Andrew Frank

The past few weeks have revealed a sharp acceleration in the disruption of the TV business by new technology. Forces set into motion will play out over the next six months with far-reaching consequences for the medium that, more than any other, has shaped our culture for the last half century.

So far the Internet has not been kind to incumbent media businesses: it’s taken down directory publishers, music labels, and newspapers. But the story of Internet-driven disruption is largely a tale of unintended consequences. Google certainly didn’t set out to disrupt newspapers, it just happened to be a side-effect of its mission to index all the world’s information. Nor was Craig of Craigslist out to kill the classified ad business. Similarly, I don’t think Cablevision intends for Network DVR to disrupt TV broadcasting. But…

There are four events of the past four weeks that look to be harbingers of end of TV as we know it. These are U.S.-centric developments, but, when it comes to the TV business, America holds disproportionate sway. (In fact, some have argued that America’s domination of television bears a direct connection to its global dominance in other areas; see Erik Barnouw’s highly recommended Tube of Plenty: The Evolution of American Television for a discussion of this and other issues.)

The four events are:

• The Digital Transition, which officially shut off analog broadcasting in the U.S. on June 12, which has left broadcasters scratching their heads about what to do with all their new digital transmission capacity
• The “TV Everywhere” announcement by Time Warner and Comcast, who plan to have the service extend subscription-based access control to online TV viewing based on industry-defined authentication techniques
• Canoe Ventures’ suspension of plans to roll out addressable TV advertising on cable TV anytime soon. The plan, called “Community Addressable Marketing” (CAM), would have given broadcasters the ability to offer ads targeted and displayed selectively to different viewer segments on cable TV. The abandonment of the plan illustrates the magnitude of the challenge presented by dependencies on legacy technology in the highly dispersed operations of the cable industry.
• The Network DVR decision, appeal of which was rejected by the U.S. Supreme Court, leaving broadcasters who were trying to stop Cablevision’s plans to allow consumers to “record” shows on virtual storage devices located in the cable cloud instead of their homes without legal recourse. (See Mike McGuire’s post here.)

Any of these taken individually would be pretty major news, but taken together, they point to some major instability in the ecosystem. The Network DVR decision, in particular, seems to be a fundamental game-changer for the economics of video-on-demand services (the line between VOD and Network DVR being increasingly hard to draw the more you think about it), as well as the economics of advertising, given the well-established tendency of home DVR users to skip ads. Of course Network DVR doesn’t have to allow ad skipping – online video services have clearly demonstrated the feasibility of making ads non-skippable even in on-demand content – but these features now appear to be a matter of negotiation rather than legal mandate.

So what do all of these have in common? Try this: they all indicate an increasing need for decision-makers at the highest levels to confront and understand the low level details of how technology is affecting every aspect the TV experience. High-level guiding principles no longer hold – we need storyboards and detailed flow charts to plan and negotiate business policies.

I once took a sales training class in which it was asserted that business executives spoke three different languages (and that the key to selling to them was to first determine which language they spoke). The three languages were: the language of CXOs, which speaks in terms of market-size and market-share, the language of VPs and Line Managers, which speaks in terms of revenues and costs, and the language of Directors, Designers, and Developers, which speaks in terms of features and functions. In general, the idea is that people turn off pretty quickly when you speak to them in the wrong language.

From this perspective, you could argue that the secret of the technology’s most successful leaders – Bill Gates, Steve Jobs, perhaps Eric Schmidt – was their ability to speak all three languages fluently, but mostly to see and exploit the subtle connections between feature-function thinking in the design details of products and the resulting major shifts they can produce in market share. Whether it’s tying the browser to the operating system, tying the device to the store, or – well, I don’t have one for Google yet, but you get the idea.

So, TV executives take note. You need to spend more time talking with your engineers (and analysts who can translate what they’re saying). In the words of Bob Dylan, “you better start swimming or you’ll sink like a stone, the times they are a changin’.”

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