Why it matters
Traditional television broadcasting is dead.
Internet technology is profoundly reshaping how television distribution works.
The speed at which new comers in the premium content world are capable of operating signals a fundamental shift in what the business of television is, and will become.
We are entering the age of broad-net-casting.
The IBC 2015 show floor was abuzz with the usual displays of broadcasting and infrastructure system vendors. Video quality, UltraHD/4K, and HDR dominated the conversations.
In the minor halls, smaller vendors had a different focus. They were promoting software-only solutions and tools to manage exponentially growing vaults of digital media. One which attracted my attention was Perfect Memory, with a fantastic platform-architected solution using “semantics” and “ontology” to perform media asset search and management. Simply put, the system helps to find something when a user doesn’t remember the name or title of the show or movie he is searching for.
Another interesting fact I heard at the show was that during the commercial lifetime of the movie “Frozen”, Disney expects to have to handle 33,000 versions, edits and “manifestations” of this digital asset.
Between these extremes, the leading edge of human-intelligence driven solutions and the accumulation of an enormous mountain of digital media, lies the heart of the challenge for the traditional broadcasting industry. This is why I say that broadcasting, in the way we have known it, is dead. It is time for the emergence of a new approach; “broad-net-casting.”
While all broadcasters are challenged in this generational shift, the perennially cash-strapped public broadcasters are particularly vulnerable. Let’s review how the job of the broadcaster has fundamentally changed:
- Distribution paradigm shift: what does television mean when consumers now watch their TV shows and movies on tablets and phones, on a schedule of their choosing?
- Rethinking how advertising is sold: how do broadcasters invest to better understand their millions of anonymous viewers, when digital advertising is now refined with data analytics models, first party data and inventory sold and delivered within 200 milliseconds? RTL shows the way, with the acquisition of SpotX… News Corp also with its swallowing of Unruly and TrueX. But how many public service broadcasters, which also rely on some commercial, advertising derived revenues (), have the financial wherewithal to follow suit and prepare for a future which will happen tomorrow?
- Format innovation: SVOD providers like Netflix are giving content creators and artists the freedom to define the format (i.e. length) of their product, and do not constrain them in a story-telling format made for advertising insertions at broadcast time, or a very rigid episode length.
- Process efficiency and “built-for-speed” company culture: Netflix explained in its “TechAway Day” technical workshop presentations that its software plant now processes more than 50 encodings of a master file to accommodate more than a thousand device profiles. Its CDN and worldwide distribution infrastructure can now support the simultaneous release of a new title, or series, in more than 40 countries. The entire company culture is organized for speed, from content creation, acquisition, ingest, distribution, engineering side and deal making / business side.
Sure enough, the revenues and business models of Netflix and incumbent broadcasters (commercial, or public service) are different. Sure enough, they offer a different service, and different content catalog.
But Netflix is vastly more efficient than the incumbent broadcasters: when we compare the number of employees required to produce $ 1 of revenue (Netflix serving as “index 1”), the difference is staggering:
Imagine how many Netflix employees it takes to align or make a decision on anything. Maybe a few, as the company is known to foster one on one, fast, decision making (most of their meeting rooms are for 1:1 meetings), while running team group meetings very selectively. In the meantime, incumbent broadcasters need to align and coordinate at least 8 to 10 times that number.
There is not ONE public service broadcaster which has the young, aggressive, Internet-culture infused gene pool to make the architecture decisions to rethink from the ground-up how they should go about the “broad-net-casting” architecture of the future.
There is not ONE public service broadcaster in Europe, North America or Asia which has the free cash flow and balance sheet to face these challenges.
The BBC’s recent submission to the UK Government analyzes the problem and calls for a “radical program of reform”, but falls woefully short in delineating a specific action plan to steer the company in the Internet direction. Why? At its heart the BBC still thinks of itself as a broadcaster. It needs to rethink its DNA, rebuild itself for speed, and focus on becoming a broad-net-caster. That is an organizational problem, not a technology problem.
One way the public broadcasters can sidestep their organizational problems is to leverage the OTT broad-net-casters directly. I expect that within 3 years we will see new alliances which one year ago would have been thought an anathema. Imagine a deal between ARD (in Germany) and Netflix, which allows both to compete jointly with SKY Deutschland. A deal between the BBC and LoveFilms/Amazon which could bring the premiere broadcast service to even more devices on a global scale.
These ideas are in no way fanciful. They will be driven by cash starved incumbent public broadcasters trying to compete in a world where the Internet brings never before seen business efficiencies.
However, time is of the essence, and speed of execution essential, as consumers behaviors are changing fast.
Unfortunately, there is another impediment to broadcaster change: the legislators.
Broadcasting rules impose a variety of obligations for public access, censorship, parental rules and ratings. Streaming offerings are treated as “Internet” based services, and often remain unregulated on all those fronts.
Behind the contentious Net Neutrality battle hides a second public policy debate: should the new streaming players be regulated to equalize market competition, or should the old broadcasting rules be relaxed to allow incumbents to acquire the agility, speed, and business model innovation needed to effectively compete.
Ultimately, the politicians and market regulators will have to choose between a more open path for the media market, or a protectionist route defending older models and entities. I suspect that relaxing the old laws and rules covering broadcasting will be a more fruitful path than restricting new comers.
Let’s hope that Francis “Frank” Underwood () can sell that to Congress, and the European Union negotiators.
That said, it may not be the regulators that make a difference, but a willingness by incumbent broadcasters to rethink how they make decisions, and a willingness to put new products and media experiences in the marketplace faster, and adapting them to follow the ever-changing consumer. In short, are they willing to embrace their broad-net-caster future?
For now, I have a suggestion: let’s rename IBC the “BNC, Broad-Net-Casting show”.
 11% for France Television and 22% for the BB, for example (source: annual reports)
 The leading character in Netflix’ flagship series “House of Cards”