Is The TV Biz Changing So Much That It’s Staying The Same?

Digital technology and the Internet are rendering the current television business model ineffective. It was that fact which provided the impetus for a group of four TV biz experts to meet during the most recent MIPCOM. The group informally exchanged views on the new path the industry could and might take.

The Cannes agenda was shaped by several news developments such as: Rupert Murdoch’s interest in merging his satellite TV service Sky Italia with Telecom Italia, Italy’s telephone company; the interest of Silvio Berlusconi’s Mediaset in the same telephone company, and the Italian government’s interest in keeping Telecom Italia’s fixed lines out of Berlusconi’s (or his proxies’) hands.

Similarly, in the U.S., Murdoch is said to be ready to divest of his satellite service, DirecTV, in order to focus on other forms of transport and consolidate his grip on content.

Indeed, worldwide focus is now on content and transport: cable, telephone, radio spectrum and, in the future, power lines.

As far as spectrum is concerned, the U.S. government just received bids of $14 billion for cellular radio frequencies auctioned to companies that want to build a wireless broadband network.
In view of the fact that only 20 percent of U.S. households use aerials to receive television, it is envisioned that U.S. TV station groups could better monetize their allocated frequencies by renting them out to wireless transport services.

Talk in Cannes turned to the various challenges that the convergence of digital technology and the Internet pose to the TV industry on the technical, regulatory and business model levels.
The moderator of the get-together was VideoAge’s Dom Serafini, who was assisted by Italian editorial contributor Enzo Chiarullo.

The four panelists, who have expertise in all areas of the business of television, were: Sal Campo, consultant, for, among others, Digital Age Solutions; Russ Kagan of International Program Consultants;  Farrell E. Meisel, president of FMI Media Group, and James P. Marrinan of Entertainment Media Consultants. Collectively, the panelists are familiar with studio production and distribution, satellite and cable TV, broadcast TV, mobile TV and most other new technologies.

Serafini’s preamble was that, in order to face new challenges, the business of television has to be redefined. Companies have to abandon their “vertical integration” and “jack of all trade” philosophies and opt for one core business –– be it transport, content, advertising or service –– since no one company could, or should be in more than one of the above-mentioned fields.

Interestingly, in the same vein, Television, the Royal Television Society’s bulletin, asked CBS-Paramount’s Leslie Moonves: “If you had to choose between your content business and your distribution business, which would you select?” To which he answered: “Probably the content business. But I don’t want to give up my distribution yet.”

According to the Financial Times (The Lex Column, Sept. 17, 2006), “The claim that content companies benefit from controlling distribution is becoming less credible in the digital world.”

Furthermore, Serafini predicted a return of governments’ active roles in regulating all four of those fields.
Finally, it is said that the combination of digital technology and the Internet has developed a streaming technology that will replace and unify all current digital TV standards.

A set-top box that adapts the stream coming from any form of transport (cable, DSL, broadcast, cellular, etc.) to a regular TV set is also being envisioned.

Indeed, according to Marrinan, the licensing divisions of the U.S. studios are now working on a single point distribution concept, with digital rights management technology that is able to recognize the interface. This means that a file containing content is not only able to recognize the player –– be it a TV, PC, iPod or cell; but also to identify the transport, so that the concept of windows will be preserved.

In other words, if the content stream goes through cable, it’s the cable window; if by airwaves, it’s the broadcast window, and so on. “In two years time the studios will forward-motion this delivery development,” he added.

Meanwhile, stated Marrinan, “The basic television business has not changed. We still have content, mass audience, advertising, and delivery. Transport (i.e. “delivery”) is in play right now and the competition is among the delivery services. The game is between two paths: cable and telcos.”

To Campo, “The key is multiplatform and content delivery network (CDN), because the key is to monitor, measure and monetize,” where “monitor” indicates the window that the audiovisual stream is utilizing, “measure” is the ability to account for every user and “monetize” offers a way to maximize revenues.  The CDN technology can deliver media content in any form over multiple distribution platforms (i.e. cellular, VoD, IPTV, etc.). CDN files are compressed, thus requiring less storage, yet are “robust,” meaning reliable, and backed up by “redundancy” or a repeated form of delivery to assure quality.

According to Meisel: “We’re in a stage of experimentation. The industry doesn’t fully understand it yet, and it is going to evolve, but it will come down to content.”

Then, picking up on the regulatory premises of Serafini, Meisel added, “We don’t need regulations. Regulators don’t fully understand what’s going on. The consumers can make that determination.” At which point Russ Kagan interjected: “The government will regulate because it has to find a way to tax them.”

On the subject of cellular and mobile telephony’s migration to broadcast frequencies, Kagan said, “There are ‘frequency swaps’ going on right now in markets, with early FCC [authority] approval for mobile operators taking over broadcast assigned bandwidth frequencies. Swaps often include payments to broadcasters to give up the frequency early. [These] are not the ‘prime’ network affiliated stations, but a lot of independent and low-power UHF stations, especially in the Midwest [area of the U.S.].” He then added, “All of the broadcast frequencies will be reallocated anyway by January 2009, when all stations must give up their analog transmissions and move to their HD [high-definition] assigned frequencies.”