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Threats vs. opportunities

The history of entertainment media is rife with portents of gloom upon the advent of the next newest entertainment delivery technology. Sixty years ago, the rise of television gave fodder to the Hollywood doomsayers. The fact that consumers no longer had to leave their homes and could now sit in their living rooms (in front of a 10in screen, no less!) and be entertained by television was going to be the end of the Hollywood movie studios and the entire film theater industry. Except it didn't quite happen that way.

Ultimately, television proved to be a huge new revenue generator for Hollywood. With the discovery that broadcasters would pay for the rights to show movies, television became an important and profitable segment of the Hollywood film release cycle. Later, the studios recognized another business opportunity: marrying television's insatiable appetite for content with Hollywood's own unique production capabilities. What film studio today does not have a television production division?

With the application of MP3 to the digitization of music, the development of portable MP3 players and the viral spread of illegal file sharing, the music industry actually came close to a doomsday scenario. It took Apple to demonstrate that by facilitating ease of purchase with appropriate pricing, there was still a multibillion-dollar music business to be had. By embracing the technology, understanding new concepts of monetization and discontinuing the idiocy of suing its customer base, the music industry survived. But this was a case of coming dangerously close to the doomsayers' prognostication of disaster for the then existing industry.

The broadcast TV industry went from being a threat to being threatened. Initially, cable television was a boon to broadcasters. It delivered additional eyeballs that broadcasters' signals could not reach because of intervening mountains, valleys that were shaded or homes located simply beyond a station's viewable field strength contours. But that boon came in the form of a Trojan horse. Little did broadcasters of the time realize that those heady days of having a captive prime-time viewing audience, essentially a total share of TV households, would quickly end.

The broadcast industry of the time, by pushing to collect fees for carriage and retransmission rights, gave the then nascent cable industry the impetus to develop its own channels and programming. By the end of the 1984-1985 TV season, The Nielson Company reported a 57.1 primetime viewing share for broadcast and a 7.6 share for cable. And, by the end of the 2008-2009 season, those numbers had flipped to a 27.7 share for broadcast and a 42.9 share for cable.

Survival of the fittest

Yet, broadcast has survived. It has a much smaller share but of a much larger revenue pie. In the tradition of “if you can't beat 'em …” broadcast networks and station groups now own cable networks and cable channels. Lastly, and perhaps most importantly, only broadcast television has time and again demonstrated to advertisers the unique ability to converge truly massive audiences at given points in time. If an advertiser has a mass message that it wants delivered to a huge audience, broadcast television cannot be beaten.

The fractionalization of viewership has continued over the past several years. Online media has begun to impact audience share, particularly as newer television sets and DVD and Blu-ray players began to sport Ethernet connections, which facilitate the delivery of online content directly to the TV screen.

Recent announcements now have online media taking competition for viewership to the next level. Netflix will now produce its own original content. The star of its new drama will be Academy Award winner Kevin Spacey. Hulu, another Internet media venture, has already launched its own original series, “The Confession,” starring Kiefer Sutherland of “24” fame. Yahoo has announced that it too is looking into doing scripted programming. There is speculation in the business community that Dish Network's recent acquisition of the shell that was once Blockbuster will be to use Blockbuster as its vehicle for entry into the battle for online viewers.

So, now the question for broadcasters: Is this newest vehicle for the delivery of entertainment content a threat or an opportunity? At first it is easy to fall into the threat camp. But broadcasters themselves are launching a new entertainment delivery vehicle — mobile DTV. Mobile DTV requires content. Local news and weather will carry it just so far. Some of the new online programming is being developed for Internet-sized appetites, i.e., five-to-10-minute bites — interestingly, the same bite size as some studies have revealed for mobile DTV. So, perhaps it is not a threat but an opportunity. Are augmenting online distribution with dedicated mobile distribution, or agreements with online programmers for mobile content rights farfetched? I don't think so, but we'll see. It's a brave new world out there.

Anthony R. Gargano is a consultant and former industry executive.

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