute for network television.

2. Distribution limitations (and thus time windows & geographic windows) are disappearing. You no longer need local broadcasters, cable companies, DVDs sold in retail shops.

3. People are developing global tastes. The freeing up of media itself is leading people to discover new content forms that they couldn’t have even realized existed before.

4. Translation is getting better. It’s clear that global audiences will consume English. For now. Innovations such as Viki are getting better at delivering sub-titled shows.

5. Revenue models are emerging. With Google building global sales forces that will over the next few years be capable of selling brand advertising in many countries around the world it will become economically viable for content producers to dub their shows from day 1. Many content producers I’m speaking with are already building this into their models. Content types such as children shows, animation, cooking & fashion are easy genre to dub.

There will always be big-budget, big-bet production and as a consumer I love this. But it’s not sustainable for most content production and it’s not economically rewarding for most creative content producers.

So I believe it’s a race to the middle and the beneficiaries will be citizens that will increasingly have access to the world’s best content at increasingly cheaper prices due to deflationary economics. And this time the winners won’t just be the platforms – I see great opportunities for torso content producers.

  • Greg Mand

    Mark…great article and as usual spot on to what I’m anticipating as well. Btw…speaking of translation (slightly different than dubbing) check out http://www.smartling.com/ They do real-time translation for companies such as Foursquare, Path, and Survey Monkey. Interesting thing is they offer a crowdsourcing platform as well so that companies can tap into their own passionate fans/community to do the translation work for them.

  • mcenedella

    Great, fascinating post, Mark. I hadn’t been introduced to the concept of ‘torso’ before. It seems somewhat akin to the serialization of novels in newsprint in the 19th century – great content from different geo/platform introduced to existing audience on a different geo/platform. Everybody (creator, distributor, audience) wins. Very interesting.

    For those of us not in the LA video/entertainment scene, how do YouTube Networks really work and why are they significant? Google /Wikipedia /homepages only provide superficial overviews.

    Thanks!

  • ruchitgarg

    Sorry its not clear to me what is characteristics of Torso.. is this a long tail content modified to make little more premium (and towards head?) like Viki?

  • Dave W Baldwin

    I’m glad you keep posting on the subject of where TV/Film is headed. Since we’re in a timeframe where the old school wants to keep things antiquated reducing choice to those who know better, it is great more and more speak on this subject.
    Regarding the niche interest, big money has tried to do this via expensive niche networks. I think they’ll be left on the losing side with the rapid rise of awareness of niche internet.
    Viki is an example of how an open forum can achieve interaction, extending further than science and/or geek clubs. This is going to be quite a decade!

  • http://twitter.com/davidsmuts David Smuts

    You are a remarkable Seer Mark in this domain. I don’t really see any of your peers with this degree of “get-it”. Hope you can make a healthy investment in this domain one day!

    This is exactly what my company Elexu is developing. Don’t want to hog your space to advertise here, but take a loot at the video on our about page http://www.elexu.com/about

    What will really make Torso TV go big will be the interactive mobile-to-TV features that make new content more participatory (and I’m not talking about tweeting, rating or liking). Our challenge in this domain is not in producing this content (that’s the easy bit) but rather, ensuring consistency of viewing quality and consistency and reliability to host live-simultaneous and multi-regional audience participation events.

    The investment in this platform and infrastructure is huge, needless to say ;-)

  • http://www.justanentrepreneur.com Philip Sugar

    I’m not sure. You write a compelling argument., but I think there is a big chasm between the two for a reason like you drew in your second chart. I don’t think the line is continuous, I think it has a big gap.

    I tend to see it as Mark Cuban sees it in the long tail ghetto post or Josh Kopelman does in “The Penny Gap” as far as making money goes.

  • http://youtube.com/gtchannel GTChannel

    “Its the economy dummy” – and in this case it is the economy of this torso.
    Our company, GTChannel, produces and translates archive content for this mass super syndication mainly in the long tail area. When you are content producer you must decide for the mainstream – which competes with the large scale producers, or niche – which gives you a fighting chance. Few long tail niche shows transcend through the torso to the head end. I can’t think of one. Some long tail dip into the torso (I’m thinking revision 3 shows) and shorts that go viral, but mostly this is a quick trip to the body and back to the tail.

    It is the monetization of the long tail that has grown in the last few years that makes this a viable end of the graph. You control the production costs relative to the possible revenue from your niche market. You push to increase the CPM or the audience numbers, but it is a game of inches. We all want to look at our content as the one show that can transcend back to mainstream, but that is fool hearty, and akin to a college baseball player looking to go to the show.

    Our philosophy for growth is by building solid business models within the long tail and for each piece of content we produce. One show in long tail produces “x”. Two shows in long tail produce “X” time 2 – scale to ….??? whatever. You can do this by covering niche markets from Tech News to Skydiving, but it is easier and smarter to work a Auto import and tuning show, then expand to Drifting (think Fast and Furious), then to Tuning, import Lifestyle, then to ??? Slowly exploding out with each step keeping one foot in the previous arena. You grow your audience without making huge leaps.

    In our case we have taken over our niche, but we are now looking to touching on lifestyle shows that our previous audience demo enjoys. I foresee this strategy to also be visible by the cars we feature – Japanese to European to (someday) muscle cars. But all this is only possible by making each piece of content work monetarily. This can’t be a hit driven model. Long tail just doesn’t allow for that.

    SSS

  • Danny Breaux

    Great post! Also, The Last Mogul: The Life and Times of Lew Wasserman streams on Netflix for those who were interested in it :)

  • http://www.bluecoastrecords.com/ Cookie Marenco

    Thank you, Mark, for another insightful article. Whether you call it the Torso or the ‘Belly of the Beast’ it’s the part of the body that keeps an animal breathing life. You can live without a ‘tail’ and survive with a small brain (or a dead one, as in the case of the music industry)… :)

    The commoditization of digital content without curation leaves the consumer spending too much time to decide. With confusion, customers leave, sales drop. Niche markets let the few who care curate the content. One doesn’t have to sacrifice expertise, creative skills and profit margins to be successful in a niche.

    My particular niche of high resolution downloads is starting to get recognition after slogging it out with mp3s all these years. Great source material is the final frontier for audio and could revive an industry that was swallowed up by commoditization in the last few decades.

    Like YouTube, more than 70% of our high resolution users come from outside of the USA. We can reach places in the world we could never dream of with old school ‘head end’ economics. With bandwidth faster and storage cheaper, we can deliver files that are 40x bigger than mp3s– not really possible a few short years ago.

    Staying alive long enough to see this ecosystem change can be a challenge, but today, we were winners in a startup contest, so I’m pretty happy.

    Thank you for recognizing that niches aren’t a bad place to be.

  • CMKelly

    You didn’t mention it, but YouTube obviously recognizes this as well, which is why it budgeted $100 million to jump-start “professional channels” to provide just the kind of content you’re talking about.

    Travel is another category that’s borderless, so that video content created by a U.S. company, for example, has an instant, global market, making it a compelling medium for global brands to promote their products. A web show along the lines of Michael Palin’s BBC series “Around the World in 80 Days” could be as big a hit globally today, as Palin’s was back in 1989–with an even larger audience and a much longer shelf-life.

    Your account of the Viki experience with fan-based translation is fascinating. The web makes it possible to turn what appears to be a bunch of small niche markets into one large, global market, with fans who are excited to see things they can’t see anywhere else. For example, in the early ’90s, before anyone could browse the Web, my girlfriend and I used to watch shows from around the world on a local TV channel in San Francisco. Saturday nights they had Japanese detective shows, sometimes without translation, which were just fascinating. (Who knew you could solve a crime because the 8:10 subway train to Shinjuku was one minute late, which totally destroyed the suspect’s alibi, because the trains were never late?) The original Iron Chef was another Japanese show from the early ’90s. I always wondered how a “station” like that would do on the internet. You inspired me to figure this out.

    Channel 26 had Nielsen ratings averaging 55,000 viewers in 2006, about 0.8% of the Bay Area population. Obviously a lot of Chinese, Japanese, and Koreans bump up the ratings, which wouldn’t happen in, say, Montana, but much of the audience was English speakers like me, who just liked these foreign shows. The Bay Area has about 1/50 of the U.S. population, so the likely maximum market nationally would approach 2.75 million people. According to the International Telecommunications Union, 35% of the global population is using the internet, or 2.45 billion people. If 0.8% of them want to see TV shows from around the world, that’s 196 million potential viewers. That would be like having a country as large as Brazil, the fifth largest country in the world, where every single person checks out your website every single day! Thanks for the insight….

  • http://bothsidesofthetable.com msuster

    re: YouTube … I guess I didn’t do a good enough job of implying that I thought YouTube was best positioned for this. But I meant to. And in fact they actually seem to have invested much more than $100m from my informal counting.

  • http://bothsidesofthetable.com msuster

    Oh, snap! I didn’t know that. Thanks.

  • http://bothsidesofthetable.com msuster

    It’s not big in the torso yet, but as in the American waistline – I think it will expand much in the torso in the coming 10 years.

  • http://bothsidesofthetable.com msuster

    Machinima & Maker Studios now each doing more than 1 billion video views per month. Massive audience & reach from which to monetize. Now both are ramping up sales teams to do pre-roll, brand integration, sell music & merch, etc.

    When you’re dealing at Internet scale, the opportunities are enormous.

  • http://blog.ideatransplant.com Jan Schultink

    I actually use Netflix to watch non-US movies and obscure design and art documentaries, for Netflix these are probably shelf fillers, for me, they are the core of the content they offer.

  • http://www.justanentrepreneur.com Philip Sugar

    I just wonder how you make money. I think the quality of the content will improve drastically because of technology, but I’m not sure how that gets you out of the ghetto.

    unPC but I would look at porn because they are ahead by a couple of years (always have been) You have most of the major producers right in your backyard. I’d actually talk to them to get their insight.

  • http://www.crashutah.com/ John

    I love the idea of the Torso and it’s a great fit in a lot more than the media industry I’m sure. Even with bloggers who you describe as not able to make much money unless they go big, there’s a nice Torso in niche areas. So, it’s not BIG BIG on your graph, but it’s BIG within their niche. I expect we’ll see a few multi million dollar exits in this torso which is a great exit considering that Techcrunch went for $30 million. Plus, the overhead is so low for these content producers.

  • JamesHRH

    this is an interesting post. I am not sure about the torso.

    The issue is to make the long tail profitable for producers, not platforms. It seems the key is to create cost effective (and time effective) coverage across a multitude of global distribution platforms.
    I agree there is still a lot of platform opportunity to be captured, as well, which I think is the thrust of your post.
    Is a billion views a month really that big these days? Not being facetious here, just wondering if you have numbers to give that fact some context.

  • Coli

    I normally like your articles, but I went only until the half of this one. It’s way too long and we can’t yet see the point of it when having read 50% of it. I gave up, sorry

  • http://www.engineperformancechip.com/ sam carson

    Today is the first time I have read your article. Believe me it is great! You have explained every little detail in easy language. Most people use complex Engine words because they thing it makes the article of higher standard. But the real thing is , article should have higher standard information and simple language so everyone can understand.

  • SportsDisruptor

    Any idea on what the international video ad markets are looking like? I’d assume that certain countries with strong broadband penetration have possibly even more evolved video ad placement abilities than what we have in the U.S. I can’t wait for the day in which a global audience can be cultivated and monetized effectively wherever the end user might be…

  • Top Choice TV

    Great article, Mark – as always. We think there’s a big Torso on the distribution side. Like to show you the plan!

  • https://plus.google.com/u/0/b/114718778524214371963/114718778524214371963/posts kidmercury

    great post mark. media and video is such a huge opportunity and widely overlooked by the mobile and software folks. best of luck in making a lot of money and rubbing it in.

    don’t forget amazon. they are playing the video game and are funding their own original content too. lots of free videos when you signup for amazon prime. watch it all on your kindle fire……ridiculously amazing company.

    product placement/paid content are the huge models here, in my opinion. i see it so much from the search marketing side. everyone is realizing content is how you win the marketing game so the ad budgets going to useless banner ads will increasingly find their way to funding quality propaganda.

  • https://plus.google.com/u/0/b/114718778524214371963/114718778524214371963/posts kidmercury

    oh also, in an attempt to rain on the parade, i’d like to mention the bandwidth problem. if it doesn’t get fixed you can kiss the whole video revolution, as well as most good things about the internet, goodbye. the solution is complete spectrum deregulation, it needs about the same amount of regulation as colors do. just like we can where whatever color we want we need to be free to use whatever frequency we want and must assume the responsibility of filtering out interference ourselves as well. again amazon, thanks to AWS and kindle fire, is best positioned for this reality; in a true bandwidth crunch i can see them offering a much faster experience — amazon instant video to kindle devices — that other providers will not be able to have a competing corollary for.

  • http://influitive.com/ Abdallah Al-Hakim

    a thought invoking article about the potential for torso in media and video and helps put some of the developments in some type of a structure in my head.

    I have been following some developments in Arab worlds and there is a popular site called @Kharabeesh that is generating terrific political satire cartoons – I am guessing they fit in the Torso model. There are also emulators of Hulu and Netflex such as @istikana and @Cinemoz – both are competing fiercely in the Arab market. As a matter of fact Istikana today announced a deal to stream some of their online content on Samsaung smart TVs (http://www.wamda.com/2012/06/istikana-inks-deal-to-offer-videos-on-samsung-smart-tvs)

  • Timothy Meade

    Not so sure that Amazon’s tech is right for video, new codecs would go a lot better. I’ve shared my radical plan for bandwidth, but the simpler one is to move digital broadcast to something that works when moving, and using H.264 for compression like Europe does. It’s sad the DTV transition was so complicated and we got so little from it.

  • http://www.victusspiritus.com/ Mark Essel

    Super sharp comment Phil. What’s your take on tools to support higher quality user generated content. (automated stylization)? Would also like @Mark Suster’s perspective on this.

    The startup I joined in late April has a pretty amazing pipeline for creating video and it would be healthy to take a broader maket view.

  • http://www.victusspiritus.com/ Mark Essel

    Don’t you expect more deals (higher costs) between cable companies and providers in the US, and leap frogging in nations that are completely wireless? I do.

  • http://www.justanentrepreneur.com Philip Sugar

    You know I think Mark has it there which is that there will be money to be made for platforms not producers. That is where I was going. I think the torso will just be platforms rounding up all of the producers in the long tail.

  • JamesHRH

    Phil – this is something I would discuss live – likely not in your neck of the woods any time soon – Skype? An area of real interest.

  • http://www.absolutelyfengshui.com/ Fengshui

    Hey I noticed that You didn’t mention it, but YouTube obviously recognizes this as well,
    which is why it budgeted $100 million to jump-start “professional
    channels” to provide just the kind of content you’re talking about.

  • http://atcounseltable.com/ Alex

    Enjoyed the post, Mark.

  • Adrijus Guscia

    Agree about the torso concept BUT distribution is not unlimited anymore. It’s not like you can upload a video to YouTube and it will become a hit, it’s not like you put up a song on SoundCloud and it will be a hit (tried starting a label just last year..not easy).. All this increased the noise so much you can’t expect to ”go viral” at whim.

    It was like that at the dawn of new platforms not as much anymore (Kindle publishing is getting here too…) Sadly, I think Gatekeepers (record labels plus content curators online and Pandoras) will become even more important and powerful as they will figure out new formulas for growing popularity (always happens).

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  • Steve Ballard

    I love your blog and that’s the only reason I am commenting, there is one niggly thing that’s bothering me and can easily be fixed with a simple css tweak. I run windows 7 at 1920×1080 (I can’t be the only one) and I like to split my windows so my browser resolution is ~540px wide (less than your column width when I run full screen) and the text spills over the edge so I have to horizontal scroll to see all the text of the article. It’s kind of funny, because the reason it is probably designed this way is to hide/cut-off the ads for those running lower resolutions (but no one runs at 540). So anyways, I have to read your articles with my screen maximized and I dislike it. I’d be happy to help you fix it, but please, it must be fixed.

  • http://www.pingup.com/ markslater

    great post. you’d love us!

  • http://searchsimplicity.com/ Gregory Smith

    Ofcourse it will. There’s no telling what the next ten years has to bring.

    Watch out!

  • http://grandresume.com/ grandresume.com

    I think there is a big chasm between the two for a reason like you drew in your second chart.