Metcalfe’s Law and Video

Don’t remember where I saw Metcalfe’s law mentioned, but it got me thinking.

Metcalfe’s law states that the more nodes connected to a network the more valuable the network is. Its a simple yet brilliant concept.

Since i have some time on my hands recovering from my hip replacement, I decided to ponder what laws applied to the value of video content and its viewers.


IMHO, there appear to be some simple “rules” that apply to the value of video content. Lets call them my hypothesis


1. The more people that see content when it is originally “broadcast”, regardless of the distribution medium, the more valuable the content.

This is the example of “appointment viewing” or “breaking news”. The more people who planned to watch, or did so as soon as they heard about it, the more valuable the content.


Call this the “heat check”.

10mm people watching a tv show at the same time creates more value for the content than 10mm people watching the same show on demand over the course of time.


2. The greater the number of people that watch content simultaneously, the greater the emotional attachment of the viewer.

The greater amount of confirmation that a viewer can get from other viewers that there were others, like them that made an appointment to see a video or immediately changed their plans to watch a video, the greater the “we ” effect and emotional attachment.


3. The longer the period required for content to saturate viewer demand, the cheaper the cost of delivery. Without the constraint of time, the originator to choose the least expensive method of delivery


4. The shorter the period required to saturate demand, the more expensive the cost. This is not intuitive. At first blush it may seem that broadcast technologies can reach an immense audience in realtime with a zero marginal cost of delivery to a new viewer.


However, there is a signicant cost to build a network that can saturate demand immediately. It usually takes constrained resources, whether it is spectrum for broadcast networks, the delivery infrastructure to reach an uncapped audience and the ability to deliver it without time constraints.


5. The greater the number of content alternatives at any given point in time, the more expensive it is for any given piece of content to acquire an incremental viewer. The cost may come in the form of investment into the production of the content, advertising, promotion or placement. It may come in the form of sweat equity from hustling to promote the content.


I thought this might create some interesting discussion that I could learn from, so here you go !

26 thoughts on “Metcalfe’s Law and Video

  1. If you can find a way to turn that into an algorithm you can make millions online. The future of tv is online the only problem is it\’s hard to find the good stuff in all the bad stuff online. A good algorithm to find good stuff could mean millions in ad revenue.

    Comment by david -

  2. How about a gross simplification? Heres translating your statements into a set of equations stripped of their coefficients

    V: Emotional value
    A: Audience size
    T: Time distribution
    C: Channels competing for attention
    $: cost

    1) V = A / T
    2) V = A / T
    3) $ = A / T
    4) $ = A / T
    5) $ = C

    As I said, a gross simplification. If this was a PhD thesis, wed use Taylor polynomials and curve fit with sample data. Fortunately, its not; so cheating is allowed!

    Each statement serves different points of view. For instance, an advertiser wants to heat check the Super Bowl, as in point 1, while a sociologist wants to chart emotional attachment, as in point 2. As for me, I like how theyre related; I like how 1 & 2 indicate emotional heat

    From this gross simplification, you could conclude that emotional heat (of 1 & 2) correlates to cost of the content (of 3 & 4). For instance, crashing planes into the WTC saturated viewers within an hour or so – it was expensive and synchronous, resulting in a lot of emotional heat. In this case, statement 5) drops out, because there really werent alternative channels competing for attention.

    Missing are some space and time factors. Space as in the ratio between sender and recipient. If you are filming your daughters birthday party, your audience may be limited to a few dozen family members, but the relative value is higher than the typical evening news watched by millions. So, perhaps the ratio of Sender (As) to recipient (Ar) has some bearing; so restating 1) as (As/Ar)/T where As and Ar have hidden coefficients.

    The time aspect is like a wave, with some cycles. The birthday is most relevant while it is happening, with a decay of a few hours, and a release time of say a hundred years. (Are the any electronic musicians in the audience? You might recognize the pattern of ADSR; of attack, decay, sustain, release. )

    There is also a cyclic nature that increases value. The TV series 24, is delivered over a a period of months, but each episode builds upon the previous one. Some goes for Sports. Early in the season, the waves may be low and long, but become taller as it heads towards March madness.

    \\~/

    Comment by Warren Stringer -

  3. Mark

    I was interested to hear about your hip replacement, what type did you have done? I am facing the same surgery and would love to hear from you about the pain threshold and how you are recovering, if you care to share. I am thinking of having the bhr type hope you are doing well and speedy recovery

    S

    Comment by sinan -

  4. Interesting set of rules… what do they imply for very niche content? Suppose you have content that some identifiable, commercially-desirable set of people are already passionate about. If the set of people are commercially-desirable enough, then you can be attractive to advertisers despite #1, while, if the viewers are passionate enough, emotional commitment will come even if it isn\’t an \”event.\”

    Then, rules 3, 4, and 5 suggest that low-cost methods of reaching an audience, such as late-night programming that can easily be recorded by a DVR, or some sort of on-demand delivery, would provide incredible bang for the buck.

    So, for instance, if you put an alternative filmmaker\’s movies on one of these low-cost channels, their fans would be highly-motivated to watch, even if not all at once. Or, if a beloved but low-rated TV show were repeated frequently and put on demand or pushed direct to Tivos, it might get more viewers.

    The question then becomes: how to monetize these channels? On Demand is obvious, and Tivo\’s working with Neilsen to provide useful ratings.

    Where does YouTube fit in? What iTunes? Should more full-length niche content move online?

    And what about unexploited, but owned, content, such as footage of the Mavs\’ practice? Could you put that somewhere for free and actually access a rabid constituency that would Tivo it or watch it on demand and be reachable with extraordinarily-targeted ads that would have high conversion rates?

    Comment by Wade Armstrong -

  5. Interesting, but I wonder if your hypotheses are true. In particular, is it always true that a simultaneously viewed \”broadcast\” is worth more than the same media made available to the same audience size in an on demand format? Certainly that\’s true about some things, i.e. sports and news, but more generally I think this may turn out to be a cultural hold over from the TV era of the 60s and 70s that will disappear with younger audiences used to on demand access to media and programming.

    Comment by Peter Rothman -

  6. As predicted this entry has created quite a stir of different opinions.

    Instead of looking at what\’s laws are associated with Metcalf\’s Law and Video I want to open up the discussion regarding what type of content benefits from these trends and why?

    One comment mentioned the HDNET live concerts are very compelling and attract a strong audience. Why is that valuable content?

    I believe that in today\’s world of media and entertainment, content that addresses the following characteristics has an incredible chance for success.

    1. Timely
    2. Tangible or measurable
    3. Multiple reference points
    4. Emotional

    Our culture is more interested in REALITY BASED content experiences. Think about the growth in UFC, music shifting back to live performances, professional college / sports and more. Fact is our attention span is only getting shorter and we need to experience content that makes a point VERY FAST or has enough of the above characteristics for us to feel like an active participant in the storyline.

    I would love to get some initial feedback as I have more to share on this subject.

    Comment by Andrew Beinbrink -

  7. it is not really about the amount of viewers it is about the velocity that information can travel through the cable HFC system and how fast a group (node) Metcalfe\’s Law audience can gather, absorb content, then leave the experience to join together in other nodes – as the velocity of distribution increases the ability to capture usage data will become more challenging, however, the value of the nodes absorbing the content will increase. Our industry is experiencing this today. I have studied it for 10 years since I first discovered the phenomenon in 1996 and how the Telcomm Act of 96 was going to aid in the increase of information velocity. HD Net stands to gain tremendously as the HDTV content will drive this velocity to join the HD node to absord content – non-HDTV content will increasingly be challenged since it will not benefit from Moore\’s Law as much as HDTV content will benefit.

    Comment by Michael Kokernak -

  8. in response to – thought this might create some interesting discussion that I could learn from, so here you go !

    and here\’s looking at you and some food for thought – so mark stumbled on your hip recovering reflections on heat check got my attention since i have been thinking about herding people and animals – i call it belonging and the power of fear and the fear of power and the fear of not belonging seems to be our biggest fear its also part of a doc i have been working on called \”Who\’s Wearing the Emperor\’s New Clothes\” if so many people believe in something how can it be wrong which goes along with your statement ( 10mm people watching a tv show at the same time creates more value for the content than 10mm people watching the same show on demand over the course of time)

    and few thoughts that might resonate with you and percolated to the top about the underlying group think and group response – in a recent science related event that i filmed that meets once a month in the basement of a cafe in nyc that looks at science and art themes – this past month was on music (i have been filming it for 5 1/2years for doc in progress PlayingWithSceince) a nyu prof revealed that the key to resonating music with people seems to be that in large groups of people respond to the tempo and to the loudness of the music and your comment about people watching something at the same time as opposed to at different times also has an interesting social sculpture effect of a common shared experience and resonance which might also be worth exploring considering – maybe there is some shared humanity that we experience and why we go to theaters to watch intimate films with strangers who are us and why so many people watch the oscars – a group of people patting themselves on the back – maybe its because of this very shared resonance our human experience that we feel but can\’t describe or quantify – anyway food for thought – there is more to this herding concept then meets the eye – be well – geo http://EmperorsNewClothesProductions.com

    Comment by geo geller -

  9. Hip replacement? How long is recovery? When will you be balling again? Make it a \”Blog Release\”🙂

    Comment by Stephen -

  10. 1. The more people that see content when it is originally \”broadcast\”, regardless of the distribution medium, the more valuable the content.

    Not exactly. More people watching at once proves IT IS HOT, it doesnt prove that the most revenue has been gotten for each and every viewers attention. You are are putting too much import on the desire of the advertiser to reach a mass audience…

    To prove this point, would certain advertisers pay more per viewer to run a commercial during the Superbowl that only seen by boys under 24? or women over 50? YES.

    So heat is only good because it is BIG. Big isn\’t good in and of itself AND personlaization of advertising is EASIER with content viewed on demand over time.

    2. The greater the number of people that watch content simultaneously, the greater the emotional attachment of the viewer.

    Again, not exactly.

    The WE factor is valuable only as mitigates itself against the ME factor. You only gain incrementally from having as WE experince as much as the individual value the group, the common audience.

    Said another way, people are more likely to see a tv show with bad acting and bad writing – that\’s ALL about them. Harley riding golfers will watch a show about harley riding golfers even if the host has a speech impediment and the open song is played backwards. People are more likely to see a movie or tv show thats very different from their own life if it has very good acting and writing. In fact you can judge content\’s \”quality\” (acting / writing /etc.) by how much it pulls in people without much care for the topic or subject matter.

    3. The longer the period required for content to saturate viewer demand, the cheaper the cost of delivery. Without the constraint of time, the originator to choose the least expensive method of delivery

    4. The shorter the period required to saturate demand, the more expensive the cost. This is not intuitive. At first blush it may seem that broadcast technologies can reach an immense audience in realtime with a zero marginal cost of delivery to a new viewer.

    Agreed. I think Murdoch got rid of Direct TV because he sees that immediate distribution is less and less valuable.

    5. The greater the number of content alternatives at any given point in time, the more expensive it is for any given piece of content to acquire an incremental viewer. The cost may come in the form of investment into the production of the content, advertising, promotion or placement. It may come in the form of sweat equity from hustling to promote the content.

    Agreed and Disagreed. In two ways:

    1) For large general audience content, the large number of content alternatives has little effect – it did 20 years ago when there were only 3 channels, but now I believe the quality of the writing / acting AND the \”evergreen\” value of content defines the cost of acquiring a viewer. Many movie classics find their footing AFTER the conventional release window, but generally, making a blockbuster requires paying everybody involved who knows they are what makes a blockbuster.

    Meaning, yes more choices means there\’s more shit that sucks to each individual, which in turn proves the value of the allstars, it all diminishes the import of distribution. Where that tipping point came is somewhere in the web and satellite TV.

    Infact, educational content is most evergreen and valuable of large audience content – in a value of per minute content created model.

    2. Small audiences were crafted when the distribtuion allowed for a variety of choices. This is where perosnalization of advertising still hasn\’t stepped up. Thats next.

    Comment by Morgan Warstler -

  11. Hello Mark,

    All of your points are in order, and very well thought out.

    They certainly explain HdNet\’s programming of Live Concerts, which, incidentally, is excellent.

    Your rationale, however, doesn\’t explain The Three Stooges, Hogan\’s Heroes or Married With Children.

    Randy Geider

    Comment by Randy Geider -

  12. I think there can be an argument made for what \”value\” is and correspondingly why a certain medium may be selected. You started this WRT video, but it\’s triggered my thinking a bit more about medium.

    Money is not always the greatest value. For example, as I try to build internal brands for projects I work on, I may agree that more nodes brings more value down the road, because I know there may be more eyes and ears, etc. However, if I want to get certain influential people to buy in to concepts and to help with the branding and momentum, then I may select a different medium that gets popular with a select audience and only for a short time.

    To maximize \”value,\” the medium may need to move from one form to another. I think learning how to move between mediums with same or similar content is often much more valuable than getting the content just right and trying to pick the perfect medium.

    Comment by Toby Getsch -

  13. The plural of \”hypothesis\” is \”hypotheses\”. Strange but true.

    Comment by Tim -

  14. Mark are you familiar with Richard Dawkins mememic theory?

    Your \”Heat\” sounds much like his \”Idea Attractiveness\” and I think would apply to your content creation better than Metcalfe\’s Law.

    I agree that the environment your content is introduced thru is important, but I believe the Quality of the content will have longer impacts on the success.

    With content publication there should be a distinction made between initial success and long term life. Breaking news will have a short life cycle while the books about the wizard kid will have a long lifetime.

    Also, there needs to be a distinction made with content control. Once the content is released who owns and controls it. A news story will have little or no control while a TV/Book series would be under complete control.

    Comment by Adam Gates -

  15. I think #1 is not obvious, and may be just plain wrong.
    Consider your example, 10 million people watch a video snippet concurrently, then never again, versus say, 1 million per day spread over 10 days. My own gut feeling is that scenario 2 has greater value, because the value is not entirely ephemeral. However, I admit that my gut feeling is no more evidence-based than yours. At best case unproved.

    Comment by Macartan Cassidy -

  16. Hey Mark,

    Check out this Wikipedia article about 2 Sided Markets – http://en.wikipedia.org/wiki/Two_sided_markets – The \”network effect\” and one side subsidizing the other\” aspects fit with your model as well. Harvard Business Review has a good article available on 2 Sided Markets as well: http://harvardbusinessonline.hbsp.harvard.edu/hbsp/hbr/articles/article.jsp?ml_action=get-article&ml_issueid=null&articleID=R0610F&pageNumber=1

    Comment by James Moore -

  17. Hey now you\’re talking Mark. This is the kind of stuff I like reading on blogs. Gets your brain juices flowing – I can see the mindmap now.

    You have to take it to the next level though Mark – this is observational stuff. What about the immersion of the viewer into the media? I am talking 3D, interactivity, user development of content, etc. By using immersion, you leapfrog the current content providers and instantly become the next tier leader. So yes, the more nodes connected the more valuable. But what if all those nodes interacted while within the content? I will tell you what it means – it brings the collective cell of people into a simple form of a new entity. Ever sit down in front of World of Warcraft or Everquest? Why do you think it is so addictive? Now add virtual 3D realism. Now add virtual contributions by each and every person toward the better good of the media. You have a new immersive content that continually grows exponentially better. James Cameron is planning on releasing a MMORPG simultaneously with the release of his 3D movie Avatar in 2009. He has mused about having the audience help build the CGI backgrounds and actually contribute to their own entertainment! THAT is the future. And it is way cheaper than building it yourself – all you have to do is give them credit when the credits roll and they will do it for free. Happens all the time today with PC gamers creating new levels and expansions for popular games. Heck the only games that have any shelf life are the ones that are open to gamers for modification! There is a reason for this and it can be applied equally to entertainment. Get it?

    Comment by Mock Mark -

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    Comment by james Hou -

  19. to the person who posted comment #2 — you can\’t make the comparisons of google to the blogsphere. Google\’s scale is so massive that the thing that matters is the massive scale. Any individual blog that had the scale of Google WOULD be worth much, much more, but it won\’t ever happen.

    MC: I\’m not sure about rule #5. I do agree that the distribution costs for ABC, CBS, FOX and NBC are far greater and the rule does seem to apply in general, but at some scale it seems to break. I think this rule definitely applies to the Simpsons, but I\’m not sure it was true for American Idol. Thoughts?

    Comment by Robert Seidman -

  20. How about this. The more people pay for access to the content, and the more advertisers pays for access to the content\’s audience, the more valuable the content. Or maybe that one is too obvious.

    Comment by Ken -

  21. All are interesting, but #2 interests me the most because it would be neat to receive that metric in real-time (or close to it).

    Comment by aharden -

  22. I totally agree with your 5, which is odd as I think you\’ve been off base on some of your other youtube/hdnet/theatre analysis. Anyway here are some I\’d add.

    6. Everything else being equal lower distribution costs increase value of content.

    7. Content determines distribution channel.
    Everything else isn\’t equal and in certain cases you can lower intrinsic value, decrease distribution costs, and come out ahead in value. Other times you can increase value, increase distribution costs, and come out ahead in value. Which way you go depends on content. Think youtube vs HDnet. It isn\’t coincidence/copyright that determins why content is different between them, it\’s economics.

    8. The greater the number of alternatives the greater the emotional attachment of each viewer.
    This is the flipside to your rule 2. If there are 500 shows on I\’m more likely to be attached to the one I choose than if there are 3 shows on.

    9. The greater the number of alternatives the greater the value of each viewer to advertisers.
    The ability to segment viewers is valuable to advertisers.

    10. The greater the number of alternatives the less value of each viewer to advertisers.
    More alternatives = less viewers per alternative = less value per rule 2

    Comment by Joel -

  23. Great content will be seen regardless of whether it starts out with one person or one million people. As you wrote, the latter is of course preferred and financially it probably means more $$$ in the end. But in terms of eyeballs, I believe the former to be a viable option for those who posses content that truly is original, interesting, etc. And I also believe it can be equally lucrative in some cases.

    Comment by Dewey -

  24. Additionally, aren\’t we talking about content heavy products? Individuals and companies attempting to launch the next big thing, often push from concept to production without proper developing and organization. Taking an additional 30 days to create higher quality in both aspects are the two determining factors for original impact.

    It is evident in T.V. shows (quality writing), clothing (new, reasonable and practical), destination resorts (quality of allure and amenities) or the service industry (efficacy, demand and marketability). Again, companies that are well capitalized that take proper research and development measures can find many pots of gold at the end of the rainbow. It only takes one false step to severely damage a good reputation, with long term impacts on image and resources to repair it.

    Everyone needs realize you must \”Slow Down\” in order to \”hurry up\”!

    Jerry R. Reynolds
    http://www.ushomewatchers.com

    Comment by Jerry R. Reynolds -

  25. I think your points about \”heat\” are interesting, however I cannot see why you could not apply the same formula to page views on blogs and websites – google traffic would be worth less than feed reader traffic.

    Comment by Wholesaler -

  26. Organizations will soon realise one fundumental principle, leverging resources (outsourcing of sorts) over the long term has lower resource demand but lower profitability margines in over time. Groups that are not well capitalised may have no alternitives, however owning the platform will always have a higher yeild. It may not be evident in the bottom line but very visable in value of the entity. You know from first hand experiance by selling a former company to the conglomerate Yahoo! As with the NBA, sometimes it is be nesseccery to part ways with one platform generating resources, to created fesability for the next opportunity.

    Mark, I will never stop until you ask me too but I request one opportunity to pitch you the US Home Watchers Project. This is a great project, give me one opportunity.

    Jerry R. Reynolds
    http://www.ushomewatchers.com

    Comment by Jerry R. Reynolds -

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