The Grim Future for our Favorite Pastime

by Evan C

Television. For most, it seems like the most basic of technologies, something people have been living with their entire lives. However, discussing the future of such an important and (dare I say) essential technology is no easy task, for you and I both know that change is not something people are always open to. My purpose for writing this is to not only inform people of the revolution at our doorstep, but to also encourage others to seek alternative viewing methods and explore the existing technology that is already out there.

Now, the things I am about to explain may seem obvious at some points and entirely unrealistic at others, but you must remember to think outside the box and understand that the future is not always simple to explain. For example, think about trying to explain e-mail (or e-mail on your iPhone) to somebody from 1988. To them it would seem impossible, but little did they know that only a decade later, AOL would have over 30 million users and “You’ve Got Mail” was not only a catchphrase, but also the title of a Hollywood movie.

To bring me back to my point, my ideas may seem like theory, but they are far more than that. I have spent years studying the industry, analyzing viewing habits in relation to their medium in hopes of gathering a greater understanding of what lies ahead. I’ve seen the world of palm pilots, turn into a world of blackberrys, and then turn into a world of iphones. The technology ecosystem is brutal, and technological cannibalism occurs in months now, not years.

Television is no different. In the late 90’s tube televisions were just beginning to be phased out after nearly four decades ofdominance. In the following 10 years, we experienced three dramatic shifts in television hardware. Tube TVs became flat screens, which became HD flat screens, which have now become 3D TVs. These changes are happening so rapidly, nobody can really keep up. Large companies are struggling to adapt to these rapid shifts in the industry, which is why small start-ups have been able to become game changers in the last few years. Their smaller operations make adaptation easier to the fast paced changes of these industries.

But while changes in technology have drastically shifted the hardware side of the industry, has that really changed the overall experience of these mediums? I mean sure, the operational differences between a flip phone and iPhone are drastic, but in the end, you’re still making a phone call right?

WRONG. While it may seem like these experiences are the same, they are actually entirely different. While the hardware changes may define the physical transitions in this movement, it’s actually the advancements in software that have truly altered the way people approach and engage with these mediums.

Interaction between users and mediums used to be a passive experience. You would turn on the TV and watch. You would sit down and read the newspaper. Today, technology has changed the way individuals interact with these mediums. We now expect interaction rather than passivity. Media no longer is sent from channel to user, but instead it’s two-way street where information is sent in both directions. People want to engage themselves in this technology, because it offers them more choice and control.

Where this urge for engagement is most prevalent is in web-based media. The Internet has created a portal of endless media that is right at our fingertips, and content creators are flocking to to the web like gold miners to the Rockies. There isn’t a content maker out there that doesn’t have a web presence, and companies are becoming smarter when it comes to opening their content to the Internet.

The big networks have already taken to the web as a way to extend their programming to further audiences. NBC, ABC, and Fox all have a major stake in Hulu, which allows them to rake in the ad revenue on programming they own syndication rights to. For them it’s a win-win, because site maintenance/hosting costs are low, and they still can collect ad revenue without lifting a finger. HBO and Showtime offer their programming online as well. Netflix distributes Starz content, Yahoo has a joint venture with Discovery, and most other networks stream their original content on their websites.

Viewers win also, because we get that “choice and control” that we covenet so much. Watching TV online on-demand brings all of the flexibility of web to the most basic of mediums. We watch what we want, when we want, where we want. No restrictions, no time schedules, we can pause and restart as we please. Since everybody already has a computer (and perhaps now a smartphone), access is as easy as ever. It’s the perfect relationship, because we still get our content and networks still get their money.

But wait a second…something is missing. What about the content producers? The actors? The people behind the scenes creating all this content? Where’s their cut? Do they really just sit back and watch the networks extend their revenue streams while their content flies around the Internet?

Here’s where things get really interesting, because we have a reached a crossroad where shit really is starting to happen. But to understand how we got here, we have to take a quick history lesson to understand why things are like they are today…

Back in the day (mid 20th century) when television was a new technology, cable networks didn’t exist, and all broadcasting was handled through the airwaves. Well if you know anything about broadcast technology, you know that these airwaves represent frequencies in which information can travel from one point to another. These frequencies run on a spectrum that is quite finite, and in order to make TV technology as functional as possible, this spectrum needed to be regulated. Without regulation, it would be nearly impossible to have functional channels because every frequency would be jammed with too much information (Think static radio).

So the FCC began issuing spectrum licenses to those they thought would control the airwaves for the “greater good” of the public. These “clear channels” would end up being ABC, NBC, CBS, and the other major local networks that you tend to find in the beginningof your TV guide.

While these networks provided important “greater good” services such as newscasts, sporting coverage, and other entertainment programming, it’s important to note that they were given a natural monopoly by our government. With exclusive access to our nations TV spectrum, they were free to operate as they pleased with little to no competition.

Now let’s say you’re a creative person, and want to develop something for TV. Well, back then, there were only a few ways to do that. You could try to create the program yourself and sell it to the network, or work with the network and try to create the program as a joint-venture. Obviously the latter option was far more common, because nobody back then really had the financial capability to produce a show on their own.

What could you do? When networks control the airwaves, it’s a one-lane road to broadcast.

In the 1980’s when cable technology became popular, the situation for content producers was very similar. The only difference was instead of networks gaining broadcast licenses from the government, they purchased them from cable providers. In order to have your content on the air, you had to go through some sort of monopolized cable provider; and this was not cheap.

Now in case you’re unaware of how television production works, most television productions are contracted out to other production companies that actually do most of the production work. So in essence, production companies develop and create shows for networks to purchase for air. This may be described as a joint venture, but in reality the situation is more like this…

1) Production Company develops show idea

2) Network green-lights show idea, provides financing for pilot or short season

3) Production Company produces show with network money (scripting, shooting, research, deliverables, pretty much all the hard work that goes into making a show)

4) Production company delivers network completed show

5) Network pays production company for completed work

6) Network airs show on monopolized airwaves, makes back lots of money in ad revenue, sponsorships, syndication rights, etc

7) Production company gets renewed contract should ratings be high.

After reading this, does it really seem like TV production is an equal joint-venture? Of course not! But what choices to production companies really have? Without the networks, there is no show. There are thousands of production companies out there trying to create, but only a handful of networks that have the ability to broadcast.

What’s important to take away from all of this, is that these networks only exist due to their monopolies over broadcast rights. They are the connection between the camera and the cable box, and without that connection, the there is no TV.

But what if you didn’t need a cable or network channel to broadcast your content? What if there was an entirely new medium that allowed viewers to watch premium content without having to subscribe or tune-in to TV networks? Something like say…THE INTERNET!!!

Yes! We have made it back to our crossroad, and the fun has finally arrived. Like Moses, the Internet is here to free content producers from the slave whips of network executives. The freedom and accessibility of the Internet has created a renaissance in creative video production, as anyone with a camera (or camera-phone) can create and upload original content for the world to see.

There’s one other thing to note in regards to this renaissance in original content, and that is the rapidly declining costs of production. The transition into digital filming has drastically dropped the costs of filming, allowing so many more people to enter the market. With the drop in camera costs, the rise in new editing platforms, and the increased performance of personal computers, people can now produce high quality content at just basic costs.

So now we have more content, but where does it go? Sites such as Youtube, DailyMotion, Facebook, and Vimeo are providing easy access to some of the best online content available, but they are cluttered. There’s no way to distinguish John’s home-video from Jane’s HD film trailer. There’s no way to sift through the junk video blogs and lip syncing teenagers to find the good quality news stories and music videos.

These hosting sites provide a launching starting point for the webvideo movement, but they are clearly flawed in two major aspects. One being the lack of quality control, and two being the revenue sharing systems. With no upload restrictions, YouTube has become the craigslist of video sharing, with anyone and everyone posting their content without restriction. At first this provided an amazing service, because it put all of the best video content in one place. But as it’s popularity grew, so did its clout and clutter, drawing all sorts of junk videos that have just tarnished the service.

Think about it like this, if you were watchmaker Rolex, would you want to be sold at the same place someone could buy a Timex? Hell no! You’re product doesn’t even deserve to be in the same room, let alone same store. Video content is the same way. Premium content providers don’t want to put themselves on the same level as Nancy the travel blogger. They pour their heart and soul into their work, and deserve a little more respect.

This is the flaw with major hosting sites such as YouTube and DailyMotion. They have no separation between armature and professional, and it will cost them in the future.

The other flaw in their service is revenue sharing. Some sites including YouTube do offer “partnerships” with proven content producers, which include ad revenue sharing, but I still believe this to be a far cry from what is deserved. Why should YouTube get a substantial cut of something they had no hand in producing. Just because they have a site that hosts video? Hell, I can start my own website and host my content just as easily, while still taking in 100% of the profits.

This is the issue that I think has stalled the online revolution so far. Producers still haven’t figured out how to financially capitalize on their online content. The big providers are either locked to major networks, or cluttered with junk and bad revenue-sharing systems.

Now is the part where you have to use your imagination, because the future is about to come.

Premium content producers need to start distributing their own content online. The top of the market has already made the jump, with Pay-per-view (PPV) services such as HBO and Showtime offering all of their content collections online. They realized early that it made no sense for them to make deals with cable networks when they could directly sell their content to users. Of course, they don’t work with a ad revenue business model, but that’s beside the point. They noticed early that the Internet grants them the freedom to become their own network.

They can directly sell their programming to customers, bypassing the hoops and deals from cable providers. Today hundreds ofthousands of PPV subscribers access their content via the Internet; do you know why? Because it provides them more choice, and more control.

But what about majority of TV, which is non-PPV? Can the Internet free them also? Yes, of course! Over the next three years, over 90% of televisions will either be directly connected, or connected through a box, to the Internet. Companies like Apple, Microsoft, and Google are already creating software platforms that will allow content producers to broadcast directly onto televisions through the web.

The Xbox, with over 40 million members, already provides HBO, Netflix, and an array of other premium content directly to televisions via the Internet. Sony’s Playstation does the same! AppleTV, Roku, and Boxee all offer boxtop solutions that directly link TV sets to the web. And major TV companies such as Samsung, LG, and Sony have partnered with Google to directly integrate GoogleTV software into their sets.

Apple is even slated to announce a new Apple Television set (iTV) that will fully integrate Apple’s mobile application store withtelevision sets. Think of the TV being one giant iPad, with the functionality to watch live TV, play games, and stream movies. It only took Apple two years to destroy the tablet market, think about what they can do in the TV world.

The revolution is here folks, and it’s just a matter of time before content producers jump on the bandwagon. Why would big players like Dick Wolf and Jerry Bruckhiemer jump through hoops for major networks when they can distribute their content directly to consumers. They have millions of dollars in the bank to finance their projects, and by selling their content directly to viewers online, they can reel in 100% of the advertising profits. Did you hear me? 100% ad revenue!!!

Simon Fuller, creator/producer of American Idol, has the ability to make $7.1 million dollars an episode in ad revenue if he were to directly sell is show to consumers. American Idol broadcasts roughly 40 episodes a season, which would net him nearly $284 million a season. Now assuming that production costs are maybe $5 million a year, he would stand to be making almost $280 million dollars a season.

But in reality, Simon Fuller sold his entertainment company, Entertainment 19, for a total of $200 million dollars. His company not only owned American Idol, but all of the international licensing rights for the shows concept, which generates millions around the world. And he sold it for less than the ad revenue he would make in one season if he directly distributed online.

Now these numbers are all estimates, but you get the picture. There’s a lot of money left on the table, and that’s because he has to deal with the network. Take that away, and he’s in complete control.

Steve Jobs realized this years ago, when he stopped distributing core Apple products at other retailers. He didn’t see why he was spending so much time and money developing and producing amazing products while companies like Best Buy and Target made money on the sale. It’s why he developed the Apple Store concept, which has become a staple in the company image. If you create a great product, you should sell it, don’t let others take advantage of you.

TV producers need to think the same way. You make the content, you should distribute it. No more middle men, no more jumping through hoops. This is the time to take control, while the Internet is young and untamed. You can take back what is yours, and eliminate the monopolies that have controlled the industry for decades.

The time is now, so make your move.