TV traumatized by tech turmoil
Nets enthused but confused by digital shifts
CBS and NBC U last week announced the first network video-on-demand deals, which followed on the heels of ABC's agreement to make "Lost" and "Desperate Housewives" available for download to computers and Apple's video iPod.
These moves were heralded by many as a fundamental shift in the advertiser-supported business model that has existed for more than 50 years.
In truth, these deals are baby steps. And, given VCRs and TiVo, it's not clear how many people will pay to see an episode they missed, when they can record it themselves.
But the line between broadcast, cable and payboxes begins to blur -- which may be the ultimate impact of digital technology on the TV biz.
The revolution is on. The music biz was slow to adapt to tech changes, and is just now getting out of a multi-year slump, thanks to pay-for-tunes sites like Apple's Music Store and cell phone tunes. In the film biz, exhibs and distribs alike are fretting over box office, but dragging their heels when someone suggests new economic role models for film distribution.
And in TV, as the recent deals show, everyone is cautiously trying different things. No one wants to be left out of the gold rush, but no one wants to kill the golden goose.
There are many details to be worked out on the TV front, including challenges from affiliates and Hollywood guilds. In the long run, such deals may challenge age-old practices such as scheduling (Saturday won't be a wasteland if you can watch hit shows whenever you want) and advertising.
It's possible the new system will make it easy to zap ads. But it's also possible that the new system will tack on ads before the show starts, and will be able to target those ads to specific demographic groups. (Your cable company knows more about your age and tastes than you may realize.)
Another question is how this will affect the production community. The assumption is that shorter content will be more popular, but no one knows for sure.
For consumers, the net result is confusion. As if 500 channels on cable or satellite weren't enough, they now have multiple chances to see a program, and multiple technologies on which to watch them.
As the growth of Internet, multimedia cell phones, and videogames continues to splinter the advertising business into niches, viewers simply have less time to devote to the Big Six nets. As that occurs, alternative means of monetizing expensive shows become more important.
"Everyone is modeling out where those lines cross," says Deloitte & Touche technology media and telecom media partner Tony Kern. "Eventually the decline in legacy advertising will be enough so that the on-demand model makes enough sense to let it start to eat into advertising."
At that point, rather than cautious steps to complement mass market ads, networks and studios may take bold steps to more fundamentally change their business model.
That could include free VOD in exchange for watching ads targeted at the user; varying prices for shows depending on how devoted the audience is (it seems likely fans of "Battlestar Galactica" or "Arrested Development" would pay more than 99¢ to support new episodes); or subscription packages to get a set number of NBC Universal or Fox programs every month.
Execs admit that digital technology has reached a tipping point where current business models could be hurt more than helped if they don't start to embrace them.
While some consumers who watch "Lost" on their video iPod might not watch that week's episode on air as a result, nets are betting it will ultimately make tech-savvy young people more likely to tune in or buy a DVD.
"A VOD model that allows consumers to see more of your episodes is great for content suppliers," says 20th Century Fox TV prexy Gary Newman. "It's more important to build audiences as opposed to feeling like you have to hoard exclusivity (for syndication)."
There's one other reason for VOD: Steve Jobs.
Much as iTunes and the original iPod pushed the music business to embrace a simple digital business model, Jobs used the launch of the video iPod to get a broadcast network to offer TV shows for download for the first time.
"It's no coincidence that three of these deals happened in a month," says Moonves. "Bob (Iger) deserves credit for stepping up first."
But while iTunes only changed the music business so far as it made it easier to buy singles instead of full albums, VOD is a more fundamental shift in the TV biz. Consumers have always bought music, but broadcast nets exist to drive the biggest possible auds to watch commercials, regardless of whether they love the programming enough to pay for it.
Nobody wants to be the network that killed the golden goose of free TV -- i.e., the $16 billion-plus in ad coin the nets take in every year.
"We don't want to take anything away from our advertisers," Moonves makes clear.
Studios, meanwhile, fear reducing potential profits from DVD, which has become an incredibly important revenue driver over the past five years. This year, the market for TV DVDs is projected to reach $4 billion.
That might explain the baby steps. "These are significant steps forward but still limited in their reach," says NBC U TV topper Jeff Zucker.
(Josef Adalian contributed to this report.)
