two solitudes: Alan Sawyer's views on the media industry

Saturday, April 22, 2006

Press: Who will provide content?

'New winners and losers to rise up in next five years'


Barbara Shecter
Financial Post; National Post




Missed the latest episode of Survivor? Not to worry, CBS, the U.S TV network, is selling weekly episodes of the hit show directly to viewers through its Web site.

If the recent trial becomes widespread -- it is one of many as networks attempt to let traditional TV viewers choose to watch a show when and where they want to -- the middlemen who help bring shows to your living room today could be cut out of the equation.

Of course, the vast majority of people still watch TV at home, but a recent IBM report predicts the "massive passives" who only watch what the networks schedule will be outnumbered by 2012 by people watching shows on their own timetable and not in front of their TVs.

Potentially at risk -- if they don't adapt -- are cable and satellite companies, which bundle groups of channels together to sell to a customer, and Canadian networks, which buy the rights to air U.S. shows within Canada.

Even Apple Computer Inc. or Google Inc., which have recently signed deals to distribute network TV shows on the Internet, may be left out.

"There's going to be a real battle for who is the supplier of content to the consumer," says Alan Sawyer, a senior strategy consultant in the media and entertainment practice of IBM Business Consulting Services.

Even the broadcasters themselves are at risk in a world in which shows are sold directly to the viewer, says Cynthia Brumfield, president of Emerging Media Dynamics Inc. in Bethesda, Md.

The CBS experiment, launched in January, opens up the potential for people who were never in the business to start making and selling programs -- in competition with traditional studios and networks.

"What used to be in the hands of very few people has now [potential to] become a mass phenomenon," says Ms. Brumfield.

A recent IBM report on the future of television says there is a lot of experimentation right now, but "what is certain is that new winners and losers will rise up in the next five to seven years."

Ms. Brumfield, who spent a decade as an executive policy analyst at the largest cable association in the United States, said cable companies fear being turned into "a commodity," paid merely for carrying programs into the home and onto a television or computer screen, rather than getting the higher fees for first gathering and packaging channels.

If a model such as the CBS direct-to-consumer experiment becomes the norm, cable companies "don't have a choice. They don't survive -- or they diversify into television and video businesses," says Ms. Brumfield.

Mike Lee, vice-president of strategy and development at Toronto-based Rogers Communications Inc., Canada's biggest cable firm, says he expects consumers will ultimately opt for "a mosaic" of TV viewing, with passive home viewing remaining a part of it.

Still, he says, Rogers is getting in the game by investing in wireless, high-speed Internet and video businesses that can offset losses from the traditional method of broadcast delivery.

Ms. Brumfield says "it's anybody's guess" what broadcasters will look like it 10 years, but they will probably adjust as other media have to new competitive challenges.

The big U.S. broadcast networks have already been adjusting to competition from the growing number of specialty TV channels. The broadcasters are likely to continue to cut costs and rebuild their business models around cheaper, "ultra-mass market programming" such as reality shows, predicts Ms. Brumfield.

"It's rare to see expensive, high-quality content on the broadcast networks any more and I think we can expect them, in the short-term to continue cutting costs and appealing to the widest possible array of viewers," she says.

The challenge in Canada is not as great yet because blocking technology prevents Canadians from watching U.S. shows on their cellphones and iPods. But Canada's TV networks are, nonetheless, preparing to fight for their place as distributors of content.

Canada has the "infrastructure" for distribution arrangements similar to those being tested in the United States, says Kathleen Dore, president of TV and Radio at CanWest MediaWorks, which owns the Global television network and the National Post.

"I think the toughest part of it is just sorting through all the rights on content where there are many rights holders."

Broadcast rights have emerged as a flashpoint in the United States and illustrate how messy it can be to rush to sell shows on alternate channels without first ironing out who deserves a piece of the action.

One battle pits the U.S. networks against their affiliates, smaller station groups that use network programming to supplement their own local programs.

The affiliates say the nation-wide availability of shows through Internet downloads is robbing them of viewers for network shows, and they are not being compensated for the resulting loss of advertising revenue.

Even cellphone companies are getting into the mix, squabbling about who should receive a slice of the $1.99 per download.

"They're all doing a very careful dance," says Andrew Zolli, who runs consultancy Z+ Partners in New York. "They all want as big of a cut as they can get."

Mr. Sawyer, of IBM, says Canada's biggest broadcasters must adapt before a new system takes hold because they rely heavily on selling advertising during broadcasts of hit U.S. shows.

Broadcasting the shows at the same time they air in the United States guarantees more viewers for advertisers because audiences in Canada will see Canadian ads whether they are watching a show on Canada's Global or CTV or on a U.S. channel such as CBS or ABC.

In the new world, when there may not be a schedule to adhere to, the Canadian networks will lose that revenue advantage.

Nothing will happen overnight, Mr. Sawyer says, because Canadian networks still spend a good deal of money to buy U.S. shows for traditional broadcasts and their big U.S. partners aren't likely to want to disturb that relationship.

"Canadian networks are valuable customers of U.S. content creators. [They] certainly don't want to alienate them," said Mr. Sawyer. But "if the conventional model disappears entirely, it's a whole different dynamic."

The IBM report says one strategy TV networks should pursue is to use viewer familiarity with them to their advantage -- to draw in viewers who are surrounded with a plethora of choices but little direction.

Jeff Leiper, director of Canadian market strategies for communications consultancy Yankee Group, says Canadian broadcasters should be increasing the amount of programming they make, and paying for it through repeated broadcasts on multiple channels including video iPods and mobile phones.

"This is exactly what they need to be doing. Locally produced and owned programming, multi-platform, that can be re-used over and over without significant cost or rights negotiations," says Mr. Leiper.




© National Post 2006




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