Fred Wilson, who writes an excellent blog, posted this PPT deck last week.  He gave a talk to some television executives in New York.

There's no audio to the deck, but it makes sense anyway.  A lot of sense.

I'm especially taken with his "Six Words to Live By in Television" (slide 20).

My thoughts, which I posted on his blog's comments section, are here:

Great presentation! Even without the audio track.

Your "Six Words to Live By" I'm most certainly going to pass on to my friends and colleagues out here in LA, who are also in the television business.

People are still watching TV -- but they're watching it in a fundamentally different way, and in a way that demolishes the secret business model of the business, which was: People hate to change the channel. Seriously: the television business has been steadily declining since the first moment people didn't have to get up off the sofa to change the channel. From clicking around 13 channels to flipping through 1300, to time shifting and now cherry-picking only the shows a viewer wants to watch, the business has been forced to do something it wasn't designed to do: make money putting on shows people want to watch.

In the not-too-distant past, networks lost money on the hits -- shows like Cheers (which was my first gig) and Friends and Seinfeld ran deficits for their producers for the first few years, but by year 4 or 5, they were all "made whole" by the network. If you wanted to renew Cheers, NBC was told by Paramount, you need to pay us back for everything we've spent, plus more, plus more in the future, plus more for the cast, plus more just because we can.

So NBC's game was to make money on the shows around the hits -- the so-called "Halo" effect -- like Wings, which nobody really liked that much, but which was, you know, on. Why flip around?

The current environment is the worst possible outcome for people in Hollywood: you have to put on good shows. All of them have to be good. And you have to make money on them, too, because you're selling that show specifically, not the time periods around those shows.

But that's not how the system is set up. And the system is changing, and it's incredibly exciting (for people like me who have been in the business for a while and who like to write and produce shows) but it's terrifying for anyone who made money the old way, but servicing a system that only works if the customer doesn't or can't make a choice.

Put it this way: the recent sharp decline in house prices in the Los Angeles area isn't totally related to the overall economic recession. A lot of it is Hollywood-specific, as we all try to learn how to make money in the worst, most painful, least attractive way possible: earning it.

Originally posted as a comment by Rob Long on A VC using Disqus.