Saturday, October 15, 2005

A Shift In The Way Television Is Done?

Three days ago Apple announced a new product, the Video iPod. The new device, a variant of the company's immensely popular iPod is a handheld device capable of holding a minimum of 7,500 songs, 25,000 photos or 75 hours of video. The device has its own colour screen on which you can watch programs or music videos. Content is - or will be - available from the iTunes music store for $1.99. Among the content that has been made available is five TV series from Disney-ABC including Lost, Desperate Housewives and Night Stalker with episodes available the day after they air on TV. It's this content which makes this product interesting. I doubt there are many people who would buy a video capable device if all there was to watch was music videos. The videos are encoded to fit the iPod's screen resolution of 320x240 pixels and image quality degrades on larger screens.

This development leads inevitably to discussion on "what it means". In an article in his blog Blogmaverick entitled "How Bob Iger Saved Network TV" Mark Cuban suggests that by offering network content online for a price, Robert Iger (President and CEO of the Walt Disney Company which owns ABC) has "saved" the TV industry by introducing a new revenue stream. According to Cuban:

The entire TV industry is scared shitless about how advertising will evolve. Will the 30 second commercial survive? Will PVRs eliminate commercial watching in a material percentage of homes? What impact will HDTV have on TV viewing and advertising (besides the obvious rush to HDNet & HDNet Movies:)? The answers to these questions are pivotal to the programming side of the equation because without enough advertising revenue for the networks, how are they going to pay for programming?

Bob Iger has enabled a new revenue stream which if it grows, could definitely be the revenue stream that saves primetime network TV.

Cuban offers some further interesting possibilities based on the decision to include Night Stalker, a show which hasn't been setting the ratings on fire, as part of the ABC package:

What if Night Stalker turns out to be a hugely popular download? Would ABC keep it on the air for that reason? What if the show is cancelled? Will ABC sell any unaired episodes? And how many downloads will be sold of those? If the show is cancelled, are enough downloads being sold so that when combined with a license fee from a cable network, the show could live on?

Since ABC will be able to see the sell through numbers on a daily basis, will that impact programming decisions?

The important thing, according to Cuban is that Iger has "had the brilliance to say yes to giving consumers his content, where, how and when they want to consume it."

The idea is interesting, and it may extend beyond what Cuban has predicted. While the TV producers were initially reluctant to put recent programming out on DVD, there has been a trend to release shows on DVD soon after the latest season of the show has completed its repeat run, and these DVDs sell well. One case was Firefly which was cancelled after 11 episodes. The Fox Network made a DVD release of the show with the expectation of tapping into the fan market of the show. In fact the DVD release was a huge seller, to the point where Fox allowed executive producer Joss Whedon to peddle the concept to Universal to make the movie Serenity. At the very least this proves that the public wants the ability to watch its favourite shows when they want to see them. This is also reflected in the use of PVRs, VCRs, and recordable DVDs.

We know that downloading video content online is a popular activity with programs like Bittorent. While much of this material is pirated - put online without the permission of the content creators - there are some people who are producing what are essentially video podcasts, intended to be downloaded online. They aren't getting paid for this of course but they do show that the ability exists to produce programing without the support of existing networks or cable providers. Downloadable programming provides the ability to service niche markets better than regular broadcast or cable TV. Now consider the ability to package a group of shows - perhaps shows with a similar theme - and make them available as a unit at a lower price than each of the individual shows on their own. How about this? TV and movie companies often have huge libraries of product which they can't sell. The ability to download content online would make this profitable in a way that it wouldn't be on DVD or through syndication. A Paramount movie from the 1930s might not be profitable on DVD (or so say the Paramount executives) given the costs of DVD production, but if that movie could be downloaded legally and a fee paid to the studio for each download, the release of the movie would be profitable because the costs would be minimal.

Setting aside the limitations of the iPod Video unit, what Robert Iger's decision indicates is something of a paradigm shift. The TV networks, like the radio networks before them, began because they controlled the means of distribution in a way that independent stations and independent producers didn't have. The radio networks were able to contract for the telephone lines to transmit their shows to stations across the country and were able to sell advertising on their shows based on that model. The same thing went for the television networks. Distribution as much as content was king. Today the means of distribution model has changed. It goes beyond cable and satellite, which allowed a host of independent niche broadcasters to flourish because they didn't need local stations to redistribute their content. I suspect that more networks are going to offer their programming as legal downloads for pay with better quality than pirates using something like Bittorrent - if you want quality you'll have to pay for it. In the long term, the networks will have to adapt. I have a suspicion that in the future it won't be Apple that acts as the middle man between producers and consumers, it will be the networks. Want to watch an episode of The West Wing at the time of your choice? Pay your two bucks to NBC's program store and go ahead, but don't try to sell it to someone else because it won't work.

Changing their approach to how shows are sold may be the only way for the networks to remain relevant.

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