TV Networks Need to Wake Up

Digital Journal has an interesting editorial on the situation with TV Networks and online video. I really don’t understand why FOX or ABC or NBC or CBS don’t have their TV feed in VGA resolution torrent-like streaming for free 24/7 using QuickTime’s h.264 (to save bandwidth while retaining good visual quality), along a lower-quality QVGA feed using Flash video (for maximum compatibility with browsers) and maybe –just maybe– a 176×144 (QCIF) resolution in 3GP/MPEG4 streaming format for mobile devices.

This is the first thing I would personally do if I was to get an exec job (!) in one of these networks. Why don’t they wake up and smell the coffee? I mean, they could even make extra money out of this with video-on-demand. For example, did a viewer missed the episode of “Lost” last night? Well, below the live TV feed list your most popular shows. When a user clicks on one of those, a list of episodes, with descriptions and original air-dates, is listed. When the user is clicking to view the episode he/she missed, must pay $0.99 to view the ad-free, uninterrupted episode via streaming-on-demand. There is money to be made here (my streaming-on-demand suggested price is half of iTunes’ able-to-download price).

Is this so difficult to build a business case? I wonder what the TV Networks are afraid of. I think what they are afraid of is themselves. They can’t do the next bold move. They don’t have the guts, or the imagination to do so. They are all fine and daddy with what they already have, but you know, ta p??ta ?e? (”everything changes, nothing stays the same”, ancient Greek wisdom), especially in the tech business.

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Wes McGee wrote on November 12th, 2006 at 8:52 AM PST:

>I wonder what the TV Networks are afraid of.

Their affiliates for one. They’ve been afraid of getting too deeply into online distribution because then they would actually start competing against the affiliates they contract with to show their network. (The networks don’t own most of the stations, and the FCC currently caps the number of stations any one group can own.) Affiliates make money by selling ads in these shows, along side the networks. They’ll lose money if they chose to go directly to CBS.com and download the show directly. They’ll likely have to set up some sort of revenue sharing to prevent an affiliate revolt.

The actors and writers unions for another. One of the few unions left that has major clout in America are the entertainment unions. The contracts are up soon. They feel that they were screwed out of their fair share the last time technology changed distribution methods (VCRs and Home Video; see here). They don’t want that to happen again. The studios don’t know how the finances will work out with digital downloads (it WILL cannibalize ad sales to TV networks and maybe home video sales too — they don’t know how much). They’re both going to walk blind into this. And that will potentially make it very ugly.


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Eugenia wrote on November 12th, 2006 at 9:04 AM PST:

Wes, you misunderstood a few things. In detail:

Regarding FCC: FCC can not tell CBS to not have online broadcasting, because this is outside the FCC’s juristiction.

Regarding affiliates: The affiliates lose nothing, because the same ads and programs that exist on the aerial/cable TV will get broadcasted on the net too. My idea is simply adding an additional broadcasting method (NOT distribution). The TV programme stays the same (and the ads too). Besides, if users stream-on-demand this is money for the network, but it is also money lost for the user. So I don’t think the affiliates getting screwed over this. And regarding streaming on demand, it’s not that different than having the users buying an episode off iTunes. If the affiliates had a problem with this, they wouldn’t allowed the TV networks to sell their goods on iTunes.

Regarding the actor’s unions: Did the actors revolted when TV went cable-based, or when it went satellite-based? No. Why would they revolt when it goes internet-based? Again, this is not a different programme or distribution method, it’s the same as the one people would get on their TV sets. But instead of viewing it on a TV, they would view it on their PC monitors. Nothing else has changed, so I don’t really see the problem. Besides, ABC already offers streaming of their most popular TV show episodes completely free, as we speak (check their web site). No one has revolted.

In need, they could screw streaming-on-demand (if you think that some groups would revolt) and just offer live TV feeds. Why don’t they just do that then? IMHO, they just don’t have the guts.


Wes McGee wrote on November 13th, 2006 at 2:10 AM PST:

Actually, you misunderstand a couple of things here. Second point first. I’m not quite sure you understand how broadcast television works in America. In effect the networks contracts out the broadcasting of its programming to television stations that serve the local markets here. The local markets accept the programming from the networks because it frees them from having to program those hours. Now these affiliates make their money by selling ads during these programs themselves. If you tape an hour of CSI, a program of CBS, from New York City’s WCBS (this station is owned by CBS) and tape that same hour of CSI from Washington DC’s WUSA (this station is owned by Gannett Broadcasting), you will see points where they show different advertisements. Many of those ads are of only local interest i.e. sells at the local retail chains or malls, or political campaign ads for local office or promotions for the local sports teams. In terms of online streaming, Tysons Corner Mall (near Washington DC) is not going to be interested buying an advertisement streaming online at the same price if most of the people viewing that advertisement is outside of the Washington DC area! So, no you will NOT see the same ads on the online broadcast as you will for the television broadcast.

The FCC discussion is only an aside to help explain the economics of television broadcasting — in that a massive online presence will inevitably cause the network to compete with its partners — with whom they are forced to partner with because they cannot own all of the stations on which their programming airs on.

And to why the actors and writers haven’t went out on strike yet. In some cases, they actually have or have threatened to (See: Next American Top Model Writer’s Strike) — but the reason there hasn’t been a big industry stopping strike is first — many of their contracts run until NEXT year. They had already had a strike in 1998 and 1999, so their contracts are not quite at their end yet. Second, they don’t understand the contours of the new methods of distribution (and neither do the studios) so they’re trying to figure out what they want to ask for first and where they are willing to negotiate and where they are standing firm. They think their big mistake back with the “home video wars” was not understanding where the industry is going themselves and being rolled over by the studios. They are going to study this closer (and hold lots of union meetings among themselves, and then with the studios) before doing anything rash.

You write as though everything has been settled and blind obvious, when that is far from the case. There are far too many unknowns here. Please read this article from Reuters before you write comments like “no one has revolted”!


Wes McGee wrote on November 13th, 2006 at 2:15 AM PST:

Again, there was also a spat between NBC and the writer’s guild over compensation for web only episodes of the show “The Office”.


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Eugenia wrote on November 13th, 2006 at 2:30 AM PST:

First, please use HTML to represent links on my blog, otherwise it creates problems on mobile devices with long links.

Secondly, if the local broadcasters have a problem with an internet TV, then the networks can license their program to a new company and have their own advertising that it’s more generic to the world (e.g. coca cola, instead of a local shop). If local broadcasters can license programme, why can’t an independent internet company? If both kinds of broadcasters have equal terms of agreements, I don’t see the problem.


Wes McGee wrote on November 13th, 2006 at 2:59 AM PST:


Secondly, if the local broadcasters have a problem with an internet TV, then the networks can license their program to a new company and have their own advertising that it’s more generic to the world (e.g. coca cola, instead of a local shop). If local broadcasters can license programme, why can’t an independent internet company? If both kinds of broadcasters have equal terms of agreements, I don’t see the problem.

Because it isn’t even that simple. Affiliation agreements vary so widely that some stations pay the national networks for the right to broadcast their shows, while in other cases the national networks pay the affiliates for time. (Though generally the more popular networks can make the locals pay, while the smaller or less popular ones buy time on the affiliate.) But the main issue here is the differences in the businesses that the local affiliates run and that of the national networks. The national networks here are, nearly without exception, parts of conglomerates who own the major studios. Even with questions about how to pay the writers, actors etc., they can repurpose these shows and sell them again and again: to cable TV networks, to syndication, to viewers at home directly on DVD. The local stations, however are almost wholly dependent on advertising. (Local TV networks are owned mostly by people with large chains of networks [Sinclair, Clear Channel, Equity Broadcasting] or by newspaper companies [Gannett, Hearst, Tribune].) They don’t produce any shows except maybe the local news programming. That said, the only reason the local TV model hasn’t collapsed yet is that the national networks still make most of their money on the first run of a show on broadcast. That’s why they don’t stream episodes of TV shows until the day after it airs on broadcast. That’s why cable syndication is of episodes several days after they aired. That’s why syndication of reruns and sales of DVDs are of several years after the program aired.

Like I said in my first post, the most likely solution to this would be some sort of revenue sharing deal or further yet a deal where the networks redirect you to the local affiliate sites to watch the shows online on their websites. Nothing like that has been setup yet, but Fox is coming close with their MyFox portals. (I.E. Fox tells people to watch streaming eps of shows on the local affiliate’s Fox site, like WTTG’s website.)


memson wrote on November 13th, 2006 at 5:32 AM PST:

Hey, Eugenia, at least you can BUY the shows for some US broadcasters on iTMS. Here in the UK we have to resort to Bittorrent. I’d LOVE to buy the shows and give money back, but Apple tied non US citizens out of that part of the iTMS… and ABC did the same with their online pilot!!


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