Change is imminent

Here we are in another presidential election year, and change is in the wind, not to mention on the tips of the tongues of every candidate.

It should come as no surprise that change is also on the tips of the tongues of television broadcasters. I'm talking about the media conglomerates that own more than 90 percent of the broadcast and cable TV programming we watch, local TV broadcasters and the multichannel TV services. These changes may represent a threat to the broadcast industry — an industry that has been resisting change for decades.

According to the BIA Financial Network (BIAfn), 2007 was another down year for local television broadcasters. The financial and strategic advisory firm serving the media and communications industries reported 2007 television revenues as $22.2 billion, a 2 percent decrease from revenues of $22.7 billion in 2006. (See “Web links” on page 16.)

In the face of the Writers Guild of America (WGA) strike, which has put much of the prime time television season on hold, one might predict that 2008 will be another down year for broadcasters. However, that's not what is going to happen. BIAfn predicts, instead, that local TV station revenues will increase by as much as 11 percent in 2008, a 10-year high.

Broadcasters in Iowa and New Hampshire already know why times are looking up. It's a presidential election year. Add to this the 2008 Olympics, and 2008 is looking very promising indeed.

Local network affiliates wonder what role they will play in the future as the media conglomerates begin to make content available via new outlets. Near the end of 2007, FOX sold eight of its owned and operated stations to Oak Hill Capital partners for $1.1 billion. During 2007, NBC pulled its shows from the Apple iTunes store and then announced NBC Direct, a service that allows many of the network's shows to be downloaded for free.

Could the Internet dribble become a BitTorrent?

For now, the new media that the WGA wants a cut of is still in beta, a term that NBC uses for its NBC Direct download site. Downloading TV shows requires a good broadband Internet connection, something that is available in a little more than half of U.S. homes. Mobile TV is even more of a curiosity as it is still dominated by the wireless telcos who want to sell the services as an add-on package for their cellular phone customers.

However, Wi-Fi hot spots are popping up everywhere, and new mobile media devices, such as Apple's iPhone and iTouch, can tap into YouTube today, as well as a new FOX News video download service.

A new study by Horowitz Associates reveals the rapid growth in consumption of broadband video among adult Internet users. (See “Web links.”) According to the 2007 report, six out of 10 high-speed Internet users watch or download online video content at least once a week, and 86 percent do so on a monthly basis, compared with 45 percent and 71 percent, respectively, in the 2006 study. News and user-generated, nonprofessional content are the most often viewed genres, followed by movie previews and trailers, music videos, and previews and segments of TV shows. The report also notes that weekly viewing of full episodes of television shows online doubled from last year, with 16 percent of high-speed Internet users now watching TV online on a weekly basis.

On the positive side, the study shows that television is still the preferred platform for traditional TV content. The vast majority (70 percent) of Internet users who watch TV online do so because they missed the episode on TV. About two out of 10 of these respondents say they watch TV shows online to view them a second time (after having watched them on TV), or that they watch TV shows online just when they happen to find them or when someone else tells them about them.

But this is changing too. In its coverage of the recent Consumer Electronics Show in Las Vegas, “The New York Times” reported that “televisions, enormously wide and remarkably thin, were front and center, and overhead.” These new televisions represent the hope of the electronics industry — televisions connected to the Internet and ready to display new forms of on-demand entertainment.

The “Times” report also noted that several television makers announced a series of partnerships with media companies that will allow delivery of Internet content, including videos, news feeds, weather and sports directly to the TV, without the need for a PC.

Comcast's CEO Brian Roberts used the CES stage to announce Project Infinity, an effort by the nation's largest cable system operator to compete more effectively with the growing number of HD channels being delivered by competing DBS operators.

The Comcast video-on-demand platform — which currently has more than 1300 movie titles available each month — will be the major focus of the multiple systems operator's content growth. Beginning next year, Comcast will offer more than 6000 movies per month, with more than one-half of them available in HD.

Roberts also officially introduced Fancast, the Internet content portal that Comcast Interactive Media has been developing for more than one year and beta testing since late summer. The ad-supported portal offers content to Comcast subscribers, as well as general Internet users. It will now provide free content from ABC, CBS, FOX, Lifetime Television, NBC, Viacom and other major programmers through a Flash-based video player. It will offer more than 90,000 videos. And Roberts demonstrated a new technology that ties multiple digital cable channels together to download an HD movie in four minutes.

Meanwhile, FCC chairman Kevin Martin, speaking at CES, said that the commission is investigating a complaint filed last November that Comcast has been interfering with peer-to-peer downloads of video using the BitTorrent protocol. Most important to broadcasters was Martin's comment that there is no chance that the nation's shift to digital television will be delayed, regardless of questions and pleas from various industry executives.

The real threat

Broadcasting exists today because it is still an efficient way to deliver advertising messages to large audiences. Just ask any politician running for office.

Unfortunately, these advertising messages typically miss the mark, much like the junk mail that shows up in your physical and electronic mailboxes each day. However, when viewers download a program, they provide useful demographic data, and the potential exists to deliver highly targeted messages for which advertisers will pay a premium.

The real threats from new media lie in two areas:

Channel surfing vs. Web surfingThe good old days when the family gathered around the electronic hearth to watch “Happy Days” are now distant history. Appointment television is all but dead except for a handful of live TV events. Channel surfing has replaced appointment TV. Now channel surfing is threatened by the new kid on the block, the Internet-connected TV. Why limit your choices to 100 channels when the Internet offers the potential to find exactly what you want to watch, when you want to watch it?
Advertising efficiencyThe second threat comes in the new form of advertising that will support downloadable TV, if the viewer does not pay directly for the content. Content providers are looking for ways to hook up their advertisers with real prospects. Shotgun advertising is expensive and inefficient. Google has grown into an advertising giant by helping viewers find what they want when they search the Internet. They are now directing their considerable resources at the problem by doing the same for radio and TV advertisers.

So what is a broadcaster to do as the world of digital media distribution is transformed? The time for fundamental changes to the business model that broadcasters have relied on for decades is rapidly approaching. It's easy to throw stones; it's much harder to use them to build a solid foundation for the future. Here are two suggestions for that new foundation:

Get connectedBroadcasters have the ability to proliferate their content via the Internet too. More importantly, this effort will pay dividends as broadcast stations learn how to hook up local viewers with local advertisers.
Go wirelessRemember, TV broadcasting is a wireless medium with vast potential to reach a new generation of viewers on the move. Relying on competitors to carry your bits (and charging them for the privilege) is just a short-term profit maximization strategy. What happens when people start dropping their extended basic TV packages in favor of a broadband package that can access an entire world of content?

Craig Birkmaier is a technology consultant at Pcube Labs.

Send questions and comments to: craig.birkmaier@penton.com

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