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November 2008

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Broadcast Networks Going Digital - One Way or Another

by Glen Emerson Morris
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With the world's economy in one whole juju flop situation the current plight of commercial broadcasting isn't likely to attract much sympathy, but it certainly does deserve our attention, even if not our prayers.

Over the past decades network broadcasting has seemed much like the Titanic, sinking ever lower in ratings as a digital sea overwhelmed it deck by deck. Current ratings would suggest the bridge is now underwater, and the bridge crew has decided it's time to learn to swim, or at least learn to tread water, while they try to figure out a business model that will float. They may just have found one.

Many of the networks have started to license at least some their shows for viewing on the Internet using a service named Hulu, and it's showing promising results. Owned by NBC, Universal and News Corp., Hulu entered the Internet World in August, 2007 as a service designed to let consumers watch movies and TV shows on the Internet sponsored by limited commercial interruption. Currently it's just one 30 second commercial every 10 to 15 minutes.

Since 2007 Hulu has grown to offer content from over 50 broadcasting networks including NBC, Fox, PBS, USA Network, Oxygen, FX, SPEED Channel, Comedy Central, Sci Fi, Style, Sundance, E!, and Bravo.

On the technical side, Hulu uses the Flash Video format to deliver a picture that's much better than YouTube, but not as good as broadcast quality. When you click on a link on the Hulu Website, it launches a customized Flash Video player to play the movie. Interestingly, Hulu licenses linking to its shows to a variety of major Websites, including Yahoo, MSN and social networks like FaceBook, allowing people to put links to their favorite TV shows and movies on their personal pages. This opens up a world of possibilities for advertisers, and the networks, too.

The hope is that by using information about the consumer available on the syndicate sites like FaceBook the ads Hulu features can be targeted much more precisely than broadcast TV could ever manage. Eventually sponsorship will be at the local level, with the local gas stations appearing in ads only seen by a few hundred people.

The social networks help launch new shows, too. It turns out there are people happily willing to watch shows on the Internet that they would not watch on broadcast TV. One of the networks noticed that a show that was not doing well in broadcast ratings was the number one hit on one of the social networks, which added a substantial eyeballs to the shows overall ratings. This is not really surprising when you consider that social networks link people with similar likes and dislikes together, and if one in a particular group like a show, others in their group may like it as well.

Over the last few years several of the broadcast networks attempts to retain an audience have backfired. The networks have committed to spending much more per episode, raising production values substantially, but also reducing the number of episodes they could afford to run each season. This has lead to shows disappearing for weeks, or months, at a time, as the holes in the schedule were filled by other shows the previous audience might or might not like. The networks have also gone too far in constantly changing program schedules, forcing viewers into a constant game of hide and seek. And the network's idea of promotion these days is to run promos for other shows on top the show currently running, sometimes making it impossible to see what is actually happening on the program.

The networks seem to have forgotten the concept that viewers are creatures of convenience and habit. Most viewers grew up on TV that had predictable schedules that consumers could schedule their week around. In the fifties, one did not schedule a PTA meeting on the same night I Love Lucy was on. Period. Those born A.I. (after Internet) are used to seeing things on demand, making broadcast stations seem like antiques, a view that's getting harder to dispute.

Internet based video offers a fixed schedule in that the shows it offers are always available immediately on demand, making both generations happy. Many viewers are perfectly happy to watch an show with inferior video quality in order to see what they want to see when they want to see it, and with limited commercials and no annoying overlays.

How well the Hulu approach will work in America with the relatively low bandwidth available here is another issue. In some ways, Hulu is bound to shake things up. Many people get high speed Internet access through a cable modem connected to their cable service. On the one hand cable systems maximize profits by selling cable channels in groups of channels making customers pay for lots of channels they never watch just to get the few channels they do watch. On the other hand, cable systems sell Internet service that is increasingly allowing consumers to watch only their favorite shows on their favorite channels, and at whatever time they choose. These are diametrically opposed business models. (Comcast recently announced a bandwidth cap of 250GB a month. Customers using more than that will soon have the attention of Comcast.)

At this point it's doubtful the move to digital broadcast television will actually help local broadcast stations or the networks. At best, the station's current viewing audience will just be split between all of the digital channels the station offers, and no audience net gain will occur. There might be some improvements in audience targeting, but not much beyond that, especially since the local stations seem to just want to use the additional digital channels to time shift the content they are already offering. It would be interesting to see what would happen if just one local digital channel, somewhere, was dedicated to showing movies 24/7. Or broadcast two or three of the top cable channels, like Discovery or Animal Planet. If most stations in the cities broadcast a few formerly cable only channels each, the local broadcast stations might actually grow their audience instead of lose it.

It will take a few years for to see how digital broadcasting turns out, but one thing is certain now. Hulu is more than a passing fad, it's the wave of the future.

Glen Emerson Morris was recently a senior QA Consultant for SAP working on a new product to help automate compliance with the Sarbanes-Oxley law, an attempt to make large corporations at least somewhat accountable to stockholders and the law. He has worked as a technology consultant for Yahoo!, Ariba, WebMD, Inktomi, Adobe, Apple and Radius.

Copyright 1994 - 2008 by Glen Emerson Morris All Rights Reserved

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