January 2010

A year-end flurry of ad spending helped moderate steep declines at some newspapers and magazines, and fueled an uptick at others, raising hopes for a recovery in 2010. Still, following a brutal 2009, when scores of publications closed or made drastic cutbacks, publishers remain wary of declaring an ad rebound as marketers selectively reopen their wallets. Publishing executives attribute the recent influx of ad money in part to marketers hurrying to spend the remainder of their annual ad budgets after doling out those funds sparingly earlier in the year amid fears of an economic collapse. Auto makers, particularly General Motors Co., which spent part of the year in government-sanctioned bankruptcy proceedings, also have ramped up marketing after months of spending almost nothing to promote their cars.

Health providers and IT policymakers returned from the holiday weekend on Monday having had just enough time to sort through the administration's "meaningful use" proposal, its 700-page incentive plan designed to spur hospitals and physicians to pursue digital make-overs of their practices. Their first impression: That the administration's hugely ambitious, carefully crafted, $20 billion incentive plan may provide too much stick for the carrot.

Observers noted the Office of the National Coordinator and the Centers for Medicare and Medicaid Services had to set up a delicate balance in designing the incentives ­ making them challenging enough to have a lasting impact on health outcomes but not so burdensome as to stall adoption. "ONC and CMS are between a rock and a hard place," said Dr. John Loonsk, the former director of interoperability for ONC and now chief medical officer for CGI Federal Inc., an IT services firm. The challenge they faced, he said, is to "thread the needle with enough requirements and specifications to create a viable, secure electronic infrastructure without, in doing so, making the adoption of electronic medical records less attractive to the providers they want to adopt them." Meaningful use planners were trying to create a balance between spurring adoption and achieving an infrastructure with enough "technical rigor" to mobilize data in ways needed to improve health outcomes, Loonsk argued. "It would have been appealing if (the HITECH Act which funded the incentive program) focused more on these data needs," said Loonsk, "but ONC and CMS are now trying to find the right balance to make HITECH work."

[Commentary] Spearheaded by Comcast and Time Warner Cable, the TV Everywhere initiative appears to be built on cable operators (and other distributors) agreeing to work together to pressure content providers to make their content available on the Internet only to viewers that have paid for a cable TV subscription in addition to an Internet connection. Thus, TV Everywhere ties online TV distribution to the existing cable, phone, and satellite distributors' TV subscriptions. (Ammori refers to all these as "cable," for brevity.) Citing news reports, statements by industry executives and other evidence, consumer groups argue there is enough evidence of collusion and other harms to warrant a full-scale investigation by the Justice Department or the Federal Trade Commission into the scheme. Unsurprisingly, the cable industry didn't welcome this critique of their plans. The head of the cable industry lobbying association (known as NCTA), Kyle McSlarrow, responded with a statement. McSlarrow is an effective lobbyist, but his response misses the mark. His key argument is that TV Everywhere consists of collaboration, not collusion. He notes that the antitrust authorities encourage collaboration sometimes even among competitors, for the sake of innovation and other benefits. McSlarrow has a point that some collaboration is not presumed to be anti-competitive; indeed, the FTC and DOJ have issued guidelines on collaboration among competitors. But the types of "collaboration" generally found not to harm competition and to further innovation are very different from TV Everywhere. Collaborations of some types are considered "per se," or automatically, illegal because they replace the competitive marketplace driving low prices, choice, and innovation with an agreement among incumbents effectively not to engage in competition with one another in certain ways.

Much like today's Internet, radio enjoyed a high intrinsic growth rate in its early years. For example, during the Great Depression, when most industries were shrinking, radio advertising alone grew from $27 million in 1929 to $185 million in 1939 translating to a compound annual growth rate of 21%. Radio entertainment during the era included a mix of music, drama, comedy, and variety shows. However, music was considered essential. After a brief honeymoon when musicians and composers welcomed free access to the enlarged audience that radio could provide, they soon began complaining about inadequate royalties. The analogies to today's Internet situation should be as obvious as cow-patties on a snow bank. The "content is king" response to the Internet from traditional media companies is in danger of leading them down the path where musicians and composers mugged themselves seventy years ago. Ultimately the advantages of moving content off physical media and cable and satellite systems, and onto the Web, are simply too compelling. Consumers gain immediate on-demand access without having to wait for shows to be broadcast. Sponsors achieve infinitely superior ad targeting and accountability on the Net. Ultimately Google AdWords will have conditioned them to pay only for video ads that get watched. Even ad agencies will eventually increase revenues. Once they learn how to create ads that induce consumers to make online purchases, they'll not only be paid for ads viewed, but will also win a bounty for each online merchandise sale. Lastly, ever-more entertaining and informative content is being created for, and distributed by, the Internet.