Andrew Keen on New Media

Writers might have won a battle but everyone could lose the war

Has Jeff Zucker, the chief executive officer of NBC Universal and one of the most powerful moguls in the American television business, been reading Thomas Jefferson? It was Jefferson who, to guarantee a happy ending for the 18th-century American Revolution, argued that "the tree of liberty must be refreshed from time to time by the blood of patriots and tyrants". And now Zucker, speaking last month in Las Vegas to the National Association of Television Program Executives (NATPE), has tried to vindicate the latest American revolution in similarly arboreal language.

The revolution on Zucker's mind was the digital upheaval in the distribution of television content. It's the internet insurrection against the main television networks of NBC, ABC, CBS and Fox – the revolution that has Americans viewing their favourite shows on their computer screens rather than over their TV sets.

Over the past three months, however, this is a revolution that nobody has been viewing. That's because the country's television writers have been on strike and all Americans have had to watch – on either their television screens or their computer monitors – have been reruns of Heroes and All My Children, and writer-free versions of The Daily Show and The Colbert Report.

In classic Jeffersonian fashion, Zucker described the Writers Guild of America strike as being like a great forest fire. "Fires fertilise the soil with new ash and clear the ground, often setting the stage for robust growth," the NBC chief told the NATPE audience. "Don't take this the wrong way: it would have been a lot better if there had been no strike, but maybe what we're going through now is our version of a forest fire. We didn't ask for it and it is unfortunate to live through, but if we are lucky, it may very well leave behind fertile soil, clear ground and the opportunity for robust growth."

On 12 February, a few days after Zucker's dramatic NATPE speech, the writers settled with the studios. So how will this strike change the American television business? Has its soil been replenished by this industrial action? Above all, can we all now expect a traditional happy ending to the current travails of the television industry?

Let's step back from the trees for a moment and look at the whole forest. It's not, I'm afraid, a pretty picture. The traditional television industry is being fundamentally undermined by the perfect storm of the internet. Fewer and fewer Americans are watching either cable or network television (during 2007, for example, Zucker's NBC lost 11 per cent of its key 18-49 demographic during prime time), opting instead for the personalised convenience of the internet. As Zucker told NATPE, "today the consumer wears the crown and that changes everything."

Worse still, Americans – with the aid of their personal video players, are not only skipping the commercials on network television, but they are also choosing to ignore advertising on the internet. To quote Zucker, the industry, by shifting its energies from the networks to the internet, is in danger of "trading analogue dollars for digital pennies."

The Writers Guild strike against the studios was, essentially, about a stake in the digital future. The television and movie studios had wanted to exclude the Hollywood writers from "residuals" (royalties) on its income from digital revenue. But, with video streaming and downloading revenue estimated by PricewaterhouseCoopers to reach a combined $4bn (£2bn) by 2011, the writers refused to be transformed into wage-labourers and be paid purely on a per project basis. As Matt Selman, an executive producer and writer on The Simpsons told me, this was a strike on behalf of writers who "haven't been born yet."

In a sense, the writers won their strike by successfully wrestling back residuals on digital revenue from the studios. And yet it didn't represent a simple victory for Hollywood's creative class. Zucker and his fellow executives at ABC, Fox and CBS now intend to make the television industry more "efficient" by fundamentally re-engineering the entire business.

This will involve considerable economies, including strictly cutting back on the development of new television series scripts and pilots. The danger, of course, is that – in contrast with Zucker's vision of "fertile soil", "clear ground" and "robust growth" -- these cuts will result in a vicious cycle of poorer television content, smaller audiences and ever-shrinking advertising revenue.

Are the glory days over? For well over 50 years, the American television industry has made a fortune out of happy fictional endings. The problem in real life, particularly when it comes to the economics of the media business, however, is that happy endings aren't guaranteed. Even the eternally optimistic Thomas Jefferson might be depressed by the state of American television.

However much blood is spilt over the next few years, there is no guarantee that television's shift to the internet will ever do anything but eternally trade analog dollars for digital pennies. As Tim Long, a former Late Show with David Letterman writer and now an executive producer and writer on The Simpsons, said to me, the television business could have the long-term viability of the Soviet Union. "We might all wake up one morning," he predicted, half seriously, "and the whole industry as we know it will be gone."

Hear the music and get rich

Oh dear, the music business is making a fool of itself again. Not content with failing to come up with a coherent strategy for distributing its content online, the "big" labels (getting smaller by the minute) are now in talks with the social site MySpace to give away their precious product for free. Yes, that's right – give away their music for free.

Apparently, all four majors – Universal Music, Sony BMG, Warner Music and EMI – have been in discussions with the News Corp-owned MySpace to freely distribute their music over its 300 million-member network. The "business model" is, of course, the Holy Grail of online media: advertising.

Problem is, nobody has figured out a way to integrate advertising into music so that consumers will listen to both a song and a commercial. And, as peer-to-peer services still allow people to steal as much music as they want, many online criminals already get music without having to pay for it, either in cash or in annoying commercial jingles.

Meanwhile, the tragic death-spiral of the recorded music business continues. CD sales remain in steep decline, digital sales are disappointing and retail stores are in meltdown.

So what's the solution? Maybe they should pay people to consume their product. Don't laugh. I wouldn't be surprised if the labels were "in discussion" with Facebook or some fashionable site to reward members with money in exchange for listening to the music.

Chapter a day keeps the slump away

In vivid contrast with the music business, book publishers are embracing the internet in a realistic yet creative way. The latest online innovation from publishers is the option to buy digital books on a chapter-by-chapter basis. Bertelsmann-owned Random House is pioneering this model. The New York-based publisher is selling single chapters of Chip and Dan Heath's marketing blockbuster Made to Stick: Why Some Ideas Survive and Others Die for $2.99 each on its www.randomhouse.com website.

Will this idea stick? I think it might. Many non-fiction books – especially business and marketing bestsellers – come with a couple of arresting early chapters and then endless repetition and filling. So buying individual chapters rather than a whole book will make sense for readers who would rather spend $5 to receive 80 per cent of a book's message than $25 for 100 per cent.