Wednesday, January 26, 2011

TWiT, Revision 3 and...Keith Olbermann? Television networks on the cheap

Update, February 8, 2011: In a teleconference this morning, Keith Olbermann and Current TV announced that Olbermann will do a nightly news and commentary show on Current beginning in Spring 2011, become the company's Chief News Officer and have an equity stake in Current Media.

Update, February 2, 2011: I fixed all of the capitalization errors for Leo Laporte's name (it's Laporte, not LaPorte, although he's known as "The Door" to his friends). In addition, NewTeeVee reported today that Revision3 reached profitability in the last quarter of 2010 and claims that it's the number one "over the top" television network in terms of viewers.

Last week, TWiT Network owner Leo Laporte signed a lease to move his operations from his farmhouse in Petaluma, CA to a 9,400 square foot building formerly occupied by the audio software company Bias. TWiT will turn it into multiple television studios, a radio studio and business offices. The TWiT Network is entirely Internet-based, although Laporte also does conventional radio and television shows for other outlets.

TWiT didn't arise out of a vacuum. Laporte was one of the central figures in the creation of ZDTV, which originally started by producing programming for MSNBC and became a 24-hour cable network focused on technology news and information in 1998. ZDTV immediately ran into problems getting (and paying for) cable carriage, as well as advertising, and in 2000, it sold out to Paul Allen's Vulcan Ventures and changed its name to TechTV.

Allen and the programming team he put in place at TechTV tried a variety of programming approaches, but nothing worked to make the business profitable (and no one approach stayed in place long enough to build and sustain an audience). In 2004, Allen sold TechTV to Comcast, which merged the channel with its G4 games-oriented cable network and renamed or eliminated most of TechTV's programs. Today, only two of TechTV's on-air hosts remains at G4.

Laporte didn't make the move to G4; he stayed in Northern California and started the "This Week in Tech" podcast, from which TWiT gets its name. Laporte added more podcasts, then began simulcasting some of the podcasts with video, and eventually added some video-only shows. Last August, the Los Angeles Times reported that TWiT's revenues were $2.25 million in 2009 and were on track to reach $3 million in 2010, with 10 full-time employees and 30 to 40 contractors. Not a huge business, but profitable, according to LaPorte.

One key to TWiT's success is that Laporte has scaled its growth to fit its revenues. He still runs it out of his Petaluma farmhouse, and he's kept the operation "bare-bones". Even with the move to a larger facility and Laporte's intention to eventually offer programming 24/7, it's still operating on a much smaller scale than ZDTV or TechTV ever did, and that's essential to its success.

Another ZDTV veteran, Jim Louderback, runs Revision3, a spin-off of Digg (which was co-founded by yet another TechTV survivor, Kevin Rose). Revision3 is also an Internet-based news and entertainment video network, and in addition to his duties there, Louderback is a columnist for Advertising Age. He recently wrote about cable network WealthTV's decision to create a channel for the Roku set-top box, and in a follow-up article, suggested that cable networks that have been unable to get much carriage from U.S. cable, IPTV and satellite operators could follow WealthTV and create their own over-the-top Internet video channels.

The problem for these cable networks (Louderback calls them "zombies") is that the can't simply move their operations to the Internet and hope for a better outcome. Instead, they have to scale their operations to the revenues that they can generate from the Internet. They don't have to pay for carriage, but they're going to have an uphill climb to earn any significant subscription revenue. (TWiT gets the vast majority of its revenue from advertising.) That means that they're going to have to dramatically lower both their costs and their expectations.

That brings us to Keith Olbermann. Keith Olbermann? U.S. readers probably know that Olbermann anchored the most popular program on MSNBC, "Countdown with Keith Olbermann", until last Friday. Initially, it was thought that NBC, the owner of MSNBC, fired Olbermann, or that Comcast, the soon-to-be owner of NBC Universal, had played a role in the decision. However, it now appears that Olbermann wanted to leave the network and NBC wanted to get rid of him, so they worked out a mutually-convenient settlement.

Olbermann spent eight years at MSNBC, but he's bounced around among many networks for years, including CNN, ESPN, Fox Sports and a short previous stint at MSNBC. The only option he's had over the years has been to go to work for a different network, but the Internet offers him another option. The Huffington Post and The Daily Beast have both built large, profitable audiences on the Internet from nothing in just a few years (The Huffington Post, in less than six years, and a little over two years for The Daily Beast). Olbermann could create his own Internet video network, operating at low cost (like TWiT) while providing a forum for a variety of outside contributors (like the Huffington Post). Whether it would make enough money to keep Olbermann interested is a separate issue, but it would enable him to work as he wants without answering to a phalanx of corporate management.

The wheels keep turning: Dan Rather went to HDNet and Conan went to TBS. Could Olbermann go to the Internet?
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