Television Strategic Investment Scenarios:

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• Television StrategicInvestment Scenarios
• Your Role as a Disruptive Innovator
• Dennis L. Haarsager
• Digital 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 OHara, 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 Innovators
Dilemma
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Examples of Established Versus Disruptive
Technologies

• ESTABLISHED
• 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 Innovators
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 Innovators
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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Pubcastings 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 PTVs

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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)

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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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Consultants 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 Consultant
• 1019 Border Lane, Moscow, ID 83843-8737
• 208-892-9445 e-fax [phone]
• haarsager_at_moscow.com
• www.technology360.com
• Associate Vice President, Educational
  Telecommunications Technology, Washington State
  University
• Box 642530, Pullman WA, 99164-2530
• 509-335-6530 e-fax [phone]
  haarsager_at_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

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• Television StrategicInvestment Scenarios
• Your Role as a Disruptive Innovator
• Digital Distribution Implementation Initiative