The NAB is underway in Las Vegas in the wake of an all-time revenue record for the broadcast industry last year. The networks are about to launch the annual sale of their inventory known as the upfronts, and all is well. Well, not exactly. There’s declining viewership, the not-so-little disruption known as Aereo, the increasingly viable civil defense, weather warning and Amber alert efforts of the Telcos, the love affair that all media companies have with online banner ads, and mostly, the way broadcasters make all of their online strategic decisions as if the Web wasn’t a horizontally-connected network.
If you strip away the HTML that displays what, for example, a local television station offers online — also known as “the content” — what’s left is the network and how that web document fits within the whole. This document must follow certain realities about life in the network that contradict the view associated with simply watching or reading the content, especially in the area of mass media. In certain instances, we have to go many years back and visit the minds of those who created the network, and here’s a noteworthy truth: they had nothing to do with media.
These were engineers of the highest level, including John Gilmore, who, according to Wikipedia, is one of the founders (the fifth employee) of Sun Microsystems, one of the founders of the Electronic Frontier Foundation, the Cypherpunks mailing list, and Cygnus Solutions. He created the alt.* hierarchy in Usenet and is a major contributor to the GNU project. I’ll spare you all the link following by saying that John isn’t likely the kind of guy who’d be running ANY of the companies on display at the NAB this week.
In addition to all his “foundings,” Mr. Gilmore is also the author of the often-cited axiom, Gilmore’s Law:
“The net interprets censorship as damage and routes around it.”
Why is this so important for broadcasters especially? Because the parameter that the FCC uses to issue licenses to broadcast companies is geography, and online, geography represents a form of “damage.” Geography is an artificial inefficiency that even China is beginning to see doesn’t work in terms of guarding certain kinds of information from the eyeballs of its citizens. In other words, when Aereo wins its legal battle with broadcasters (it will), the just-announced News Corps’ response to take its stations off-the-air will backfire, because anything that attempts to give station owners a piece of the pie through Internet streaming will eventually have to bend its knee to Gilmore’s Law.
News Corp. Chief Operating Officer Chase Carey told Fox News Entertainment:
“This is not an ideal path we look to pursue, but we can’t sit idly by and let an entity steal our signal,” Carey said at the annual gathering of broadcasters, called NAB Show, in Las Vegas. “If we can’t do a fair deal, we could take the whole network to a subscription model.”
News Corp plans to use GPS to determine how its stream will be divvied up via geography, but this is entirely to satisfy the revenue wants and needs of local affiliates. That may seem fair to the stations, but consumers will get doubly hosed — by cable companies, whose fees aren’t about to go down, and by Fox (and others later), via its own subscriber fees. Something will have to give, and consumers will demand one OR the other but not both. And Gilmore’s Law says that if it ends up that streaming is preferred, the owners of the content will ultimately win.
Whereas terrestrial broadcasting used to be the most efficient way to distribute video content by dividing the airwaves into geographically-defined markets, that is no longer absolute. What we have here is the railroads, who at one time owned shipping across-the-land, believing they deserve a fee for each jet that races across-the-sky, crossing over their land-based tracks in the process.
There are ways that local media companies can make money and even thrive downstream, but riding the coattails of their network big brothers is going to become a net liability sooner rather than later. The ones who will “win” the most will be those who own the programming that people watch, and this needs to be a part of everybody’s long-term strategic plan.
BONUS LINK: The Verge Nuclear option: would Fox really leave the free airwaves to undercut Aereo?