#DigitalSkeptic: TV's 'Golden Age' Online Accounts for Less Gold Overall

NEW YORK (TheStreet) -- My old buddy Denny Moyes like to point out that the storyline has yet to be written on where the gold will actually turn up in today's so-called "Golden Age" of television.

"The competition among the major TV distributors that has created this new 'Golden Age,' whether cable, network or streaming, is keeping the quality high," said the New York City -based independent professional designer. Moyes has decades of experience creating award-winning sets and lights for the likes of Walt Disney, the producers of Phantom Of The Opera and these days, emerging Internet media brands such as Amazon.

But that race to quality, says Moyes, "Requires hiring high-quality talent. And that doesn't come cheap."

Moyes and I have been debating the merits of the fast-changing multi-episodic TV business over the past several months over drinks, dinners and email. And this first-rate designer points out what many investors forget: The costs of creating the top-quality, long-form shows for the likes of Netflix, Google and most recently Yahoo! will be not limited to just hiring top-quality actors and directors.

The real costs of making these suddenly critical long-form programs is the well-established fees of hiring traditional production companies that in turn round up the entire cast of tradespeople, craftsmen and specialists that put the live actors on real sets, where they can tell real stories.

"Just because the show is on the Web doesn't change what it has to look like," Moyes said. "And what it looks like is determined by the people who do it."

There is little economies of scale such as those found in special effects or animation that can take advantage of new technologies or be jobbed out to lower-cost studios around the world. When it comes to making HBO's Game of Thrones or Netflix's House of Cards, what moves the needle is the ephemeral magic of humans working together in a room making a show.

"We are not working on the Web. The Web is just one of places it ends up," Moyes said. "Where we work is the same world it has always been.

"And in this world, you get exactly what you pay for."

Where's the Golden Age gold?
What's blatantly obvious to investors who bother to look: Moyes' point that great TV is the same high-stakes gamble it's always been is absolutely confirmed by the finances of large media companies. Just take a gander at the annual statements for Time Warner, Viacom, Sony or Comcast and you'll see these enterprises make no secret about the costs and risks in making a long-form TV show.

I went deep into Time Warner's financials, since shows such as Game of Thrones and True Detective have become the templates for the emerging global multiseries TV business, but really any of these company's statements tell the same story: All these operations start with gushing language about the success of various long-form, multi-episode hits.

"I'm pleased to tell you that the success of our strategy is reflected in our company's financial results -- with adjusted earnings per share growing by 13% in 2012 and by more than 130% over the last four years -- positioning us for continued growth in 2013 and beyond," Time Warner CEO Jeff Bewkes said in his most recent annual statements.

But if investors look at the actual numbers for Time Warner, a much bloodier story emerges. Yes, fancy-schmancy new media subscription revenues grew by a healthy 36% from 2011 to 2012, for $86 million in revenue.

The far larger traditional Theatrical and TV Content revenues that is the lifeblood of this business unit actually fell over the same year: Dropping 5-ish percent, to $11.5 billion from $12.2 billion.

And if you break down this revenue retrenchment by sector, there are significant areas of softness in the TV numbers. Sure, the home video and electronic delivery of television products grew by 15% for the year. But the home video and electronic delivery for critical theatrical products fell by 19% for the period!

That all indicates that shows such as Game of Thrones may drive the Web buzz. But the losses from lucrative old media are overwhelming the razor-thin margins from these new media TV replacements.

It's 'Apocalypse Now' meets the WWF
Even more troublesome, the new media efforts of Netflix, Yahoo or Amazon are becoming the stuff of Web parody. Cambridge, Mass.-based photographer and artist Todd Vanderlin has created the spoof of spoofs on the Web's original content ambitions at NetflixOriginalSeries.com/#.

This online parody absolutely nails the goofy mentality lurking as tech companies try their hand at TV. Go take a look at who is nominally acting and directing such concepts as The Kid meets Hey Arnold or It's All About Eve meets Criminal Minds or my favorite, It's Apocalypse Now meets the WWF.

If investors don't think ideas this dumb are sitting on Marissa Mayer's or Jeff Bezos' desk, they are dreaming. "The potential for real profits is still there," Moyes said. "But the way those profits get made has not changed for the Web."

"This is the same business it has always been."

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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