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May
21, 2005
| PART TWO: THE NEW LAWS OF TELEVISION
There are two principle components of the new value chain of television
hyperdistribution: the producer and the advertiser. An advertising
agency is likely acting as an intermediary between these two, connecting
producers to advertisers, working out the demographic appeal of
particular programs, and selling ad payload into those programs;
this is a role they already fulfill - although at present they work
with the broadcast networks rather than the producers. There is
no role for a broadcaster in this value chain; the audience has
abandoned the broadcaster in favor of a direct relationship with
the program provider. That said, the broadcasters are uniquely qualified
to transform themselves into highly specialized advertising agencies,
connecting advertisers to producers; this is something they already
excel at.
This is clearly a viable economic model: the producer gets paid
at least as much for their programming as they would have received
from a broadcaster, and probably more; the advertiser gets a cheaper
ad buy; and the audience continues to receive free television programs.
This is a win-win-win scenario, unless you're a broadcaster.
Although broadband uptake is ramping up rapidly throughout the
world, many areas have very limited broadband access, and many other
families can't afford the fifty dollars a month for a broadband
link suitable for television hyperdistribution.
Although broadband is still the exception in most households, at
least 70% of those households now have at least one DVD player.
DVD has rapidly supplanted VHS as the distribution medium of choice
for audiovisual content, and sales of DVDs have passed twenty billion
dollars a year. So, for the rest of world, which doesn't yet have
broadband, and who might never want to futz with all these new technologies
- could an advertiser just send them a DVD in the mail?
This may sound ridiculous on the face of it, but can we make the
math work? Can we get to cost-equivalence for DVD distribution of
television programs? Let's run the numbers again: if you really
compress a TV signal, you can fit about 3 hours of video programming
onto a standard dual-layer DVD. Because the ad breaks have been
removed from the programs, that 3 hours is actually the equivalent
of four hours of television programming - which is a fair helping
of prime-time television. If I wanted to send this directly to millions
of the households, it would cost no more than perhaps fifty cents
per DVD. It's going to cost an advertiser about the same as ad buys
in a television broadcast, but consider: this is no longer television
by appointment. That DVD can be watched anytime, by anyone, anywhere
there's a DVD player. These DVDs will have "handoff rates"
close to those of magazines. They'll have long shelf lives. This
model would probably be very successful.
If it seems ridiculous to consider sending a DVD to the majority
of households in the English-speaking world, I have to tell you
a story from my own experience in the United States. During the
1990s, AOL grew from a tiny company to a giant which would later
swallow TimeWarner. A few times a year I'd receive an AOL mailing:
in the mid-90s, these mailings would have a floppy disk in them,
preloaded with the AOL software. By the late 1990s, those mailings
would be CDs of AOL software. And these weren't targeted mailings
- these were mass mailings, reaching most of the hundred million
US households, at least twice a year. It got so bad that friends
of mine made objects d'art from AOL floppies - and plenty of folks
used their CDs as coasters.
Retailers mail circulars to their customers, or put them into newspapers;
why not put a week's television programs into the weekend edition
of the New York Times or the Sydney Morning Herald?
(The Herald distributes the Sydney Tropfest DVD every year
- this is no different.) These novel partnerships would bring the
distribution costs way down, and have the added side-effect of raising
newspaper readership. (Consider News Corporation, which owns newspapers
and a television network. There are opportunities for real "media
synergies" here.) There are any number of ways to make the
economics of television distribution by DVD work. I believe that
the first producer/advertisers to do so will open a door to a new
form of distribution - television by mail, and television by newspaper.
What I've described so far sounds promising. But let's face it,
there are going to be strong arguments against the widespread adoption
of the hyperdistribution models I've just described - it's just
that many of these arguments won't be based in economics. The first
of these arguments will undoubtedly be inertia: everyone is making
money, so no one will want to change. Producers will continue to
sell their programs to broadcasters, and broadcasters will continue
to sell ads to advertisers. It has ever been thus, it will ever
be thus. While this argument is appealing, it assumes that the present,
and worse, the future, looks anything like the past. It ignores
the fact that because of hyperdistribution, the audience is already
in control of distribution. The producer has lost control over
where, when and by whom productions are viewed. The producer may
fret and file lawsuits and lobby to change the laws regarding the
copying and distribution of television programs, but these have
little overall effect - though it will anger the audience. Consider
that, despite the famed Betamax decision of 1984, it is still just
as illegal to time-shift a broadcast television program in 2005
as it was in 1979. Yet no home viewer has ever been prosecuted for
it. Why? Because you don't sue your audience. (Just ask Metallica
how well that worked out.)
The producer has a better chance to reach an audience than ever
before, but has no control over how productions reach that audience.
If control over distribution could be maintained, if the oligarchy
of commercial television broadcasting could consolidate its hold
on program distribution, none of this would need to change. But
it has already begun to change; the horse has already fled the barn.
The audience is asserting their control over television programming;
this is actually a good thing, because the moments for television
viewing are expanding in direct proportion to the exercise of this
new power. Until very recently, television was an experience which
was confined to the lounge room, shackled to a big, heavy box. But
now we can watch full-length television programs on our mobile phones
(a new capability of the latest generation of mobiles), or on the
Sony PlayStation Portable (PSP), a high-resolution, widescreen,
portable game and media machine, two of the new "must have"
items for the younger set. Audiences are growing fond of the idea
of on-demand TV, available wherever they are, whenever they want
to watch it. Television viewing has become a multitasking activity;
you might watch a short program - something like the 11-minute "Adult
Swim" episodes pioneered on the Cartoon Network, or the 3-minute
"mobisodes" being rolled out by various wireless carriers.
You can dip in, watch something, then go on to something else. Television
viewing is no longer wholly consuming; but it is also becoming more
pervasive. Freed from the tyranny of the box, people will be watching
more TV, and more different kinds of TV, than ever before.
Now for the economic objections. Television producers only make
real money when their programs go into syndication - generally when
a series reaches 100 episodes. Broadcast networks in the US are
notoriously cheap - they'll cover some of the production costs for
a CSI, but the rest is the producer's gamble. Fortunately,
producers have begun to realize huge revenues selling DVDs of their
most popular television series. NEWS Corporation, for example, earned
unexpected record profits in Q4 2003, based on the sales of DVD
sets of Buffy the Vampire Slayer and The X-Files.
Hyperdistribution will undermine the market for syndication and
DVD distribution of television programming, so producers will be
understandably reluctant to hyperdistribute their works. On the
other hand, the direct relationship between the producer and the
advertiser should mean that more money goes into the producer's
pocket than ever before. With the disintermediation of the broadcast
networks, advertisers will pay less, but producers will get paid
more. Television production may not have the jackpot of syndication,
but it should become a more profitable business overall.
Furthermore, people have been taping their favorite series for
years, and that hasn't undercut DVD sales. People buy a DVD because
it's packaged in a neat box, with special features, commentary tracks,
and the kind of paraphernalia that a fan wants to invest themselves
in. Owning a DVD is about more than simply having a copy of the
program; it's a badge of membership in a community of fans. The
core audience for a DVD of a television series will buy it, even
when it is freely available through other means. And while DVD sales
will certainly slow in the age of hyperdistribution - and syndication
will likely disappear - that's lamentable, but unavoidable. Hyperdistribution
isn't going away. DVD may have been no more than a brief, happy
moment in the distribution of television, after TV went digital,
but before those bits found their way onto the Internet. No one
can reasonably expect those kinds of revenues will last forever.
Another, more important economic question arises: if broadcast
television is abandoned as the distribution outlet for television
programs, how will audiences know what to watch? It's believed that
without the endless promotion that accompanies any television broadcast,
the audience will simply evaporate. That's true insofar as the audience
won't know what television programs to watch if they aren't advertised.
But given that the audience is already being presented with a nearly
infinite number of choices, that's a problem which producers will
be facing whether or not they remain with the broadcasters. Even
if a producer resists going into hyperdistribution, there are already
many programs in hyperdistribution, and this number is rapidly increasing
as Google, Yahoo! and others enter this field. Avoiding the paradox
of hyperdistribution is not an option.
The only long-term solution to this problem lies in actively encouraging
fan communities - social networks which spread the word about the
show. That's certainly been a successful strategy for Battlestar
Galactica: the SciFi Channel has been providing episode "podcasts"
on their website - audio commentary by series creator and executive
producer Ron Moore. Fans can download these podcasts and play them
in conjunction with the program. (Interestingly, the podcasts are
recorded as if the commercials have been removed from the broadcast
- making them suitable as DVD commentary tracks, but also ideal
for the edited versions that viewers have been downloading.) Fans
want to be involved, they want to be enthusiastic. Fans want to
make converts, encouraging their own circles of friends to watch
the show. Podcasts are the perfect spoils for such folks.
Let me give you a personal example: my friends in Australia have
formed a small cult of hard-core fans of a new Cartoon Network (USA)
series, Robot Chicken. Robot Chicken isn't yet available
in Australia - and may never be. A few months ago I read about Robot
Chicken in a New York Times article, which I forwarded
around; another friend downloaded the first episode using BitTorrent.
That episode was funny enough to keep us hungry for more. So now,
nine episodes into the series, we're all up-to-date on Robot
Chicken, half a world away from its broadcast territory. I've
told my friends. They've told their friends. And on and on and on.
It doesn't require a broadcaster; it doesn't require advertising
dollars. All it takes is a solid program and hyperdistribution.
The audience takes care of the rest.
And so we come to the final objection, which is both economic and
sociological: it's too hard for the average viewer to download hyperdistributed
television programs. It is true that, as of this writing, the technologies
used to locate and retrieve hyperdistributed programs aren't really
designed with the average computer user in mind; they require some
setup, and their interfaces are less than friendly. But even these
crude interfaces have been enough to jump start Australia into first
place globally in television program downloading. The situation
is a lot like digital music, before the advent of iTunes; when Apple
married digital music to an impeccable user interface, they touched
off a revolution which gave them 70% market share in online music
purchases, and a monopoly position in digital music players. But
back in 2000, in the months before iTunes, people were making the
same objections about downloaded music they make today about hyperdistributed
television programs.
It's as simple as this: we're in an interregnum, that brief period
of time before some bright young hacker or some clever company solves
this problem definitively. When that happens, when the rest of us
can download television programs quickly and easily, it'll seem
like a bomb went off - broadband use will soar, people will desert
the broadcast networks, and the only producers to survive this transition
will be those who harnessed the strength a new value chain, where
piracy truly is good.
There's no doubt that the broadcast networks will do what they
can to slow the transition to this model, because they'll lose billions
of dollars. But here's another paradox: they more they try to slow
it down, the more they'll anger their audiences, and drive them
to hyperdistribution. For the broadcast networks it's a lose-lose
situation; all they can do is transition as quickly as possible
to a live-interactive broadcasting model, and work to transform
themselves into advertising agencies connecting producers and advertisers.
Their future looks nothing like their recent past.
So, how do we jump start this? Which producer and which advertiser
are willing to risk their livelihood on an unproven economic proposition?
It'll likely be a fledgling producer with a hot property and nothing
to lose, paired with an advertiser who thrives on being there first
- perhaps BMW, perhaps Nike, perhaps a brand we've never heard of.
Once the model proves successful, there'll be a groundswell, as
the economics behind television production realign to accommodate
hyperdistribution. And that time can't be more than months away.
Meanwhile, coming up from behind, beneath, and all around, the
two giants of the Internet, Google and Yahoo, are laying the groundwork
for hyperdistribution networks of their own. Already, you can upload
your own content to Google Video, and very soon they'll make that
video available to everyone else. Broadcasting is facing a threat
that's not economic - it's attention-based. Those giant networks
are providing a media experience which is personal and immediate,
something a broadcaster can never offer. They'll change the face
of television as well - and that's something which will be fully
explored in hyperpeople.
The new laws of television production and distribution emerge from
an understanding that the audience is in control of distribution,
and that this is not a situation to be feared, but to be embraced
wholeheartedly.
Rule
One: Create Globally, Distribute Globally
An independent television producer can now reach the same global
audience as any of the big studios. Distribution is no longer the
barrier it once was; you don't have to get yourselves "over
the hump" and into global distribution. All programs are now,
at least potentially, globally hyperdistributed. This means that
your content probably shouldn't be too localized. Productions need
to be written with an eye toward the more than four hundred million
English speakers in the US, UK, Canada, New Zealand, and Australia.
If you can produce regional content that does well internationally,
good on you. But don't plan on it. Work with universal themes, and
universal stories - they'll give your productions legs to travel
the world.
Because you have no choice but to release your productions to the
world, you will need to develop a strategy to work with advertisers
from across all the territories across the English-speaking world.
That's certainly more work - and a burden which was previously shouldered
by the distributor - but it's also an enormous opportunity. If you
have a solid production, you'll be well rewarded for your efforts.
Rule
Two: Shorter is Better. Funnier is Better.
The television moment is becoming more pervasive, as television
spreads into mobiles and laptops and game machines. This is creating
an enormous demand for programming well-suited to these devices
and the situations where they're commonly used. This is the archetypal
example of someone waiting for a bus or train, or having a few spare
minutes at lunch. This audience often doesn't have the time to watch
a 22-minute or 44-minute program; they have a few minutes to spare,
and want to be taken out of the moment. This market generally favors
comedy - such as Cartoon Network's "Adult Swim" episodes,
which run for 11 minutes, or even shorter pieces, such as "Happy
Tree Friends," or JibJab's "This Land" (which had
over 70,000,000 downloads in one week). It seems that the shorter
and funnier the piece, the further it is likely to travel. That
said, this doesn't mean that television is about to devolve into
slapstick. Robot Chicken, for example, is often highly intelligent,
with jokes that work on several levels simultaneously, including
satire, parody, and slapstick.
If you do have a desire to create drama, consider how to deliver
it in small doses that leave the viewer wanting more. This tends
to favor melodrama over drama; we're already seeing an explosion
of short-form soap operas, a renaissance of telenovelas.
If you have a grand design for an epic, consider how to deliver
it in little, self-contained nuggets of entertainment. Study the
audience; don't try to force your own dramatic ideas on an audience
which doesn't have the time or attention to invest in them.
Rule
Three: It Won't Happen Overnight
Although we are already into the era of the hyperdistribution of
television programming, don't expect the broadcasters and their
lucrative models of television distribution to disappear overnight.
The bulk of this transformation in distribution will happen slowly,
over the next five years. That's actually a good thing, because
it gives you time to experiment, to learn what does and does not
work. It gives you time to hone your skills. This is a new world
for television, and a level playing field for producers. With the
barriers to distribution gone as the audience takes control, you
have as good a chance as Brillstein-Grey or Southern Star to create
a series of hit programs. But how do you keep those hits coming?
At every step along the way, with every production you create, look
to building a brand identity. In a world where there are no more
broadcasters, where audiences are getting their programming by any
means necessary, brand identity will be the one way that audiences
will separate the good from the bad. Having just one well-branded
hit may be all you need to set you on your way to a very successful
and lucrative career in television production.
Rule
Four: Do It Or Die
If you ignore the coming era of hyperdistribution, we can write
you off right now. You're in the same boat as a producer of radio
plays in the 1950s; the most successful of those individuals established
careers in television, but others ended up bitter and unemployed.
We have to deal with the world as it is, not as we'd like it to
be. The clock can't be turned back on BitTorrent. In the new, "flat
world," where any program produced anywhere in the world is
immediately available everywhere in the world, the only sustainable
edge comes from entrepreneurship and innovation. Yet broadcast television
has become a self-contained world, inside a comfy plastic bubble,
breathing its own air, which - after half a century - has gone noticeably
stale. It's ready to be shaken up.
The future belongs to the fast, cheap and out-of-control. Cheap
productions will more easily find the advertising partners they
need for hyperdistribution; costly productions will find themselves
competing against so many cheap productions that they'll find it
progressively harder to justify their costs in the face of ever-smaller
ratings. The audiences of the future will only very rarely number
in the millions. The "microaudiences" of hyperdistribution
will range from hundreds to hundreds of thousands, but in that "long
tail" of television productions there is a vast appetite for
an incredible variety of programs. This is no longer an era of mass
media and mass audiences: the dinosaurs of media are about to give
way to the mammals.
I want to close with a story I read a few years ago, about the
beginning of Michael Eisner's era at Disney. He had his right-hand
man down in the vaults, surveying the crown jewels - fifty years
of classic films like "Snow White", "Pinocchio",
"Bambi", and "Fantasia". Every few minutes Eisner
would get a call and hear, "I just found another hundred million
dollars." Disney holds some of the most valuable screen properties
in history; Eisner's genius lay in developing an economic value
chain which could leverage their true value.
The transformation of Disney from a failing motion picture studio,
mired in obsolete economic practices, into a massively profitable,
vertically-integrated media megacorporation is a case study of how
a transformation in distribution can breathe life into an entire
industry. The renaissance of Disney owed more to the emergence of
VHS distribution than any financial magic cast by Eisner. Yet VHS
was decried as the "Boston Strangler" by Jack Valenti
in the years before it became Disney's ace in the hole. Once an
economic model harnessed the power of VHS distribution to the studios'
advantage, all talk of piracy ceased. Profits went up. Everyone
got what they wanted.
Thirty years later, we're at the edge of another transformation
in distribution. The forces that cry "Piracy!" today will
be congratulating themselves on their "sound business practices"
tomorrow. There's money to be made; there is a viable economic model.
All we need do is connect the wires, and watch the sparks fly.
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Download
(using BitTorrent, of course) the live presentation of "Piracy
Is Good?", delivered by Mark Pesce on May 6th, 2005 at the
Australian Film Television and Radio School in Sydney. (200MB)
See
BitTorrent.com
for help downloading.
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Previously:
Part
One: Hyperdistribution
Post-Script: The
Swarm Manifesto
Written in response to news that the
MPAA has filed lawsuits against six sites for sharing TV
programs.
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Mark
Pesce
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.
Starting
in June, Mindjack will be serializing Mark Pesce's new book, hyperpeople.
Sign
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other new Mindjack features.
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