Yahoo and Microsoft Plan to Make TV Shows — And It’s Not a Terrible Idea

Yahoo and Microsoft Plan to Make TV Shows — And It’s Not a Terrible Idea
BY   (Updated by endah)
  • 6:13 PM  |

Image: FailedImitator/Flickr
Image: FailedImitator/Flickr
First, Netflix did it. Then Amazon. Now Microsoft and Yahoo are making their own TV shows too.
It’s the kind of also-ran move we’ve come to expect from the latter two companies, which always seem to be late to every party. But let’s not be too cynical. Given the direction online ad dollars are moving, neither Microsoft nor Yahoo has any choice but to play the TV game. And in the end, we — the viewers — may actually benefit more than anyone else.
Microsoft’s original programming gambit will come via its new Xbox television studio, Bloombergreported this morning. The six new shows set to roll out starting in June include a sci-fi thriller, a World Cup reality show, and comedies with Sarah Silverman and Seth Green. Meanwhile, Yahoo is looking to land a viral hit the way Netflix did with House of Cards. The company wants to land four web series that are closer to the traditional multi-episode TV season format than the short-form video content Yahoo has pushed in the past, according to the Wall Street Journal.
Given the direction online ad dollars are moving, neither Microsoft nor Yahoo has any choice but to play the TV game. And in the end, we — the viewers — may actually benefit most.
For both companies, the push into TV comes as their online ad businesses struggle. Last year, Facebook leapt past Microsoft and Yahoo to gain the second spot in overall digital-ad market, according to research firm eMarketer. Between the two, the situation is much more dire for Yahoo, which is primarily an ad-based business, whereas Microsoft is mainly a software business with a sideline in ads. Even so, Microsoft last year held onto the third spot with 6 percent of the digital ad market, while Yahoo slipped to fourth with 5.8 percent. (Unsurprisingly, Google dominated with 39.9 percent, while Facebook held 7.7 percent.)
Amid this jostling, more and more of that online ad money is pouring into digital video. Spending last year topped $4 billion, says eMarketer, which estimates a 41 percent increase this year to nearly $6 billion. YouTube is eating about one-fifth of that money, but that leaves many more ad dollars looking for a place to go. And if there’s anything that ad dollars like, it’s television — which still trounces digital as the most popular medium for advertising. Taken together, these trends point a clear path for any big tech business that depends on online ads (and doesn’t have a popular social network). In short, TV is the future.
Fortunately for Microsoft and Yahoo, Netflix has already provided proof of principle. A tech company can create good original TV online that helps increase its audience. One caveat is that Netflix is a subscriber-based business, but in a way, that should be an even higher hurdle than an ad-based model. After all, you don’t have to get people to sign up for anything to show them an ad.
Not that ads necessarily matter that much to Microsoft. As its consumer business weakens, what Microsoft probably wants more than ads is to sell more Xboxes. Good streaming shows could be one more way — and quite possibly the crucial way — to entice consumers to its hardware rather than the ever-increasing number of streaming-to-TV devices hitting the market, such as Amazon’s new set-top box.
From Amazon to Apple TV to Roku to Chromecast, it’s becoming clear that creating an internet-connected TV device (or is that a TV-connected internet device?) isn’t hard to do. And that commoditization has made differentiating one of these devices from another increasingly difficult. “You don’t change TV by providing a better user interface for marginal content,” Andreessen Horowitz’s Benedict Evans said on Twitter. “The TV experience is not centered on switching channels.”
But if switching channels isn’t the killer app, then what is? Making shows people actually want to switch to. It’s easy — and reasonable — to be skeptical that Microsoft or Yahoo or Amazon can actually make a good TV show. But all it takes is one good show to prove the skeptics wrong.
The great thing about this moment in the rapidly changing TV industry is that the show itself has become the only barrier to entry. Distributing TV has never been easier or cheaper, which turns television as a medium into a greater meritocracy than it’s ever been. Yes, House of Cards reportedly cost Netflix $100 million. That could well be the new price tag to become a competitor in the TV game. But for companies like Microsoft and Yahoo, that could be a small price to pay for a hit that has the potential to turn their revenue trends around.
And the more companies that making an effort to make good TV, the better the odds that one of them succeeds. This approach has already worked wonders in traditional cable — remember when AMC mostly showed old movies and FX showed reruns? Now, you don’t have to be a TV network at all to make good TV. For those of us who love TV, that can only be good news.