13 , 2005
| PART ONE: HYPERDISTRIBUTION
October 18th, 2004 is the day TV died. That evening, British satellite
broadcaster SkyOne part of NEWS Corp's BSkyB satellite broadcasting
service ran the premiere episode of the re-visioned 70s camp
classic Battlestar Galactica. (That episode, "33,"
is one of the best hours of drama ever written for television.)
The production costs for Battlestar Galactica were underwritten
by two broadcast partners: SkyOne in the UK, and the SciFi Channel
in the USA. SciFi Channel programers had decided to wait until January
2005 (a slow month for American television) to begin airing the
series, so three months would elapse between the airing of "33"
in the UK, and its airing in the US. Or so it was thought.
The average viewer of the SciFi network is young and decidedly
geeky. They are masters of media; they can find ways to get things
they shouldn't have. Thus, a few hours after airing on SkyOne, "33"
was available for Internet download. No news there.
A new peer-to-peer file sharing technology, BitTorrent, was employed
to share the quarter-gigabyte audiovisual files of "33".
Unlike older forms of internet downloading, where too many requests
for the same data can clog up internet links and send servers crashing.
BitTorrent distributes files more and more efficiently, as more
people join the hunt for the data. Everyone looking for bits of
a file - say, an episode of Battlestar Galactica - shares
the pieces they've already located with anyone else who doesn't
already have that piece. Since the pieces are scattered randomly
among all the users who want the data, there's a lot of to-and-fro
between the users; rather than being a request for one copy of one
file on one server, it's as though many hundreds of hands are copying
and exchanging playing cards. You may start out holding only the
Ace of Hearts, but soon enough you'll have a full deck.
This is a form of peer-to-peer file sharing known as "swarming":
all of the peers in a swarm share the portions of the data they've
already received. And, as the Chinese proverb goes, "Many hands
make light work." BitTorrent transforms the creaky and unreliable
technology of audiovisual distribution, making it fast and hyper-efficient.
BitTorrent creates the conditions for something I've termed "hyperdistribution"
- a distribution channel which is even more efficient than broadcasting.
That has certainly been the case with Battlestar Galactica.
The British aficionados of the series provided torrents for each
episode within a few hours of each broadcast. Many fans in the US
picked them up and watched them; so did many people in Australia.
While you might assume the SciFi Channel saw a significant drop-off
in viewership as a result of this piracy, it appears to have had
the reverse effect: the series is so good that the few tens of thousands
of people who watched downloaded versions told their friends to
tune in on January 14th, and see for themselves. From its premiere,
Battlestar Galactica has been the most popular program ever
to air on the SciFi Channel, and its audiences have only grown throughout
the first series. Piracy made it possible for "word-of-mouth"
to spread about Battlestar Galactica.
Just two months ago, we saw something very similar happen, again
with a beloved series, the BBC's Doctor Who. After a hiatus
of almost two decades, the BBC cast Christopher Eccelston in the
role of the Doctor, and set the show to premiere on the 24th
of March. A few weeks before the air date, an "unfinished"
version of the first episode of the new series leaked onto the internet
through the BBC's production partner CBC. Hundreds of thousands
of Doctor Who fans downloaded the episode, wanting a preview of
this new version of the nearly-immortal Doctor. The BBC were publicly
outraged, but there's a strong sense that this act of piracy, while
not officially sanctioned, was unofficially encouraged by BBC. It
certainly created a groundswell of interest in the series, allowing
people to "try before they buy," and probably increased
program viewership. (The episode drew 10.81 million viewers to BBC1,
which is among the highest ratings Doctor Who has ever seen.)
Audiences are technically savvy these days; they can and will find
a way to get any television programming they desire. They don't
want to pay for it, they don't want it artificially crippled with
any digital rights management technologies - they just want to watch
it. Now. This is the way that half a century of television and a
decade of the Web has conditioned them to behave. We can't
really complain that audiences are simply doing as they've been
told. It is pointless to try to get them to change their behavior,
because, in essence, you're fighting against the nature of television
programming itself, the behavioral narrative which grew out of our
relationship to the technology. We all understand that this piracy
is technically illegal, technically a violation of copyright; but
we're in a hell of a bind if we're telling the audience to "sit
down, shut up and do as you're told" when it comes to television
viewing. The audience won't do as they're told: they'll do as they've
been taught, and that is another story entirely.
Still, piracy presents us with an economic problem: how do producers
get paid for the programs they create when audiences disintermediate
the distribution channels through which producers get paid for their
programming? The economics of television production, as practiced
for the last fifty years, are very straightforward: producer (or
perhaps the producer's distributor) sells the program to a broadcaster.
Broadcaster sells commercials to advertisers. Everyone gets what
they want: the producer gets enough money to cover his costs, the
broadcaster gets money to cover his costs, the advertiser gets some
attention from the audience, and the audience gets the program.
Widespread piracy of television programming has short-circuited
this process, connecting the producer directly to the audience.
As yet there are no viable economic models connecting the television
producer directly to the audience. Industry pundits talk about audiovisual
downloads through some system like Apple's iTunes Music Store, and
perhaps we'll see something like this in the near future, but this
works against the simple fact that people do not expect to pay
for television programs. People will pay for movies, when
they choose to pay for movies, but they won't pay for television
programming. Not if they can get it for free. The audience is not
at all involved in the economic value chain of television production;
that's been the rule for a half-century. It's reasonable to presume
that any attempt to change the economic behavior of the audience
is doomed to failure.
Cable and satellite broadcasting presents something of an argument
against this assertion insofar as people do pay for these services.
But in these cases the audience is really purchasing choice.
(Los Angeles has at least 20 broadcasters, and, despite this, has
a thriving cable and satellite broadcast market, because people
want even more choice, and are willing to pay for it.) Hyperdistribution
has extended this choice to anyone with an broadband connection
extended it well beyond any possible offering by any cable
or satellite broadcaster. Can these industries possibly compete
against the nearly infinite range of content offered on a broadband
Now we have a paradox: the invention of an incredibly powerful
mechanism for the global distribution of television programming
brings with it a fundamental challenge to the business model which
pays for the creation of the programs themselves. This is not at
all BitTorrent's fault: the technology could have come along a decade
ago, and if it had, we'd have stumbled across this paradox in the
1990s. This is a failure of the value chain to adapt to a changing
technological landscape a technological desynchronization
between producer and audience. Once again, there's no need to find
fault: things have changed so much, and so quickly, I doubt that
anyone could have kept up. But the future is now here, and everyone
in the creative value chain from producer to audience must adapt
This presentation outlines one economic model actually more
like a family of models which connects television producers
to their audiences through an hyperdistribution strategy, one which
doesn't require any change in the audience's economic behavior.
This, I believe, is the surest path to success for any new economic
model; without audience acceptance, any model will inevitably fail,
and while this model is not guaranteed to be successful, it seems
to face fewer roadblocks to acceptance than other models which have
Television broadcasters owe their existence to the absence of substantially
effective competition. When you're dealing with real-world materials
that are in naturally short supply - whether diamonds, oil, or broadcasting
spectrum a cartel can maintain and enforce its oligopoly.
But when you're working with media, which exist today as digital
ephemera, bits that can be copied and reproduced endlessly at nearly
zero cost, broadcast oligopolies are susceptible to a form of "digital
arbitrage," which can hollow-out their empires in an afternoon.
Hyperdistribution techniques are more efficient than broadcast networks
for television program distribution.
Now, before you presume that this is all so much future talk, that
maybe, someday, people will be downloading television programs
from the Internet, know this: that someday has already come
and gone. Per capita, Australians are the most profligate downloaders
of television programming in the entire world, followed closely
by the British. While the Americans lag behind, they're still on
the chart, in third place. The sea change has already taken place
- undoubtedly sped along by the monopoly position of the commercial
broadcasters, who, in many cases, act as barriers rather than conduits
for television programs. If a commercial broadcaster doesn't show
a program, or delays it for years, that's no longer of concern to
television audiences: they'll just download it from the Internet.
This trend is only going to accelerate with the uptake of broadband
throughout the world, progressively hollowing-out the commercial
broadcasters until they have returned to their roots: television
as a live medium. The only types of programming unsuitable for hyperdistribution
are those which are broadcast live: news, event and interactive
programming, and sport. Since these are all widely popular, it's
not as though the commercial broadcasters will collapse. But their
business models will change, because their cash cows are fleeing
The pervasive culture of TV downloading leaves the producers of
pre-produced television programs high and dry, receiving nothing
of value for their work. But is this really true? The absolute,
basic motivation of a TV producer is not money though money
is needed for production but to gain and hold an audience's
attention. TV producers want their programming to be watched as
widely as possible by everyone. That's what they care about,
and that's all they care about, because, with viewers, everything
else takes care of itself: audiences equal money.
This assertion seems so basic, so fundamentally essential to the
economics of television, that it's very hard to understand why anyone
(other than a broadcaster being cut out of the value chain) would
get upset about piracy of television programming. The model as practiced
at present can't effectively leverage the economic benefits of hyperdistribution,
but that model was created before hyperdistribution was technically
possible. The age of hyperdistribution demands the development of
new economic models which can harness piracy, for profit. So, let's
move directly to a discussion of one such model.
Consider Battlestar Galactica. A few weeks before the series
premiered on television, I sat down to watch the 13 episodes of
the first season, all of which I'd found on BitTorrent. Somewhere
around the second or third episode I became briefly aware of the
"bug," the smallish, semi-transparent station ID which
has become the constant on-screen companion to all television broadcasts.
I was looking at the bug for SkyOne, the British satellite broadcaster,
which nestled comfortably in the upper left-hand corner of the screen.
I noted the bug, then proceeded to ignore it. But it never went
away. In episode after episode, the bug remained, a tattoo commemorating
the trip from broadcaster to audience.
Somewhere around episode seven, it hit me like a ton of bricks:
I was looking at the most valuable and most underutilized piece
of real estate in the world. The bug carried the station ID
which is fine if I'm in the UK. But in Australia SkyOne has no meaning
at all. So that message, which should be full of meaning
full of "payload" has been utterly misspent. It's
as if they took the finest piece of land in Sydney Harbour, say
where the Opera House resides, and decided to use it as depot for
broken trains. That screen real estate has real value, because it
commands the audience's attention, constantly if subconsciously.
What if, instead of carrying the broadcaster's station ID, the
bug contained an advertiser's payload? I decided I wanted to see
what that might look like, so I took an episode of Desperate
Housewives and ran a little test, using the logo of one of Australia's
best known retailers, Myer. I placed the advertiser's bug in the
lower left-hand corner. This is probably sufficient for a well-known
retailer like Myer (or Macy's or Harrod's, etc.): it's simply enough
to remind the public that they exist - and that there's undoubtedly
a sale on.
While I thought I was being truly innovative in my thinking, I
was wholly wrong. On a recent Friday evening I sat and watched a
rugby match: to my astonishment, I found that a commercial broadcasters
had already adopted this technique. When the game went into an instant
replay, the icon of an Australian liquor distiller Bundaberg Rum
did a little dance in the upper left-hand corner of the screen.
This means that the technique is already in use, and advertisers
understand its value. That's a very important point: advertisers
are ready for this.
The earliest models of both commercial radio and television developed
around the idea of program sponsorship: one sponsor per program.
Over the 1950s (in the case of television) this model evolved toward
the 30-second advertisement, which interrupted the broadcast. For
the last half-century that has proven to be an enduringly successful
economic model, but that model is now under threat from Personal
Video Recorders (PVRs), which allow a viewer to fast-forward through
all advertisements, often taking them in 30-second leaps, so the
audience never sees so much as a single image from an ad. PVRs,
playing into the television-taught behaviors of immediacy and convenience,
have proven immensely popular, and are not going away; instead,
they will become an integral and expected feature of the television
viewing experience. This means 30-second ads are not a part of television's
future. They're too easy to edit out of the viewing experience.
The idea of an advertising payload attached unobtrusively to the
television program has a certain appeal; it can be ignored, but
it's always present. The audience can't edit it out of the program
without destroying the content of the program. Audiences will learn
accept them so long as the advertisements aren't too busy,
distracting, or otherwise obnoxious. (Consequently, there will be
a lot of work going on in the next decade to determine just how
obnoxious such an ad can be before the audience objects to it.)
As the advertisement-as-interruption disappears, we will see a
series of advertisements perhaps running five minutes apiece
embedded into the programmme itself. This is easy to achieve
technically, and will be palatable to most major advertisers. Since
this evolution seems inevitable, another question comes immediately
to the fore: what's the role of the broadcaster in this new economic
value chain? Today the broadcaster aggregates audiences, aggregates
advertisers, puts commercials into the program breaks, and makes
a lot of money doing this. But and here is the central point
I'm making today wouldn't it be economically more efficient
for the advertiser to work directly with the program's producer
to distribute television programming directly to the audience,
Let me run some numbers for you, based on another set of back-of-the-envelope
calculations: If we presume that the advertiser is going to pay
at least as much as the broadcaster for hyperdistribution rights
to a program, there's a large fixed cost for the purchase of those
rights. Further, there's another fixed cost to maintain the internet
servers which "seed" the program's hyperdistribution -
the internet equivalent of broadcast transmitter operation costs.
Add in a small amount for the post-production costs incurred to
affix the advertiser's payload to the program, and we're done. Those
are the entirety of the costs.
The advertiser is looking to lower costs in advertising; if those
advertisers are paying between $250,000 and $500,000 for thirty
seconds of advertising (in the United States), just a handful of
advertisements would cover hyperdistribution costs. It's a numbers
game: if enough viewers watch a hyperdistributed television program,
it is cheaper for advertisers to work with producers, and handle
the distribution themselves. Furthermore, if the program is widely
popular, it is far, far cheaper to do so. In other words, the
higher your ratings, the cheaper the advertising. That's precisely
the reverse of broadcast television, and one big reason that advertisers
will find this model so appealing.
Although no formal surveys have been conducted, it's reasonable
to assert that at least four percent of Australians, two percent
of Britons, and one percent of Americans are already using broadband
hyperdistribution to get some percentage of their TV programs. Based
on my own research, I have found television downloading to be widespread
among men 18 to 25 years old, precisely the demographic most coveted
by advertisers. In other words, the prime audience is already there,
already waiting and already willing to receive. All that remains
is to put the components of this new value chain into operation.
is the co-creator of the
Virtual Reality Modeling Language (VRML) - the first
3D interface to the internet - and the founder of the Interactive
Media Program at USC's School of Cinema-Television. In 2000, Ballantine
Books published Pesce's The
Playful World: How Technology is Transforming our Imagination,
which explored the world of interactivity through a detailed examination
of the Furby, LEGO’s Mindstorms and the Playstation 2. In late
2003, Pesce was invited to the Australian Film Television and
Radio School, with a mandate to redesign the curriculum to incorporate
the new opportunities offered by interactive media.
in June, Mindjack will be serializing Mark Pesce's new book, hyperpeople.
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