The new DTV food chain

In the face of increasing competition from cable, interactive services and even Hollywood, broadcasters must devise new ways to keep and increase their audience share.
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In a food chain, each organism eats a smaller organism, and is eaten by a larger one.

Over the past five decades, TV broadcasters have seen their position in the media food chain evolve dramatically. In 1950 the big fish was the local movie theater; for most Americans, home entertainment meant gathering the family around a console radio. But the little screen soon emerged as the big fish in the media ocean, and the motion picture industry scrambled to preserve its food supply.

It can be an informative exercise to examine what has happened to the motion picture industry and broadcasters after five decades of evolution driven by rapid advances in analog, and now digital, technology.

Hollywood adapted to competition from TV. It widened its horizons, focusing on the entertainment experience. Saturday morning serials and the newsreels became extinct in theaters. The pictures got wider and the sound got better. And Hollywood embraced TV and commercials to extend its market reach.

The premiere of a major motion picture on the little screen became a big event; the networks got into bidding wars for the rights to the most popular movie titles. And the Hollywood content machine soon started churning out entertainment programming optimized for the little screen.

Broadcast TV entered its golden era, feeding the masses hungry for news and entertainment, huddled around the little screen in the living room. Hollywood developed an appetite for “free TV,” setting aside artistic concerns about the interruption of their stories to make room for the commercials that paid for the content.

Then technology threatened Hollywood and the broadcaster once again. The consumer electronics industry introduced the personal videotape recorder, and satellites revolutionized the distribution of television programming.

In 1982, testifying before a Congressional committee, Jack Valenti, president of the Motion Picture Association of America, delivered a dire warning:

“Now we are facing a very new and a very troubling assault on our fiscal security, on our very economic life, and we are facing it from a thing called the videocassette recorder and its necessary companion called the blank tape…. I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone.”

Even as he spoke, however, Hollywood was leveraging this new technology to its advantage, to create a new food chain that threatened the TV broadcaster's food supply. The VCR enabled Hollywood to bypass broadcasters, reaching directly into American homes. Families gathered around the color TV and VCR to watch movies without commercial interruptions.

Meanwhile, the cable industry drew power from satellite distribution, which brought an end to the dominance of over-the-air broadcasting and its programming oligopoly. Equally important, cable deployed a critical new technology and the infrastructure to support it. The cable set-top box, equipped with conditional access technology, enabled commercial-free premium channels, and the customer support infrastructure collected the subscription fees that paid for the content.

The new premium cable networks turned to Hollywood for the original movie content needed to fill these channels.

The term “original” is critical. In the context of premium movie channels it means uninterrupted, uncut, uncensored. Cable delivered the juicy fillet; broadcasters turned movies into hamburger.

Today, theatrical release is the big fish, then hospitality release (hotels and airplanes), then home video release (sales and rentals of tapes and DVDs), then premium cable distribution, and then first-run broadcast, followed by general broadcast release. Only in the broadcast release is the movie edited for TV and filled with commercial interruptions.

Steak and hamburger

Over the past five decades, television has split in two — over-the-air and subscription (cable and DBS).

Over-the-air broadcasting has evolved from black-and-white to color to stereo. For a few early adopters it is digital, sometimes HD. But 85 percent of American homes now get most of their TV fare via a subscription service, with about one-third of those homes subscribing to a digital TV service. Broadcasters still command about half the total audience, but they no longer compete on a level playing field.


Figure 1. Alternatives like cable are increasingly threatening broadcasters’ audience. By 2011, cable is expected to have captured almost two-thirds of American viewing shares. (Total viewing shares exceed 100 due to multiple-set households.)

Premium subscription content, on the other hand, has evolved down a different path. The premium channels that originally provided only movies — HBO, Showtime and others — now produce made-for-TV programs. These programs are uninterrupted, uncut, uncensored and increasingly delivered in HD. And this content is then released on tape and DVD — bypassing over-the-air broadcast. (See Figure 1.)

This has not gone unnoticed by the broadcast networks. They are coming to the realization that they are serving hamburger to the masses, not steak. That's not going to change, at least not for local TV broadcasters. DTV does not change a thing, except the power bill. Broadcasters can offer HDTV — but with commercials, and without the juicy content.

Technically, DTV broadcasters could deliver anything, as long as they encrypt it, figure out a way to get paid for it, and give the government five percent of the revenues generated. But that would require a significant investment in infrastructure, and a transmission system that works as reliably as cable and DBS. And it might mean backing out on the promise that got them the second DTV channel — delivering HDTV to the masses.

Throughout most of the Advanced Television standards setting process the focus was on the delivery of HDTV. The original request from broadcasters to the FCC in 1987 was to open a proceeding to determine the requirements for delivering HDTV. The networks in particular were pushing for HDTV. After the process turned digital in 1992, HDTV became an even greater imperative, since digital compression made it possible to deliver a single channel of SDTV in 2MHz of spectrum or less, and there were concerns that Congress might decide to allocate only enough spectrum to each broadcaster to duplicate their NTSC offering. So the emphasis was placed on HDTV, since it required an entire 6MHz channel. Support for SDTV formats was added to the standard in July of 1995, but the networks continued to promise that they would deliver HDTV. After the standard was approved, Preston Padden of ABC made a public statement that ABC might not use the new channels for HDTV, but rather to deliver multiple channels of SDTV, including some premium channels. He was immediately hauled in front of a Congressional hearing, where he backed down and recommitted the network to HDTV.


High equipment costs and increased competion from premium services have left small-market broadcasters unable to compete with the big fish.

CBS is now using the broadcast flag issue as a possible end run from their commitment to FREE HDTV. They are saying that they cannot continue to offer this valuable content unless it is protected. This may well be nothing more than an excuse to move HDTV content to premium cable where the networks can charge for the extra quality, and more importantly, include content (sex, language, violence, etc.) that they cannot broadcast because of content restrictions on broadcasters.

So, bottom line, it looks like CBS and possibly the rest of the networks may back out of their promise to deliver HDTV so that they can turn it into a premium niche service (which is what it always has been and will be for years).

By now it should be clear that in the world of techno-politics, what people say and what they mean are not necessarily the same thing. Mr. Valenti is at it again, with dire warnings about the digital threat. Meanwhile CBS is demanding that the government protect HDTV content or they will stop delivering it via free-to-air broadcasts.

Both are being disingenuous. Both are big fish trying to protect their interests. Both want to control the food supply.

Are there legitimate DTV business opportunities? Certainly!

Are broadcasters interested? Apparently not.

To be fair, today's broadcasters lack the resources to compete with big fish like Viacom, GE, Disney and FOX. If these big media conglomerates get their way with removal of the ownership caps this year, many broadcasters may have no choice but to let themselves be bought out.

The truth is that the big fish can survive, with or without over-the-air broadcasting. They can have their steak and the hamburger too. With that in mind, here's what the new television food chain may look like in a few years.

First-run shows will be delivered via cable and DBS in premium packages. They will be uninterrupted, uncut, uncensored. They will be in HDTV with surround sound.

After premium release, programs will be edited for content, cropped and downconverted to fit the 4:3 SDTV screen, and filled with commercials for the broadcast network release.

Then, packaged media versions of the uncut first-run shows, with added content about the shows, actors, e-commerce, etc. (just like DVD movies) will be released.

Finally, syndication release will have less content and more commercials.

There are alternatives to this view of DTV evolution.

After an initial failed attempt to compete in the subscription TV marketplace, digital broadcasting is beginning to hook viewers in Great Britain. The Freeview service launched last fallalready has 1.4 million viewers. It provides about 30 channels of programming supported by UK license fees (BBC) and advertising; all one needs is a digital receiver that costs about $120. This is equivalent to about three months of extended basic cable bills here in the United States.

In Germany, cable TV never got off the ground, in large part because the broadcast infrastructure evolved to deliver multichannel programming. Now it is going digital. All the analog transmitters in Berlin will be shut down by August 2003, and the service is robust enough to support mobile reception.

Perhaps the time has come for U.S. broadcasters to take control of their destiny.

Local broadcasters need to tell Congress that free-to-air broadcasting will soon become extinct if the politicians let the big fish continue to gobble up everything in sight. They need to tell the American public that they should not be forced to pay twice for “free TV.” The cost of advertising is passed onto the consumer at the checkout counter. This is why Coke costs much more than the store brands. And consumers pay again when they subscribe to multichannel services like cable and DBS that are advertiser supported, as is virtually all of extended basic cable. Broadcasters could deliver the equivalent of extended basic cable without the subscription fee. Then consumers would pay once for a receiver, and continue paying for TV at the checkout counter.

With local cached storage, broadcasters could use off-peak hours to download programming for consumption on demand. And with a real conditional access system, rather than broadcast flag waving, they could even deliver movies, uninterrupted, uncut and uncensored. Broadcasters can provide 30 to 60 channels of commercially sponsored programming, without the monthly bill, and they can deliver the steak too.

Craig Birkmaier is a technology consultant at Pcube labs, and hosts and moderates the OpenDTV Forum.

Web references:

Testimony from 1982 Congressional Hearing on Home Recording of Copyrighted Works cryptome.org/hrcw-hear.htm

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