Television StrategicInvestment Scenarios:Your Role as a Disruptive InnovatorDennis L. HaarsagerDigital Distribution Implementation Initiative

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Digital Distribution Implementation Initiative

CORE WORKING GROUP

• Ed Caleca, PBS• Jeff Clarke, KQED• Dennis Haarsager, DDII

consultant; KWSU/KTNW, NW Public Radio

• Byron Knight, Wisconsin• David Liroff, WGBH• Pete Loewenstein, NPR• André Mendes, PBS• Jim Paluzzi, Boise State

Radio

A strategic investment initiative funded by the Corporation for Public Broadcasting.

Joint Radio

Television External

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Multidiscipline Experts Group• Jon Abbott, WGBH• Brenda Barnes, KUSC• Rod Bates, Nebraska• Joe Campbell, KAET• Scott Chaffin, KUED• Beth Courtney, Louisiana• Vinnie Curren, WXPN (now CPB)• Tom DuVal, WMRA• Tim Emmons, Northern Public

Radio• Fred Esplin, Univ of Utah• Glenn Fisher, KTCA• Jack Galmiche, Oregon• John King, Vermont• Ted Krichels, WPSX• Jon McTaggart, Minn Public Radio• Paige Meriwether, KUED

• Steve Meuche, WKAR• Peter Morrill, Idaho• Meg O’Hara, WNET• Maynard Orme, Oregon• Allan Pizzato, Alabama• Lou Pugliese, onCourse• Don Rinker, Alaska• Meg Sakellarides, Conn. Pub R-

TV• Bert Schmidt, WVPT• Jonathan Taplin, Intertainer• Kate Tempelmeyer, Nebraska• Tom Thomas, SRG• Mike Tondreau, Oregon• David Wolff, Fathom (now

Sunburst)• Art Zygielbaum, Nebraska

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Disruptive Technologies

• Innovations that result in worse product performance, at least in the near term.

• Bring to market a very different value proposition (typically cheaper, simpler, smaller and frequently more convenient)

• Usually are the cause when leading firms fail – not sustaining innovations

From Clayton M. Christensen, The Innovator’s Dilemma

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Examples of Established Versus Disruptive

TechnologiesESTABLISHED• Photographic film• Wireline telephony• Full-service brokerage• Campus-based instr.• Medical doctors• MRI/CT scanning• Offset printing• Cardiac bypass

surgery

DISRUPTIVE• Digital photography• Mobile telephony• Online brokerage• Distance education• Nurse practitioners• Ultrasound• Digital printing• Angioplasty

From Clayton M. Christensen, The Innovator’s Dilemma

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Disruptive Innovation

• “The pace of technological progress generated by established players inevitably outstrips customers’ ability to absorb it, creating opportunity for up-starts to displace incumbents.”

• “There are times at which it is right not to listen to customers, right to invest in developing lower-performance products that promise lower margins, and right to aggressively pursue small, rather than substantial, markets.”

From Clayton M. Christensen, The Innovator’s Dilemma

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Public Broadcasting Today

• “Everyone is baking their own cookies”• “Hail Mary” method of funding depreciation• Usage strong compared to other public service

providers (11.8B person contact hours annually for public radio, 5.8B household contact hours for PTV)

• Policy support of public broadcasting less assured• Our esteem is an asset that can be leveraged or

squandered• Other public service entrants entering electronic

media, usually using disruptive technologies

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Electronic Media Today

• Conglomerates dominate ownership and control diverse distribution outlets, with both “horizontal” and “vertical” operations and pricing advantages

• Users are beginning to take control of when they access programming

• Subscriber-based economic models (e.g., HBO) are competing with ad-supported ones

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Television Today• Cable/DBS are gatekeepers for the main receiver

in 85% of homes• Cable/DBS increasingly deliver original

programming• Cable/DBS focus is on quantity vs. quality• Non-broadcast channels are on threshold of

overtaking broadcast channels in viewing• Television advertising may erode as cable & DBS

develop greater advertising options • No federal support for multicast; no active support

for non-HD models

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Pubcasting’s Diverging Fortunes

• Terrestrial digital transition is mandatory for TV, market-driven for radio

• Content production entities are generally licensee based (with major exception of NPR)

• Public TV viewing and number of members is steadily declining, while public radio listening and memberships have increased; revenues generally following the same vectors

• Public radio players have explored alternative distribution platforms to a greater degree than have PTV’s

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Television In Five Years - 1

• OTA terrestrial will be of minor consequence as last-mile distribution to mass audiences

• Viewers will choose from increasingly customized, personalized programming options

• Revenues from other than spot advertising will become significant and competitive

• “Must convince” replaces “must carry” for multicast channels; some stations will be shut out of cable/DBS

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Television In Five Years - 2

• Erosion of audience and revenue threaten existence of many licensees; may be fewer licensees

• A variety of technologies, wired and wireless, to compete for delivery of services

• Audiences will still value storytelling, but truly compelling content will continue to be scarce

• First stations in the new mobile video/multimedia service will begin operation

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Plausible But Unexpected Wins

• DTV killer application – content or service – that accelerates adoption

• DTV universal set-top box works with a wide variety of digital services, including DTT

• New broadcast models (rich media, mobile) prove economically viable

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The Closet of Our Anxieties

• DTV DOA with stranded $1B+ investment; diminished credibility with funders

• Minimal or no federal funding for public TV NGIS – capabilities drastically reduced

• Early surrender of analog spectrum• Continued reduction of funding for public

broadcasting (now seems likely for television)

Strategic Investment Scenarios

Investments may be individual or collective

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Collective Investment Modalities

• Toolkits – activities or tools licensees can use to achieve best practices without need for collaboration

• Service Clouds – stations outsource significant activities created for specialized purposes

• Colonizers – efforts to operate public broadcasting mission elements independently with or without station involvement

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Scenario 1 – Sustaining

• Make strategic investments in initiatives that sustain the legacy (broadcasting) business

• Tends to maintain operational independence• Preserves as much “gross tonnage” of public

service as possible, at least in near term; lengthening the “glide path”

• High investments in “toolkits,” somewhat lower investments in “service clouds,” little in “colonizers”

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Scenario 2 – Repositioning

• Make strategic investments in initiatives that reposition public television in new directions consistent with historic mission

• Capacity and scale created at collective level• Emphasis on editorial (programming) rather

than operational independence• Accepts the current “glide path” but creates

new “climb paths”• Increased investments in “service clouds” and

“colonizers”

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Innovation Modality1 Tool Kits

Innovation Modality 2Service Clouds

Innovation Modality3 Colonizers

Public Television Investment ScenariosDiverging Investment Possibilities

DLH, 1/7/03, p. 1

Diminishing ability to make parallel strategic investments within both scenarios

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Consultant’s TV Provocations

• Form “virtual broadcast groups,” digital distribution companies that operate key functions of current stations across markets

• Provide elective, centralized station operations services through PBS

• Create public service “digital condominium association” with other state, national and international advanced networks

• Task system economics panel with devising strategies to redeploy [insert ambitious amount here] to priorities

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Questions/Provocations for Integrated Media

Professionals• Most broadcasters seem to treat the Internet as a

sustaining, rather than disruptive, technology innovation. Most indicators, however, point to it being the latter. How do you design your services differently in each world?

• If we consider the Internet as a disruptive technology for broadcasters, what investment and service strategies should we follow in delivering IP services?

• How do we exploit the emerging Wi-Fi and (at least for joint licensees) DTV wireless data capacities?

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Contact Information

Dennis L. Haarsager, DDII Consultant1019 Border Lane, Moscow, ID 83843-8737208-892-9445 • e-fax 206-770-6100haarsager@moscow.comwww.technology360.com

Associate Vice President, Educational Telecommunications & Technology, Washington State University

Box 642530, Pullman WA, 99164-2530509-335-6530 • e-fax 888-455-1070 • haarsager@wsu.edu

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Quotes Appropriate to Change

• Where a calculator like the Eniac today is equipped with 18,000 vacuum tubes and weighs 30 tons, computers in the future may have only 1,000 vacuum tubes and perhaps weigh only half a ton. – Popular Mechanics, March 1949

• We would rather be ruined than changed, We would rather die in our dread, Than climb the cross of the moment And let our illusions die. - W.H.Auden

• The first principle is that you must not fool yourself - and you are the easiest person to fool. - Richard Feynman

Television StrategicInvestment Scenarios:Your Role as a Disruptive InnovatorDigital Distribution Implementation Initiative