February 11, 2008
Pulling Out the Crystal Ball: Is Streaming the Way of the Future? (1 of 2)

There are a lot of lingering questions following the writer's strike. Will TV audiences return? How will networks recoup the lost revenue of the last three months? Will TV meet the same fate as newspapers and see advertisers move to greener new media pastures? Could NBC's reaction be the beginning of the end for the fall premiere season and the up fronts?

These are all interesting questions, but one sentence in this Washington Post article caught my attention Sunday afternoon, referring to the contentious and complicated issue of writers' payment for streaming content online: "[t]he guild, in turn, held fast, arguing that writers had to share in the profits of what may become the preeminent way to view filmed entertainment."

I think this leads to the most interesting question of all. Will streaming episodes online become the primary way that people view television content? And, perhaps equally as important, will that be a viable way for networks and producers to monetize content? I would argue that the shift is is not, as some suggest, a foregone conclusion.

Eventually, my guess is that we will use the Internet to access content more than we do today. That said, a comparison with DVDs and their residuals, an understandably sore spot for writers, may not be the best one. DVDs took off as quickly as they did in part because they provide a more convenient and different way to watch television and offer on demand access to content, just like downloading or streaming.

The difference is that DVDs, like VOD and DVRs, use more or less the same technology that people already had in their homes, or which replaced or were incorporated into existing ways of watching (such as the VCR). DVDs also integrate the convenience and technology that enable people to access content the way they were used to, watching video on the television screen. This method also created a legal avenue for people to do something they had already been doing: recording, archiving, and sharing TV content.

VOD has been taking off in the last year as more people get digital cable, but its popularity is driven by its ease of use, utilizing the same technology that most people are accustomed to using, a TV and a remote. Further, charges conveniently show up on a centralized cable bill. Also, both VOD and DVDs are monetized using a pay-per-view or pay-to-own model and don't rely on people watching advertising.

How prevalent streaming becomes in relation to other methods (DVD, VOD, broadcast, downloads) will ultimately depend on the collective movement of five interdependent forces: content creators (including writers), technological change, cable companies, advertisers and audiences. I will look at one of these aspects in greater detail now and will then look at the other four forces in a subsequent post later tonight.

Content creators

As NBC's statements about not going to the up fronts this year suggest, the old models of financing television have not adapted to the new realities of how people actually watch TV. The problem is, networks and advertisers were comfortable with the old models, and no one's quite sure if the risk of doing more product placement and in-program ads is actually worth it.

This may be the right time for content creators to look to the music industry and begin to change their revenue model, looking particularly at how high-status creatives have pulled away from record labels. Last year, Ana Domb and others wrote about Radiohead's move to what was more or less a self-publishing model, but for a mass audience. Madonna announced a deal with Live Nation to manage all facets of her music and image. The Internet has definitely given us more opportunities to find the audience that will help to finance cultural production.

That said, I'm not suggesting that TV could get to quite the same place. More people are often involved in the production of a TV show than an album, and decision-making is more distributed. However, now may be a good time for writers and producers in particular to adopt a more entrepreneurial approach to the marketplace by adopting a model with lower upfront costs and payments and joint ownership of properties by the contributors, like shareholders in a corporation. Some have already tried to do this, but it will take several years and more prominent writers and producers taking the risk to really change things.

Rights management is another important issue. As we've seen in the music industry, effective DRM is difficult and has the potential to be as much a problem for PR as it is a financial problem. Opening up distribution is critical to publicize new properties but may mean losing advertising revenue. Because they aren't "network suits," writers in particular have a lot of credit with and goodwill from the audience. Asking for restraint in illegal copying and distribution would be a very challenging communication but one that writers have a better chance in doing successfully than the networks. The other option, of course, is to incorporate more advertising. The bright side to this model is that the writers would probably have much more control over what products were used and how.

Unfortunately, comments are still down on the blog, but I would still like to hear your comments. Please email me your thoughts at eleanor@sloan.mit.edu, and I will post them next week as an update to these posts.

Stay tuned...