Traditional TV companies head into the fall season with a gut-wrenching drama playing out off-screen: sinking stock prices at a time when the economy is healthier than it’s been in years.
That uneasy disparity has prompted intense scrutiny of 20th century business models frayed by changing consumer tastes and mounting competition from over-the-top providers like Netflix. Offerings legacy companies have rolled out in response—everything from skinny bundles to TV Everywhere to stand-alone OTT platforms—are objects of obsession for Wall Street and the media.
Little attention, however, has been paid to an arguably more ominous threat: what might be called the silent disruption to underlying TV technology, the humming infrastructures long known as “big iron” for their capital-intensive heft. Faced with the growing realization that these basic technical setups long used by TV companies aren’t well-suited to the new world of digital delivery, many players are scrambling to reinvent themselves. Their goal is to refashion operations to adopt many of the technology approaches used by big players like Google, Amazon, Microsoft and Apple. This, many veterans tell B&C, is the only way forward.
If successful, these efforts could upend the way consumers and Wall Street view the medium and allow them to do everything the Internet giants do now—target programs and ads to individual consumer tastes, quickly launch new services and rapidly embrace new consumer technologies. “The need for new approaches is really about having the agility to change with the marketplace and being able to stay flexible and agile for the future,” explains Vince Roberts, executive VP of global operations and CTO of Disney/ABC Television Group, who has vowed to “never again build a traditional TV facility.”
Over the last four years, Roberts and his teams have been working on a groundbreaking effort to put ABC’s master control operations in the cloud, using the kind of software, IP video technologies and commercial off-the-shelf hardware typically used by the tech giants for their operations. That effort, just completing its first phase, will open up new business opportunities in the next year and greatly speed the pace of innovation, Roberts believes, by allowing them to anticipate consumer trends rather than just reacting to them.
But if rewards are huge, the proponents of this silent revolution also face some major challenges and questions. How much will this transition cost? What will it mean for business models? Can the industry make the transition fast enough to satisfy consumers? And, importantly, is this technology even ready for primetime?
Learning From Netflix
“The only way the TV networks and even the MVPDs can compete in this new world is to move to an underlying technology that enables them to participate in the next generation technologies that Netflix, Hulu and Google can capitalize on because they don’t have a lot of legacy infrastructure,” explains Charlie Vogt, CEO of Imagine Communications. His company is supplying many of the basic technologies ABC is using for its new cloud-based master control. Last April in Las Vegas, Imagine hosted a conference during the NAB Show where Disney unveiled its cloud plans.
Vogt and others note that Google, Apple, Amazon, Netflix and others have been able to rapidly innovate and transform consumer tastes because their offerings are based on very flexible infrastructures using software, IP video and cheap, commercial off-the-shelf [COTS] hardware that is often based in massive data centers, the the cloud.
This infrastructure allows them to take advantage of the $1 trillion invested each year in IT technologies.That influx has fueled massive improvements in processing power as well as a host of new consumer technologies, which have been used to build growing over-the-top businesses using IP delivery of video.
The TV, cable and broadcast industries also have a sterling history of innovation. Over the last 50 years, they’ve nurtured and helped develop technologies for recording and shooting video, wireless video transmission, innovations in live production that make it possible for consumers to watch sports and news from all over the world, the first VOD services and broadband high-speed Internet services, just to name a few examples.
Their infrastructures are very reliable—viewers turn on their TV, they get a picture without having to wait for the video to buffer or load. But they were also based on hardware designed for specific purposes by hundreds of different vendors, which created facilities that were complex, costly and inflexible.
This “big iron” approach meant that networks had to spend millions of dollars on equipment if they wanted to launch a new network or service. Worse, the video standard used in TV facilities—SDI video—was incompatible with the IP video used for online or mobile distribution. That disconnect has forced them to transcode video digital delivery and create separate processes for those digital businesses.
“Today you have an SDI-based broadcast infrastructure that has been around for a long time that feeds an IP-based…infrastructure to the Internet and the two systems don’t naturally talk to each other,” explains Jeremy Legg, the CTO of Turner Broadcasting System.
Legg is part of a growing camp trying to overcome that problem by shifting to infrastructure that would give them the flexibility and interactivity of IP video while retaining the reliability of their existing tech setup.
Revolutions in the Cloud
Describing this transition and forecasting the end result is difficult given the very different needs of various players and individual companies.
In its purest form, vendors argue that broadcasters and programmers would keep their studios, cameras, newsrooms and their on-air production infrastructure but move most everything else to data centers (i.e., the cloud) that they either own (a private cloud) or are operated by an outside company like Amazon, Google, Microsoft or Verizon. In this new world, programmers would produce IP video and send it to the cloud where it would be processed for different devices, stored and played out for distribution as live linear feeds, on-demand content or even new networks.
Software interfaces in the broadcaster’s studios and headquarters would control software-defined networks that would allow ads and content automatically inserted into different feeds and targeted to individual consumers. This software would also run on top of commercial, off-the-shelf servers and hardware rather than customized broadcast equipment, making it easy to expand or reduce capacity.
That means broadcasters could mobilize a new channel in a few hours that might offer past seasons of a series just before the fall season launch. Or they could create channels of content tied to specific ad campaigns or sporting events.
“This gets rid of all the complexity for broadcasters, who now have to deal with new screen sizes, operating systems and formats every time they add a new device,” says Ralf Jacob, chief revenue officer for Verizon Digital Media Services, which is pitching similar services to programmers and stations. “They don’t need to be tech specialists who know how to deal with all the complexities of over-the-top video and the online world. They can focus on what they do best, creating and monetizing content.”
That streamlined model will obviously vary quite dramatically in the way it is applied, given the very different needs of individual companies. Broadcasters with extensive live news and sports programing would require infrastructures that will vary widely from those used by a kids channel playing out pre-recorded fare.
While timetables may vary, a growing sense of urgency has prompted a number of notable investments and deployments in recent months. In addition to Disney/ABC’s efforts to move its master controls into the cloud, Turner took a majority stake in iStreamPlanet in August to provide it with technologies for the transition to cloud-based systems and a number of other programmers are moving in the same direction.
“I’ve told my staff, I’m not interested in deploying any more blinking lights,” says John Honeycutt, CTO of Discovery Communications who is another major advocate of reinventing traditional infrastructure. “We need to move to this software-defined, cloud-based environment. There is a lot of detail about how we get that, but that has to be where we go….We’re doing multiple proof of concepts and are laying the foundation for the transformation over the next 24 months.”
Adds Stan Moote, CTO of International Association of Broadcasting Manufacturers (IABM), “There is no question that there is a greater sense of urgency on the need to transform their infrastructures.”
Surveys by IABM show that technologies related to multiplatform delivery has been the No. 1 purchasing priority for some time, followed by file-based workflows and media asset management. “All of those technologies show their interest in taking their facilities into this new world,” he notes.
They also provide a useful starting point for reducing some of the complexity of the current infrastructure. “We are looking for ways to combine our broadcast and digital infrastructures whenever possible,” says Keith Jackson, senior VP and CTO of engineering at NBCUniversal. “The goal being of a converged ecosystem with reduced complexities….We are making good progress but it is still a work in progress.”
Legg adds that they hope to bring their broadcast and online operations more closely together in the next two or three years and that the iStreamPlanet deal will help speed up the transition.
“That investment will help us move a lot of things to the public cloud,” which will give Turner much more flexibility to launch new services, he says. “It facilitates our efforts on the broadcast side to get to a place where…we will be able to migrate our existing SDI stack to an IP-based model and to begin to move things like our content libraries to the cloud and then ultimately look at cloud-based play-out.”
Meanwhile, broadcasters that have made heavy investments in Internet operations and start-ups are already benefiting from that experience.
Marc DeBevoise, executive VP/GM of entertainment, sports and news at CBS Interactive, notes that “we’ve been distributing full episodes, and live streams of major events like the Super Bowl and SEC football for a long time.” Doing so has provided experience and tech infrastructure that helped with the launch of the CBS All Access over-the-top subscription service.
Another beneficiary has been CBS Interactive Advanced Media operations, which runs in-house streaming and digital operations. It also handles the streaming businesses, websites and mobile apps for about 130 college athletic programs. The unit invested in Syncbak, which provides key technologies to enable 24-hour streams of affiliate stations.
Cycling Even Faster
Cable operators have very different needs but they have also been reinventing their infrastructures. “As we move forward, cable operators recognize that the core network and infrastructure looks less and less like cable and more and more like IP,” as it moves from “being hardware centric to software centric,” says Phil McKinney, president and CEO of CableLabs.
As part of that process the industry’s research consortium has reconfigured its operations, growing its staff from 130 to 210 in recent years, and building bridges with tech community by opening up a new office in Silicon Valley and bringing in new talent. “I would say that 50% to 60% of the staff did not come from the cable industry,” says McKinney.
This focus on software and new technical infrastructures is already paying off at Comcast, with cloud-based products like X1, added Sree Kotay, chief software architect for Comcast and executive VP, technology design and development at Comcast Cable.
That product, which allows them to greatly improve the user interface and search capabilities, is also part of a larger push to speed up the pace of innovation. Instead of making big product changes once or twice a year, “we are now delivering things every day and sometimes several times a day,” he says. “It is a very dynamic shift in terms of our operating model and the way we engage consumers.”
As part of these micro-updates, it has also established closer ties to Silicon Valley companies, where it now has a large staff of developers, and set up small teams that work directly with companies on new applications. One such effort with Electronic Arts was the recent launch of a gaming service on the X1 platform, Kotay noted.
The shift, however, faces some challenges. As reports in B&C this month have noted, there are still many concerns about the ability of existing standards to suit broadcast workflows and provide the kind of reliability they require.
The tech transformation will also require major operating changes that will fundamentally alter the way companies invest in technologies and their workforce, putting some jobs at risk and opening up new ones to people with the right skills. Technologists interviewed for this article declined to discuss layoffs, but it is clear that these changes are likely to be particularly hard on unionized labor, master control operators and other technical positions. These are the roles likely to be moved into outside data centers amid the push to put more operations into the cloud.
This resource trend, however, isn’t brand-new. A number of PBS stations have already undergone wrenching staff reductions as part of a major push toward centralized master control operations. Commercial stations have already reduced tech staffs over the past decade by automating many processes that once required human hands on the controls.
The impact of these changes on tech teams also poses some challenges for vendors. “The hard part is that you are pitching these new approaches to the engineers who feel like their livelihood is at risk and that providing all these services from the cloud will put them out of a job,” says one supplier of cloud-based services.
It will also force companies to rethink how they finance and manage their tech investments.
“One of the challenges with all of this is moving from a capital intensive model to an operating expense intensive model,” says Honeycutt.
On the plus side, the shift to cloud-based services means that broadcasters don’t have to make expensive upfront outlays to launch new services. Instead of spending several million dollars on a new facility for a new channel, they can simply buy more storage and services from their cloud provider. Then, if the channel fails, they can shut it down and not be stuck with a lot of useless equipment.
“I’ll be able to scale infrastructure up when I need it and scale it down when I don’t,” Honeycutt says.
But it also means that these companies will now be facing higher ongoing operating expenses and payments to big outside cloud-providers like Amazon, Google, Microsoft or Verizon and potentially some unexpected costs.
David Kline, chief technology officer at Viacom, reports having made great progress in improving their infrastructures to handle their rapidly growing online and digital businesses. In those efforts, “cloud-based systems have become a necessary evil,” says Kline. “You gain in efficiency and innovation but I think it is a myth to say it is cost positive for your balance sheet at this point in time.”
One issue, he and others say, are hidden costs or costs that are created by moving to cloud-based technologies. “Every time I pull some content down from the cloud or store it in the cloud you have to pay for that and those costs can be considerable,” Kline notes. “Cloud services can give you that quick spin-up of new services and faster innovation but you have to make sure it is not costing you more than it is worth.”
As companies put more content in the cloud, they will also need better connectivity and more bandwidth to quickly send a lot more content to those data centers, which can be expensive. Still, the potential payoff balances those risks, most argue. “Imagine a world where you can start to personalize networks and target advertising,” says Legg at Turner. “That is a direction we want to go and is one of the inherent promises of this technology shift.”
REVOLUTIONARY PROMISE AND PERIL: FIVE THINGS TO WATCH
1. BEST OF BOTH WORLDS. By adopting infrastructures based on IP video, software and cloud-based data centers, some technologists believe they can meld their hugely popular content with the best of the Internet that would upend the way consumers and Wall Street think about TV.
2. NEW REVENUE OPPORTUNITIES. If successful, the transition would allow programmers to personalize the delivery of content and ads, allowing programmers to better compete with over-the-top providers for digital dollars.
3. WINNERS AND LOSERS. Revolutionary change can be wrenching: the move to cloud- and IP-based technologies will produce some layoffs while creating new jobs for those with skills in IP video and software development.
4. WAITING FOR STANDARDS. Some complain that current standards for IP video aren’t suitable for the TV industry and a number of proposals have emerged to fix those problems. The big question is how much of a delay this will cause.
5. SPEED TO MARKET. Technologists stress the urgency of making a rapid transition, with some hoping to make key advances in the next two or three years. In a rapidly changing consumer technology landscape, will that be fast enough?