GigaOM

[...] Internet TV Allan Leinwand, a venture capitalist who often writes columns for GigaOM, is asking readers there “whether or not the writers’ strike in Hollywood is the inflection point that will [...]

[...] already seeing striking TV writers turn to online video. Now venture capitalist Alan Leinwand wonders if deprived TV audiences will turn to online video. Venture capitalists are always looking for [...]

[...] I digress. My response to the blog post: Writers’ Strike: An Inflection Point for Online Video? As a few people have mentioned above, the WGA Writer’s Strike is probably not the inflection [...]

[...] Dims, Blames the Writers Remember all those stories and reports about how the writers’ strike was driving TV viewers over to the [...]

It’s not that simple. The number of people who get their content from television are far greater than those who get it from a computer. And you can’t go down to Costco and buy a computer with the robustness to adequately view online content. We’re going to have to see a huge upsurge in the purchase of equipment and training to drive an inflection point for online content. That’s not going to be easy, especially in the current economic climate

What I have been finding is more people are turning to Netflix and are watching more movies and boxed sets of favorite, but cancelled television series. My teenage son has become a big fan of video podcasts and is moving away from network production. So there is a possibility of an upsurge in independent production of content supported by advertising taken from networks and major production houses. The momentum is on the side of content creators if they can hold out long enough.

A rating point? That’s the goal? Not going to happen for any single web property. Just the same way cable has made it hard for top network shows to put together more than half a dozen points themselves. Here are last night’s numbers. Ratings/Share

Jan. 3, 2008
ABC 1.8/5 NBC 4.0/10 CBS 2.6/7 CW 0.9/2 FOX 4.0/10
Adults, 18-49
Source: Nielsen Media Research

The internet video market is of course even more fragmented for any one program or network to build TV scale audiences. That said you’ll notice that the internet is now a larger advertising medium than TV in Sweden and by next year the UK as well. It’s a tough place for mass marketers would need mass advertising channels.

There are some great unknown and previously know artist that are just begging to be aggregated into new internet properties that may be the harbinger of the shift to put internet video on the same footing as Television.

Want an example of raw talent? See (link)

With a little budget and script development, talent like this can steal the show from the crippled television industry.

IMO, Internet TV is the bomb and leads to new forms of broadcasting which some of us are already practising profitablly and it is going quite well in fact. A rating point may not happen for one Internet program but it does not matter b/c the aggregated audience of an Internet network that distributes programming may be far larger than a Nielsen 6.0 or even Grey’s Anatomy 12.0. Business methods we have implemented is the future of broadcasting b/c we hit millions per week with ads for a fraction of the cost. In fact, TV may charge around $30 CPM we charge $.30 and the results are far better and measurable. The writer above points out that these days networks are drumming up 4.0 nielsen ratings. I can reach 4 million targeted people with an ad in five minutes and most likely 15% will open it and 4% will go on for further information. Of that 4%, I will convert 4% on the first touch. We have seen the future of broadcasting and it is here today. Cheers.

I live in LA and have many friends in the WGA.

While I think an influx of web viewership is happening due to the strike, I would not expect any ‘mass’ migration until audiences can easily watch video on their TV sets. That’s the big missing ingredient. Right now, this process is way too cumbersome… and audiences lack patience if viewing palm-sized clips that are surrounded by tons of distracting desktop clutter (windows, folders, icons, IMs).

Once TV can become more of a jukebox, more people (even the “moms and dads” you speak of) will watch longer online content.

I think the internet is a fantastic distribution medium, but it’s not a great display medium (at least when it comes to watching a series). TV sets offer the reverse– great display, lousy distribution. We’re not too far away from finding a hybrid of the two that will succeed. Apple TV and OnDemand had some big hiccups but they are steps in the right direction.

As a case study/testimonial…

In a week or two, we’re a launching a very cool web series, The Mortified Shoebox Show, based on our popular books and stage shows, MORTIFIED. We’re really proud of what we’ve produced and think it has huge potential.

That said, we recognize that we are launching a series via a medium that has yet to mature. So while we hope our series will catch on in the current web environment… we don’t expect our efforts to have giant payoff until the medium matures and offers something more akin to OnDemand.

The good news?

The web is actually changing pretty damn fast. Which is EXACTLY why getting in on the ground floor is worth the risk (for content creators like us… or sponsors… or VCs).

It’s not just the Writer’s Strike you need to consider. Analog Television ends February 2009 - and with it the power of “Must-Carry” for the local broadcasters. I suspect that the next round of cable negations will look a lot like past agreements - with the local powerhouse stations getting compensation for carriage. However, in the next round, when it has become apparent that the consumer no longer watches “Over The Air” television, the cable companies will turn the tables on the broadcasters.

As new television “appliances” are developed with Internet connectivity, the consumer will achieve their demand of “a la cart” through a combination of providers and services.

The Strike, if it carries into the Upfronts, will force the networks to alter their plans, with a result of the consumers foraging for content. People will hear about great things on the Internet seen on their neighbors Internet enabled TV and more will buy these appliances.

Broadcast Television only shines on live events, everything else is delivered via tape or video servers - even now. All that’s needed is one provider to cut out the broadcaster middleman.

My time is too valuable to sit through 20 minutes of TV commercials in an hour. I only watch about two hours of TV a week and it is all from DVR with a commercial skip button. The evening news is a joke, might as well rename it drugs are us. If my wife would let me I’d have the cable disconnected.

Only exception to this is live sports which still completely annoy me with commercials. Sometimes to the point that I will turn the game off rather than watch the commercials.

I spend at least three hours a day consuming information from the net mainly in email and RSS form. Ads? I can’t name a single ad I’ve been exposed to in the last week. I’m bombarded by 10,000 ads a week; I’m so desensitized to them I barely know they are there.

When I want to be entertained I read a book (two or three a week) or see a rare movie (once a month). Neither of these are filled with overt commercials.

My advice for online content - sell one or two targeted ads at a high price. Not 2,000 for $100 each. If there were only one or two ads I might even watch them.

Channel based TV is going to disintegrate into total on-demand. What’s the status of the court case where Comcast is building a DVR in the sky? If they record every show on every channel just in case you missed it, it is the end of channels. Once TV goes total on-demand with playlists there will be no difference between TV content and Internet content. Of course with total on-demand TV comes targeted advertising and Google.

So the answer is: the writers strike has no impact. TV as we currently know it is already on the path to its destruction.

Hello,
I very much agree with this. I have a blog in which I write about technologies and digital media. I have written a post at
(link)
called “Predictions for digital media for 2008″.

If your agree this is happening, my blog covers some predictions on how I think it will take shape.

James

Wow! I’m kind of shocked by most of these answers. My personal shock aside from statements like “getting in on the ground floor” or “not expecting any mass migration from TV to web” (are these people under 90 years old?), I’ll try to stay close to the question: Will the writers strike be the inflection point for online video?

In short, yes! If the current migration to web for rich media, the rapid rate of technology that improves that experience and the low cost, ubiquitous platform that is the web were not enough, having no new content on TV is the nail in the coffin. Ironic isn’t it? I recently stated that the lack of new TV content will ironically be the greatest disruptor we’ve seen in years, to drive more people and more importantly, peoples time, to viewing video online.

Ratings points are an obsolete measurement and we need a new set of metrics really. I took at look at panorama’s portfolio and while it’s mostly medical, gridnetworks is the one I believe Allen is speaking of. Everyone in the space says they have the “best” haha, so I’ll just assume that Grid is actually the best at giving the user the true HD experience. Although when I tried it out I couldn’t use it because I’m on a mac at the moment. I know there’s no scale in mac’s but most video, content, early adapter people use them, so I always find it frustrating that stuff isn’t made for mac users in the video space. Anyway, Allen, would love to debate this point more offline. For the record, I hope the WGA gets a fair deal, but if the strike goes past March, the snowball will have rolled to far down hill and online rich media is going to eat TV’s lunch sooner than later.

@Lou - agreed on the momentum being with the content creators. When do Mom and Dad get inspired to watch this content?

@Drew - yes, in my view a single ratings point is the goal as that will attract advertisers and absolutely convince them of the viability of television over the Internet.

@Alan - thanks for the link. Got any other content that will draw mainstream to Internet video?

@JD - agreed! What content do you think will generate higher CPM rates?

@dave - good luck with your content. Please post a link and we’ll hope for a huge viewership.

@Don - great insights!

@Jon - I think the advertisers will have an issue with every show being on demand all the time. I think we’ll see some flexibility around viewing windows (e.g. you can watch “The Office” on Thursday night during a 6 hour window). Time will tell…

@Ryan - yes, I am speaking of GridNetworks (www.gridnetworks.com). I think the lead-in to this post on NewTeeVee actually has a link to the company, so I was not trying to be obtuse but rather not blatant :) I do think that they have a superior distribution technology for high quality video and that should help enable Internet video to scale faster. Stay tuned for a Mac client in the very near future. As for your snowball, we’ll see what happens, but I think we’re thinking along the same lines.

As a few people have mentioned above, the WGA Writer’s Strike is probably not the inflection point you’re looking for. While more and more people are looking for video content on the web, they are not devouring large clips. In fact, the average viewing length for online videos is still around three minutes, which is a long way away from a full hour (or, 42 minutes for Tivo viewers) of commitment for one show.

Sure, more people watched Will Ferrel’s “The Landlord” this past year than watched any one show on TV (over 40 million), but none of his follow-ups got anywhere near that audience (or buzz).

The “inflection point” you’re looking for, unfortunately for creators like me, is all about technology adoption. There will not be a significant changeover to “web-delivered” video until two things happen:

1) Computer Hard Drives become the primary storage location for personal video collections. In 1998/99, college students started ripping their CDs into MP3s and sharing them via Napster, and pretty soon after that, everyone else did the same. The same thing won’t happen with video until a) average, consumer hard drives get big enough to store ALL their DVDs, and b) there exists some standard for ensuring quality in digital files.

2) Just like music needed the iPod, so too does Web-deliverd video need a device to bring the “TV-like experience” to your TV. No one wants the computer experience on your TV; Microsoft’s WebTV failed years ago. I’m not sure why AppleTV (or the like) hasn’t taken off yet, but maybe it’s just too early to tell.

In any case, the writer’s strike is doing one thing. It’s driving creators to the Web. The growth in online content quality has been amazing during the past few months, and you’re starting to see more and more celebs on the web… that’s only upping everyone’s game.

So, we’re still stuck dealing with budgets in the hundreds of thousands, and profits in the tens of thousands. However, someone will discover the perfect combination of delivery, quality, and interaction, and they’ll hit the jackpot… albeit probably in 2009 or 2010. Now, everyone repeat after me, “Please be me. Please be me. Please be me.”

The WGA strike accelerates the continued fragmentation of audiences, and could very well be an inflection point:

1980s - Cosby Show - 33+ rating
2007 - Heroes - 6 rating
2008 - ????? - Could we see as low as a 3 or 4 rating for a break-out hit?

The future is personalized programming that can be accessed across all devices. (1) Most consumers don’t care where a program is from, as long as it interests them and they can watch it whenever they want. (2) The TV is one of many devices consumers want their video.

How many of my subscriptions would I recommend to my parents? At least 30-40:
(link)

The inflection point is when my mom or dad has something to watch, period. The current primetime TV offerings, with writers, don’t quite do it since the shows today are for a different demographic, none of which my mom/dad fit into.

The strike puts enough check in viewer minds to be an issue but I don’t think its the inflection point. Helpful but not it.

5tacos

It’s highly optimistic to say that the writer strike will be the inflection point. I live in Europe where the strike will have no consequence for people’s viewing behavior at all.

As for the US I believe that there aren’t too many really know players that mainstream households would know and use. Yes, the tech savvy will always use the Current TVs, Joosts, Blinx and Youtubes if they feel bored with their TV. We all however know the viewing patterns for those online video consumption. People rather watch short clips than hour long shows. I wouldn’t know any person that sits down on a Sunday evening and says lets turn on the PC to watch a nice video.

TV and Internet will eventually merge but that will not happen without the big networks having an active role in it.

Alan I really think that game consoles are going to be the tipping point for IPTV and the console manufacturer that does it first is going to turn itno a full blown media company .

Sony and Microsoft already are headed to this space with XBox Live and Sony’s Home product .

Nintendo could also potentially enter the space and already have a Video and downloadable game content channel in Japan .

“but we’re still waiting for the market to really rival that of traditional television (to invest)”
Come on Allan, do you really mean that? based on your portfolio (GridNetworks), sounds like you are a bit more proactive than that. By the time the market rivals television is the time that many of the early risktakers, who led the way to the next generation television, will be cashed out with healthy multiples.

what I’m saying is it’s about expectations - there is going to be a tipping point when mom and dad can order a movie via CinemaNow, or Movielink or Butaca.tv, without needing to troubleshoot the S Cable or download Manager. That time is actually now, people just need to be better educated - the writers strike is just focusing the attention to what everyone close to this space already knows (the importance of digital).
(by the way, great invesment in Grid - but I’m a customer :) Randall Green

rg

Mr. Leland,

I am trying to pull together some grass roots talent, and am starting to see the formation of somewhat of a portfolio, not jsut of the absurd, but also interest focused.

If you will contact me @ abmadw@gmail.com, I will be glad to fill you in on my plans.

That was a careless misspelling of your name, sorry.

It’s Cablevision with the remote DVR case. It is currently on appeal.

(link)

The simple concept is to move the DVR hard disk out of your house and back to Cablevision’s central office. Cablevision will then record all shows onto your DVR “just in case you missed them”. Since everyone gets the same channels everyone shares the same remote DVR disk.

There is absolutely nothing technical stopping this from being built. Recording all of the channels remotely and then feeding them back on demand is easily implementable with current technology. This is just an extreme form of switch digital video (SDV).

I can’t wait for this. No more “appointment” TV.

Once this happens is it is obviously simple to add internet content as choices in the DVR menu. Of course there is nothing to stop you from recreating a channel via a permanent playlist.

TV hasn’t been disrupted yet by the digital age like music has. Its time will come too.

What everyone involved in online video and yes VCs should know is contained in a demo video at (link) . It is critical to know where things are going and the writers strike is nothing compared to this, it’s a real eye opener.

Is the writers’ strike in Hollywood the inflection point that will drive mainstream America off their couches and onto their computers for new video content?

It depends what the content is. That’s the bottom line.

I think it’s dangerous to view what is happening as a tipping point from one thing to another thing. What’s really happening, let’s say for TV in particular, is it’s going from one thing to everything. Content is becoming disassociated from it’s delivery technology.

I don’t think the audience is going to “move” from their TV’s to their computers. The CONTENT is going to move and split off in all directions. People will discover it based on what the content is (it’s quality and their interest in the subject) and if it makes sense in their present situation (in their living room relaxing, commuting to work on the train, in the office at their computer, etc.)

So to come back to the point I think, yes, the writer’s strike is a major tipping point because it focuses the mainstream on the changes in media. As far as getting people to get up off their couch and move to another room? No. I think the content provider has to deliver the show to where the people are.

You specifically mentioned an hour long show. I’m assuming you mean something like a TV drama. Ultimately I think most people will still want to consume an hour long drama on their couch in their living room, so if that’s your content then you have to deliver it there. Some WILL watch “on their computer” though. I’ve watched hour long shows on my computer when I had to (streaming) but I’d much rather watch most shows in my living room, even the short ones. Since I have an AppleTV that’s what I do.

Will it deliver a Nielsen ratings point for some Internet video shows? Yes some shows will make big, big numbers. And it won’t really matter because ultimately the big, big numbers will have less and less value. Targeting will become much more important. I do a knitting show called Let’s Knit2gether. We are approaching 10,000 viewers which is quite respectable but nowhere near big numbers. BUT, every single one of our viewers LOVES knitting and that has value. I know, I know, convincing an ad agency of this is like talking to the bottom of your shoe. Some people out there do get it though and we’ve actually had potential sponsors call US directly. Again this all comes back to the content.

What shows would you recommend to your parents to watch to get them to move away from the television? Well, if they like knitting they’ll probably like our show:

(link)

Or how about something like this. It’s an hour long drama!

(link)

Cheers!

@Alec - great insights. Let’s hop that al of us in this space can have a share of this very large market.

@Frank - thanks for the links. Some interesting content there!

@5tacos - you’re right, I’m still waiting to point my Mom to something that she wants every week on the Internet in the same ways she watches “Desperate Housewives”.

@cosmos1980 - interesting take. The big networks seem to be using Internet video to supplant DVRs. Watching old shows on their websites have ads that you can’t skip and allows them to monetize their content without paying distribution fees (although they do have to pay for the bytes delivered).

@Matt - good point about the game consoles. I’m still waiting to see if that really happens, but clearly the technology is there.

Big question!

I’m a writer — currently on strike, and incredibly ambivalent about it — and I’m not sure I’d call this an inflection point, because I think that the entertainment business is always in some kind of slow-rolling revolution. But I don’t know anyone in the entertainment business — and I’ve been working as a writer and producer for a long time — who doesn’t anticipate huge disruption in the next few years. That said, I don’t know many people in the entertainment business who are afraid of this, either. Things are going to get shaken up, sure; but when things shake up, a lot of money and opportunity shakes loose, too. And Hollywood is made up, essentially, of a lot of one-man corporations. Put it this way: Hollywood is a great place for individuals to get rich; I’m not so sure it’s so hot for shareholders.

So, can I suggest a strategy? In Hollywood, currently, failure costs a lot of money. An unsold 1/2 hour pilot costs about $2 million; a failed 1/2 hour series costs about 6x that. And features, boy — it costs a lot of money to find out that the public doesn’t want to see your movie!

The web, among other things, radically lowers the cost of finding out whether what you’ve got on your hands is a failure or a potential hit. And so any strategy should lever off of that basic advantage.

Try everything. Remind yourself that hits are impossible to engineer, or reverse engineer. We don’t know — we’ll never know — in advance what the audience (whatever the demographic) wants to watch, wants to get obsessed by, will set up fan sites for, will pay premiums for, will wait in the rain for. The web, though, can give us a better sense, and for a lot less money, whether or not a project is worth pursuing. So, try everything. If rolls of the dice are cheap, for God’s sake, roll the dice! That’s the great capital advantage the web has over Old Media — the very people (like me) who are striking right now demanding guaranteed minimum payments from big studios (and those come after the huge fees our agents and lawyers negotiate for us) will work for free on the web.

I don’t know about inflection points, but I know a terrific arbs opportunity when I see one!

I talk a lot about this on my blog, (link) , and I’m even launching a crowdsourced animated show venture, at (link) . Because, you know, try everything…

Allan,

No and Yes is the short answer.

NO: Our parents, the babyboomers are too entrenched in the couch experience and in content being scheduled and delivered. We’re currently faced with a mass of content online with no discernible way of selecting the best, nor the most relevant to our needs. It’s this problem or growing pain that will keep them glued to the sofa and the remote. This is a generation reared on an editorial and trusted voice, the TV Guide of yesteryear or the weekly papers with their ‘Top Picks’ of the day’s viewing, whilst Gen XYZ (not sure what we’re calling ourselves now) rely on collective aggregation and filtering, on peer recommendations.

YES: It’s youth we should be focusing on, web soaps like LG15 and it’s brood are merely the first iteration of a new form of entertainment

I worked as Creative Director of Europe’s largest talent agency for 10 years and have seen the incumbent industry battle and fail to understand the web savvy, they are more interested in preserving the status quo and we’re seeing only reluctant steps by the majors to address this.

What we need is content and content creators, if anything we can hope that some studio writers will find a new creative outlet in online programming. Nurture them and we’ll see a seismic shift.

Adam

@Randall - I am proactive and can see the infrastructure changes needed for Internet video, but I’m still waiting for the tectonic shift in the consumer mindset. You’re right that the strike is educating people. And thanks for being a customer of Grid :)

@Alan - no worries on mis-spelling my name, I do it too :) Thanks for the contact info and good luck with your talent search!

@Jon - thanks for the link.

@joe - that link does not work.

@Eric - thanks for the links. And, yes, I am waiting to see when 42 minutes of content (an hour long show) really uses the Internet as a viable distribution channel to reach a million viewers. I’m hoping that format is not conducive to 18 minutes of commercials…

@Rob Long - Thanks for the great insights. Good luck on the strike, I wish you well.

@Adam - thanks for the great comments. Please bring us some unique content from your side of the globe!

The current division between internet video and TV is bothering all of us. For this reason I sat down and wrote how I would like it to be here:
(link)
Future device connectivity is going to change everything but we will always have the backup to watch things on DVD like it happens with CDs. We like MP3s and generally music on HD or flash but never say no to a good CD from our old collection :-)
As for news I think the web has overtaken TV in this ages ago, I would never go back to consistently wasting my time… Thanks to Allan for the great post.

No. The writers’ strike is not an inflection point for critical mass migration of viewers from the TV set to the computer. The strike would need to last multiple years, and most importantly, all those writers who are not on the picket line would need to start writing FOR internet TV. Then the content would appear on that platform and create the switch. As impressive as the volume (and at times the quality) of video now appearing on the web, it’s a tiny fraction of what’s shown on the tube.

If you’re looking for the next model for TV, you might want to look at overseas markets. In some of these markets, notably Korea and Taiwan, the media industry is less entrenched with multiple and conflicting interests, and so new technology is more easily adopted and better models launched.

Just as Asia and Europe have more advanced mobile systems, I believe they are more likely to incubate the model that replaces our current TV model.

The questions and posts on this blog are really good. I have incubated and launched TV stations around the world (helping start the No. 1 channels in Czech Republic and in Taiwan) and have learned a few lessons about the business. The most important is to recognize the very complex ecosystem of the video business — whether it’s online or on-air.

When I looked at overseas markets for launching a new TV station, I found I needed to scrutinize the whole ecosytem of the video business, which runs something like this:

content creation ==> distribution to audience ==> effective marketing to audience ==> monetization (advertising or subscriptions)

Evaluating a potential TV venture in these four steps was really crucial, and I think it’s the same for the online video now. Let me briefly go through each step that I used as an evaluation tool, and it will be more clear.

Content Creation. Was there a critical mass of content that I could get my hands on (rights to) that would draw an interesting audience in size and quality (demographics) to make a venture possible. Usually, existing media sops up all potential talent (for new productions) and libraries (existing content) so there’s literally nothing for new players.

Distribution. If there is content, can I transmit it (somehow) to my intended audience? My business was broadcast, so was there a frequency I could get use of? Was there cable in the country, or a satellite platform widely in use?

Effective Marketing. If there is, can I get my intended audience to notice? If a cable or satellite platform exists and broadcasts 100 channels, can I somehow get my audience to notice my single new channel? Usually, this is ENORMOUSLY difficult. And almost always requires a PREPONDERANCE of QUALITY programming.

Monetization. Even if you get to this point, meaning that you found good content, the means to distribute it, get the audience to notice you and watch you (which means you did step one effectively), you still need to monetize the audience you’ve achieved, and sometimes (often) there are reasons you won’t be able to do this. The most common reason is that advertisers demand a certain critical mass, which means you not only have to successfully launch, but you need to launch big. Which means each step (content, distribution, marketing) must be done big — which greatly increases the cost (investment). The second reason is simply institutional inertia. yes, you’re getting a decent audience but ad agency X has been sending Y million in advertising to channel z, and that’s difficult to stop too. In my opinion (perhaps many others’ too) this was one of the chief causes of the first internet bust. Advertising just didn’t keep up with the audience as it shifted to the new medium so fast. it took about 5 years, roughly. If an online video business does emerge (of comparable size to the current TV business), you’ll need to think how the advertising paid to existing networks and subscriptions paid to cable and satellite companies would be switched. It’s tougher than anyone thinks.

So you can see why successful media outlets (TV stations, channels, etc.) are so valuable. There are a lot of forces keeping them in place, and new entrants are VERY difficult to get off the ground.

That all being said, does the writers’ strike afford the opportunity to create a new paradigm (so to speak, I hate that word) in the video viewing business. I originally said no, but, actually, it just might. I’ll describe how it could in my next post.

But it won’t be for the faint of heart. You’ll have to be as brave as the media entrepreneur Rupert Murdoch — who has done all this time and time again.

I like how Jon Smirl refered to ‘appointment television.’ The concept of making an appointment to watch a television program is absolutely archaic. And while DVR/TIVO/On Demand are all wonderful products for consumers, they don’t truly benefit the cable companies, especially in terms of advertising dollars. TheIssue.com is running a piece on the strike and one of the blog’s they have culled from poses the question “How long before cable companies become nothing more than ISPs?” It is only a matter of time before the technology and the content are up to par with HDTV and cable. While it seems Apple is on the right track with Apple TV, I’m wondering how long it will take to catch on, if it will at all. Regardless, the integration of Wi-Fi with HD quality and content driven television is bound to happen in the future. The only real question is, what will the consumer have to pay for it?

-Michael
The Issue | (link)

Could the writers strike be an inflection point? In other words, will online video grow ever faster cannibalizing “TV” as we know it and become “the dominant” platform? I think it’s possible.

When I was incubating TV stations, we looked for opportunities where there was some significant disruption in the chain of the ecosystem I spell out above. In the Czech Republic, it was in the distribution area; we secured one of two national frequencies. In Taiwan, the venture also won a license (the fifth in the country) but that was not enough. The Taiwan venture was successful because it started producing a good proportion (but not all) of its content in Taiwanese vs. Mandarin. The other stations were chiefly Mandarin even though 80% of the population speak the Taiwanese dialect at home. (The reason a station could start broadcasting in Taiwanese was due to the political change occurring in the country at the time.)

So, is the writers strike a sizable disruption in the present TV ecosystem where a new venture could get started? I think it could be — but it depends on what happens with the other three legs of the chair.

The disruption that has happened is that an enormous volume of talent has come available to produce new shows. Furthermore, the incumbent TV platform is not producing new shows. This almost never happens. A new venture could really differentiate itself and secure the ability to produce lots of new content over a prolonged period of time. We can only say this is an OUTSTANDING opportunity. The incumbent TV industry has really left itself vulnerable.

So Step One — The New Venture must secure the talent. VCs should put in, say $100 million (and this is just for starters, the costs will grow fast and), and sign every single writer that they can find. If this were really to happen, watch how quickly the studios would settle, so the New Venture would need to move really fast and sign say 10% to 15% of the writers including some of the best (whoever they are).

Second Step — Distribution. OK, the internet is sufficiently progressed where video can be efficiently distributed to the home. While there’s a lot of work still to do to make this more consumer-friendly, it’s believable that the cable companies are endangered of being stepped over TO THE HOME. However, I believe there’s a bottleneck WITHIN the home — namely the distance between the typical home computer and the typical home TV screen. The solution is easy enough: wireless connectivity, but there’s a sizable re-tooling effort required to equip homes with the right wireless standard and in adopting the typical TV screen to it. I believe this is akin to putting up an antenna or satellite dish and is totally doable — but it will slow down adoption. Speed of adoption will depend on the volume and quality of new content originating from the New Venture — so it will depend in part on signing the most and the best new talent now on strike. So perhaps you’d like to start with a few more $100’s million to secure more talent — it will speed up talent. You’ll also have to spend on some R&D to perfect and endorse some standard, but those are details.

Marketing. Here, the New Venture would face a favorable climate. Creating a new TV company and giving jobs to striking talent would captivate the minds of many, many Americans. The New Venture would most certainly be noticed. But you’ll need bucks for a prolonged, inventive marketing effort. (Furthermore, you’d have to deliver on that imagination, meaning the combination of computer and tv screen the New Venture would be pushing would need to have many new, useful features. I believe this is possible, namely because I have a few ideas in this category that I think would be very useful and compelling but I have not heard them discussed in the industry much. So the R&D budget mentioned above is not small.)

Monetization. going to be tough, don’t kid yourself. Viewers aren’t going to pay much if anything for a subscription at first, and advertisers aren’t going to flock to you, no matter how much of a hit you become in the first year or two. So figure if all goes well, you’ll see some meaningful revenue in year 3 and by year 5, you’ll breathe a sigh of relief that yes, there is actually a revenue model here. And if you do create the computer TV/video model for America, you’ll make a good return. Probably extremely good.

So, what would it take? hmmm…I don’t know, but I’ll take some guesses:

Step 1. Securing the talent is really key. This actually creates a barrier to entry to your competitor — the media companies. always nice having a barrier to entry, kinda like a patent. So you want to spend liberally here. And you’ll have to promise the best talent that you’ll be around for a while so contracts with them for a few years will be necessary. I really don’t know how much these guys make. If I said $100 million over three years, that’s $33 million per year. That doesn’t seem like enough, so I’d say $250 million over three years.

Step 2. Distribution — which is perfecting the home solution — the software that will run the system and give all the new cool features, the wireless standard and adoption to existing and new TV screens. Again, I have no idea, but $150 million over the next 3 years? Also, you might want to subsidize the price of the home wireless system and the adopters to the screen to speed adoption in the home. So, there’s a lot more you can spend here too.

Step 3. Marketing. I have no idea, again, but … $60 million/year x 3 years = $180 million

Step 4. Monetization. The cost here is what are your running costs before you break even? So, the chief consideration will be production. How much are you going to produce? Again I don’t know, but in the first year, I’d say your production costs should be 1/2 of the cost of one of the networks. In the second year, 100% of the typical networks content costs, and in year 3, 150% of a typical network. I am sure there’s someone who can tell me that but I am going to take a stab in the dark and say production costs are a billion a year at a typical network. So over 3 years, make sure you got $2 billion to plow into production.

So, if I do my math right, about $2.58 billion over three years.

Rupert spent a lot more than that to start Fox.

Any takers?

P.S. As I think more about this, it’s actually more possible than I originally think. And I hate to bring up the bogie of Microsoft, but their media center is a lot better than people give them credit for. they pretty much solve the in-home distribution system. They are well positioned to be the ones to secure the talent to make the new shows and put it over their media networks. And they have enough cash for it too. But i doubt they’d have the guts to buck the studios. On the other hand, their media centers could be leveraged by a new entrant.

Tiran,

You are absolutely right that the distribution method is already setup (in terms of microsoft). And while I agree that a large minority of web savvy citizens would jump at the chance to be a part of internet television (as consumers), I can only think that much of our society is stuck in the baby boom era. Personally, I don’t see my parents, or their friends, hoping on the internet television distribution channel yet. Although if Apple can properly market Apple TV and fix a few bugs, that is the best model for bringing in high quality content to the average home. After all, wi-fi is practically common place in many middle to upper class homes. I feel a subscription program would make the average boomer more inclined to jump on the internet TV band wagon. Possibly something in the vein of Sirius, or Rhapsody, only for television.

Cheers,

Mike
The Issue | (link)

ps- any and all feedback is much welcomed on TheIssue.com

If bringing in Moms and Dads is key to online media you need to get the content on to the television. That’s the key. It’s a simple device (even if my Mom sometimes can’t figure out which remote does what). Best of all, its opposite the couch or recliner.

The other issue, and its been said, is content. First, we’re beyond the era of a guy sitting in front of his webcam being considered professional content and too much of the content out there today is two guys standing in front of a green screen reviewing products. It’s done to death.

We need serialized situation comedies, dramas, reality series, news, etc. Everything that television offers needs to be offered on the internet.

Shameless plug: Lutz and Balls, Paranormal Investigators (http://www.lutzandballs.com) is a new series in development that is a situation comedy in short form (3-8 minute episodes). Perpetual salesmen and slackers, Craig Lutz and Bill Balls lose their corporate sales jobs and set off to get rich quick by diving into the tabloids as paranormal investigators. It’s X-Files meets Bill and Ted… Heck, here’s a sneak peak at episode 1: (link)

When the market allows, we’ll kick it up to 22 minutes just like a full blown 30 minute sitcom on television, but at this time we don’t think the audience is there… yet.

Prove us wrong, though. We’d love to get a big production deal and we’re still looking for sponsors.

And so it goes…

That that isn’t the link to episode one. This is (link)

he principal value of television distributed over IP is its openness, so efforts to bring long-form, highly produced video content to the living room must embrace that fundamental value proposition with an interface that’s as easy to “surf” as my Time-Warner channel guide.

Continue reading at
(link)

Actually, whatever the next paradigm is for TV, the search-discovery-and-choose process must be MUCH easier than the time warner remote. And actually, creating this part of the solution is (my bet) the most important part of the next TV paradigm.

And yes, that search-discovery-and-choose process must cover “user generated” content and such. Though this is not as important as making sure access to professional content is seamless.