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Battlestar Galactica and the Death of Networks

May 15, 2005

On Mindjack this week, Mark Pesce has an excellent article — “Piracy is Good? How Battlestar Galactica Killed Broadcast Networks“.

The article starts out with a familiar refrain (one I’ve sang myself a number of times) — the one about how P2P distribution has been shown to actually increase conventional consumption. In this case, the example is the wildfire spread of Battlestar Galactica torrents in the three months between the series airing in the UK and the US SciFi channel premier, with an unexpected increase in viewership in the US.

Old stuff — which doesn’t make it wrong, the networks just don’t want to hear it.

It doesn’t take much math to figure out that networks could dramatically increase viewership (particularly of “long tail” shows that are no longer getting airtime anyway) by offering downloads or torrent trackers themselves.

The problem is, advertising support broadcast networks don’t want to increase show viewership. They want to increase revenue. The shows are just that inconvenient wrapper around the ad payload. This same ad payload is often stripped out in todays TV torrent distributions, and even if it wasn’t, a substantial amount of advertising is regional in nature, and isn’t effective for a worldwide viewership.

It’s possible (perhaps even likely) that if an officially sanctioned download (with ads) was available, people wouldn’t bother stripping out ads and redistributing it unofficially. National or worldwide (or ‘net centric) advertisers could be found to replace regional ads.

Mark takes a different tactic, and goes on to suggest replacing interstial advertising with ad overlays (like the little “network id” bugs in the corner of the screen), which can’t be removed easily without taking content with it. He makes an effective case that advertisers are ready fpr this, and it makes great economic sense.

The advertiser is looking to lower costs in advertising; if those advertisers are paying between $250,000 and $500,000 for thirty seconds of advertising (in the United States), just a handful of advertisements would cover hyperdistribution costs. It’s a numbers game: if enough viewers watch a hyperdistributed television program, it is cheaper for advertisers to work with producers, and handle the distribution themselves. Furthermore, if the program is widely popular, it is far, far cheaper to do so. In other words, the higher your ratings, the cheaper the advertising. That’s precisely the reverse of broadcast television, and one big reason that advertisers will find this model so appealing.

It’s here I think that we come down to one of the two real reasons the whole “content distribution” industry is so scared of ‘net distribution.

They’re unnecessary.

Once you start doing this, they can be easily replaced by a smaller “middleman” industry to sell advertising and distribute over the ‘net. Deals can be brokered between content producers and advertisers, and material distributed at a much lower cost, without having to have a costly network of TV stations as a barrier to entry. Much more content can come out on ‘spec, target narrower markets cost-effectively, and have a productive revenue generating life much longer than today’s TV season.

The video content industry stands to be disintermediated, just like the music labels are being. Today’s players can either move to the new business model, or try to milk the existing one for whatever it’s worth while trying to get the government to prop up their failed model.

All signs lead to the latter — the MPAA’s renewed battle against TV Torrent sites is just another sign of the time.

I suspect the other key reason they’re scared of the ‘net is that they’re waiting for someone to get a functional on-demand market generated. DVD sales have proved that people are willing to pay money for TV series, and with Microsoft and Apple both in striking distance of a working living room pay-and-download system, the content companies must have visions of millions of sales of TV episodes at a buck or two each.

It’s a nice dream (if you own the content), but this will no more kill net distribution of material for free than iTunes has killed P2P audio downloads. As Mark points out in his article, people have come to expect TV to be “free” (advertiser supported).

This is going to be a difficult mindset to change, and it’s always easier to float downstream than it is to paddle upstream.

We’ll see what happens.

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