A Warning To Heed

Ad-supported TV networks got some advice from Wall Street last week on how to stay relevant, maybe even stay alive: Stop acting like ad-supported TV networks.

The message, delivered in separate reports from Magna Global and Deloitte, was that the networks are dinosaurs with one foot in the tar pit, while their broadband competition is bursting with new energy and new delivery systems. That competition includes not only cable, satellite, phone and computer companies but also the individuals who will create their own ad hoc networks and deliver their own programming—and anybody else’s they find—on the Internet.

The networks, and their co-owned content suppliers, cannot simply defend the old model with lawsuits against teenagers and court challenges to new technology.

It’s like damming a flood. The water will find another way around. Take 24, for example. Illegal downloads in the UK—the Fox drama is the favorite among peer-to-peer (P2P) network file-sharers there—have almost tripled from last year to this. Such show-stealing/sharing is bound to take off in this country.

If the movie studios win their current courtroom fight against Grokster and clamp down on P2P software, that will only slow the flow, says Magna Global.

As the music industry learned, it is virtually impossible to stop people from sharing their digital content.

Networks, argues Deloitte in its report, must become interactive. They must push on-demand technologies. They must be flexible enough to repackage and repurpose their content over a host of platforms.

They also have to start thinking in terms of “swarm networks,” the decentralized, self-organizing collective behavior that forms around those P2P networks. We are already getting ready to swarm. From our BlackBerries to our cellphones to our laptops, we are gearing up to create our own media matrices.

The drag on broadcasters is, of course, the legitimate and crucial issue of content protection. Theirs is a multibillion-dollar business that hinges on the value of intellectual property. We’re not saying don’t protect the franchise. We’re saying that protecting the franchise means recognizing that the solution is a compromise between defending the fortress at all costs and completely tearing down the walls. It means coming up with new delivery models—something like iTunes TV maybe

Networks are beginning to think digitally, naming executives to start thinking outside the pipe—ABC News Now is a good example—but devising new methods of content-sharing has yet to become part of the DNA. Those reports by Deloitte and Magna Global are more than mere suggestions. We note also that outgoing NAB President and CEO Eddie Fritts, in his convention speech last week (see below), explicitly warned broadcasters that it’s high time for them to find ways to embrace technology before they are destroyed by it.

The spur for broadcasters should be the realization that advertisers will find a way in—Magna was advising its clients to start mapping out their routes—via embedded ads, product placement or direct-response appeals tied in to the content.

Broadcasters can innovate along with everybody else or follow along afterward. Or, as these two studies suggested, they can stay the course and get run over.