TV News in a Postmodern World

Local Television's Perfect Storm

by Terry Heaton
There are an abundance of dates and events that observers use to mark the beginning of the digital age, but for the media industry, it began in the New Jersey labs of Princeton's Institute for Advanced Study in 1954, when a small group of engineers and other scientists created the first computer graphic image. Digital images are comprised of pixels, individual points of different hues that, when combined and viewed from a distance, make up the overall image.

As Andrew Zolli wrote for Core77 in 2004, these first pixels were primitive, but they marked the beginning of a "sea change in how we represent and see the world."

Over the next five decades, we learned to shape our pixels to better reflect the 'real' world, even as we re-fabricated the world to more closely approximate those phosphorescent dots. The pixel became both a mirror and a lens, reflecting and shaping our reality. The result is a contemporary world more closely matched to the kinds of certainties pixels alone can render.

This idea of dots on a page forms a metaphorical message for us, as we try to make sense of what's happening in today's local media world. The image is one of the perfect storm, and like a category-5 hurricane relentlessly pounding away at the shore, it's dramatically altering the picture that's currently in place.

That's because the lowering of barriers to entry and subsequent explosive growth in the personal media space essentially reduces all media companies — and regardless of their net worth — to equal pixels that make up the overall picture of media. And here's the real problem: the resolution keeps getting better as the number of pixels increases, and how do you stand out when you're nothing more than a pixel on a page?

To continue the metaphor, in order to stand out, you must represent a group of pixels, those that make up, for example, the nose of a picture of Uncle Harry. Viewers of the picture won't see an individual pixel, but they can certainly make out the grouping that comprises the nose. This need to display multiple media "signals" in one place and at one time is the great truth of media tomorrow but one that few traditional media companies can embrace, because they see themselves as the picture itself, not merely a pixel.

But the new "big four," Google, Yahoo!, MSN and AOL (remember when that used to be ABC, NBC, CBS and Fox?) see the value of being the nose through aggregating the pixels formerly known as media companies. And what choice do we have but to follow suit?

On the horizon, the clouds thicken and lightning flashes as the perfect storm builds.

Technorati, the blog search engine, now tracks over eight million weblogs and close to one billion links, according to founder Dave Silfry. A fast-growing segment of that is video blogs (vlogs), and, well, eight million is a lot of pixels. In six months, that's likely to be 16 million blogs, so the resolution is getting sharper.

Convergence was a popular word among internet prophets a decade ago, but the dream never materialized. That's about to change in a big way as the explosive growth of web video migrates to platforms that bring it to the living room. Big and small screen manufacturers will begin coming out with computers already built into flat screen and projector TVs early next year, and the connector in the back won't care whether its content source comes from cable TV or broadband. Real convergence is months away, not years.

According to industry insiders, AOL and Intel are about to announced a deal involving Intel's Viiv-powered Media Center PCs that will enable users to send broadband videos to their flat screen TVs. It's viewed as the next step in the big-money world of movie downloads, and it means more pixels on our page.

Rupert Murdoch is talking about unloading his share of the satellite company DirectTV. Why? Because it's not easy to interact with a satellite, and the shift to broadband means the value proposition of satellite TV begins to diminish. All those channels become pixels on the page, and the storm grows.

The New York Times Company is dumping its nine television stations. "The proposed sale," said Times executives, "would enable us to place an even greater emphasis on developing and integrating our print and rapidly growing digital resources." A broadcast signal is a very expensive pixel on the page.

It looks like Clear Channel may be selling some of its 1,200 radio stations. It's hard to compete with other pixels that are grouped together in very listener-friendly clusters.

AT&T has launched its broadband network, essentially basic cable over the internet. It starts with twenty channels, but that'll grow. More pixels.

Both the Hollywood Reporter and the New York Times have assigned full-time columnists to covering "online TV." What is online TV, if not more pixels on the page?

A new company, Viral Video Chart, has come out with a way to be a nose. This smart group of folks has created an algorithm to weigh the popularity of online videos, regardless of the platform. If you go take a look, you'll notice that the bulk of the popular videos come from YouTube, MySpace and Google Video, more pixels on the page. Viral Video Chart doesn't care to be a media creator, because you're better off clustering pixels than being one yourself.

This way of determining web "ratings" is a serious conundrum for the advertising business, because "hits" are individual and change every day. You can't do a network upfront when you don't have a clue about what's even going to be number one tomorrow. ABC sees the anti-Nielsen handwriting-on-the-wall and is selling spots in their broadband offerings at a flat rate instead of basing them on the dead cost-per-thousand (CPM) model. Without a way of measuring individual pixels, how do you know which ones to buy?

CBS has decided it needs to get into the "free" video-on-demand business, so it's dropping its 99-cent pay-per-view model with Comcast. Meanwhile, each of the networks have announced deals that include free broadband streaming of prime time programs this season. Shows will be advertiser-supported, but the distribution model is completely different than the tried-and-true network affiliate model. The storm is building in intensity and destructive force.

ABC is allowing its affiliates to stream the shows from their own websites and include their own commercials, and at first glance that sounds great. But the internet isn't television with its value on scarcity, and a URL is just a URL. Ultimately, the program streams are just pixels on the page, and where will consumers go to access those pixels, a walled garden like abc.com or a more flexible and versatile nose like Google?

NBC is responding with what appears to be a bold business-to-business streaming venture called >nbbc (for National Broadband Company, although it looks like "on bbc" to anybody outside the U.S.) that it believes puts it back into the business of broadcasting. The idea is that any content creator can use the >nbbc player to distribute its content in an unbundled form. This is good, right? Well, for a distribution play, there are a lot of strings attached, leading observers to scold the network over attempts to control content. New media guru Jeff Jarvis harshly calls it "cluelessness and outmoded controlfreakishness" from the "Numbnuts Broadcasting Company." Ouch! He deconstructs what he calls "clueless quotes from Randy Falco of NBC Universal television group:"

* "We want to create new tools to allow NBC Universal to do what it has always done: to deliver quality entertainment experiences to as broad an audience as possible," Mr. Falco said. "In short, we are going back into the broadcast business on the Internet."

No, you are not in the broadcast business. The internet is not about broadcast. It is not about you telling me what to watch. It is not about you making the selections for me. I have that power now. You just donít know it.

* "If we really want to compete with big aggregators like Yahoo and Google, we need our video in as many places as possible," Mr. Falco said.

No, if you wanted it as many places as possible you would follow the YouTube model and let us distribute it for you. But you donít trust us. Odd not to trust the people who make you money.

* And my favorite: "When ĎSaturday Night Liveí had a great clip of Lazy Sunday, YouTube made a lot of money off it,..In the future, when we have a Lazy Sunday clip, NBBC will make a lot of money on it."

No, fool, you made a lot of money from YouTube because your long-dead stinker of a show, SNL, got new audience because your public — the ones you donít trust — put the video up and got it seen...until you foolishly made them cease and desist.

Jarvis isn't alone in his criticism of the NBC plan, and this feedback from people in-the-new-media-know ought to give the network pause. Disruption consultant Michael Urlacher, for example, says most people are betting that the "big TV guys" know what they're doing, but he suggests an alternative:

...ignore what the experts or anybody else says and watch what the consumers are doing. More to the point, watch what they are paying for:

  • 60 million Ipods sold as of July 1, 2006
  • 1.5 billion songs sold as of July 1, 2006
  • Average selling price has not fallen substantially

This is not to say that Apple has a lock on video, although Apple's pending iTV device is an incremental concept sale to iPod users. More importantly, some of the attributes of the iPod/ iTunes products and business model are important to consider as key ingredients to its success as a disruptor:

  • Simple: Single-function device; Not a PC/phone/swiss-army knife etc
  • Easy to use
  • Closed architecture: Apple integrates standard hardware technology with proprietary software
  • Apple started with marginal market (Mac users only)
  • Apple started with limited selection of music inventory
  • Users pay for content
  • Apple had nothing to lose and the most to gain by cannibalizing the music business

The disruption of an industry has very little to do with who controls the technology or who is the largest incumbent player. Being in the video business already, as is the case for CNN, NBC, ABC and arguably Amazon, may be the largest handicap to creating the next generation video system because these companies all have something to lose.

The challenge, of course, is to maintain share in the old world while building share in the disruption, but that is very hard to do, especially in a world where control is shifted to consumers. But to resist or, worse yet, to try and bring new media concepts into the old media model (which is what NBC is actually doing) guarantees pixel-only status in the perfect storm.

2007 will likely be an awful year for local broadcasters. National business is going away at an accelerating pace. Network compensation is all but gone. Stock prices continue to fall as investors' nerves give way to full-blown panic attacks. Staffs are being cut, and there will be no election or Olympics to offset declining audience shares and sales. Some companies may not make it.

Jerry Gumbert, president of local television consulting company Audience Research & Development in Dallas, thinks broadcasters will hang on through 2007, because they'll see some relief in 2008 with the summer Olympics in Beijing and a Presidential election year, but it's a crap shoot after that. "2009 may well be the drop dead year for these companies," he says, "unless and until they can fully embrace the Media 2.0 disruption."

Also in 2009 will come the date when local stations lose their analog broadcast channels and have to switch to digital channels, adding further expenses while running the risk of losing more viewers to the confusion.

But the greatest problem is the perfect storm in the form of the seeming irrelevance of being a single pixel on a page. By 2009, this storm may already have knocked down towers and crushed printing presses everywhere. The confluence of forces coming together is certainly destructive for the status quo, but after each storm comes new life, and that's where we need to be looking.

(DISCLOSURE: I am a consultant with AR&D)