The Rise of Broadband Video and the Future of Digital Media

The Silicon Flatirons Center, The Cable Center, and Communications Technology Professionals brought leading academics, regulators, and businesspeople to Denver on Oct. 12 to discuss a video programming industry revolutionized by broadband.

By Eric Schmidt, J.D. Candidate 2011

The Silicon Flatirons Center, The Cable Center, and Communications Technology Professionals brought leading academics, regulators, and businesspeople to Denver on Oct. 12 to discuss a video programming industry revolutionized by broadband.

The conference, titled “The Rise of Broadband Video and the Future of Digital Media,” featured panel discussions and keynote addresses on topics including the changing technology of broadband Internet, its effect on business models in the video programming industry, and public policy implications of the shift toward broadband video. The conference addressed questions such as whether services like streaming video on demand will complement or make obsolete the traditional model of network channels, and whether delivering video content for free online is a sustainable business model in light of opposite experiences by the recording and newspaper industries.

Federal Communications Commissioner Meredith Attwell Baker began the conference with a speech on the federal government’s National Broadband Plan, which is scheduled to be unveiled in February 2010 after a series of workshops and field hearings. She said the plan will have three key objectives: deployment of broadband facilities, adoption by users, and introduction of new applications and devices.

“The bottom line is that broadband is critical infrastructure, and so we have to accelerate the development of the broadband ecosystem,” Baker said. “The utility of the Internet is an important driver for adoption and usage. The free flow of information among a wide range of users has much to do with the growth and adoption of broadband, and useful content is what draws potential users for a closer look at all the Internet has to offer.”

Video programming on the Internet has exploded over the past few years and continues to grow exponentially, Baker said, citing the popularity of services such as YouTube and Hulu. Broadcast and cable networks are now making an increasing amount of their own content available online.

“We have moved from using the Internet to watch a homemade video of a dancing baby to watching ‘Dancing with the Stars,'” she said. “If consumers are offered more types of the high-quality online video content that they want to see, adoption will increase.”

ZillionTV CEO Mitch Berman then discussed his experience leading a company that delivers streaming video directly to subscribers’ televisions. He said the whole concept is about empowering consumers and giving them what they want.

Berman said the industry should embrace a shift to complete, on-demand access to streaming video, without traditional constraints of schedules or channels.

“There is so much change that is enveloping us right now, and it affects antiquated business models that many are holding onto,” he said. “But we are not getting into a lifeboat to just survive. I submit to you that we are getting into a lifeboat to prosper, and those who don’t adapt to change are going to miss the boat.”

The first panel discussed disruptive innovations in broadband video that have changed how and where consumers can access content. Panelists included moderator Tom Lookabaugh, a Silicon Flatirons senior adjunct fellow and chief technology officer at Entropic Communications; Richard Green, a Silicon Flatirons senior adjunct fellow and former president and CEO of CableLabs; Ryan McIntyre, managing director at the Foundry Group; Steve Sklar, director of product and partnership management for Qwest Communications; Jack Waters, chief technology officer at Level 3 Communications; and ZillionTV’s Berman.

The group agreed that competition between broadband video and traditional sources such as broadcast and cable is not a zero-sum game, so the industry must recognize that consumers for the foreseeable future will have multiple ways to access content.

“It’s growing at both ends,” Green said. “It means more opportunity, it means more consumption, and it means happier customers.”

One possibility is an “authentication” model, where paying cable subscribers receive access to premium content online. Panelists said the necessary technology for authentication is in place, but with so much content already online, people will need incentive to try something new, and they want devices that are “less geeky” easier to use.

The second panel discussed changing business models and emerging opportunities in the video industry. The panelists were moderator Raymond Gifford, a Silicon Flatirons senior adjunct fellow and partner at Kamlet Reichert, LLP; Stanton Dodge, general counsel at DISH Network; Joe Waz, senior vice president at Comcast Corporation; Michael Zeisser, senior vice president at Liberty Media Corporation; Henry Ahn, executive vice president for TV networks distribution at NBC Universal; and Jonathan Sallet, a Silicon Flatirons senior adjunct fellow and managing director at The Glover Park Group.

Panelists discussed the theory of economist Joseph Schumpeter that capitalism is a process of “creative destruction” where innovation destroys old business models and new companies replace incumbents who cannot change with the times.

“New models are both adding to the existing ones and undermining them,” Zeisser said. “Schumpeter is a helpful model, but the best point of view is to take the view of the consumer.”

Cable and satellite TV operate in a two-sided market where revenue comes from both subscriptions and advertising, but that is changing as online content becomes available for free and piracy and recording further devalue ad rates, panelists said. Advertising made free broadcast TV possible, but consumers dislike interruptions when surfing the web. At the same time, quality content is expensive to produce and requires some source of revenue to pay for new programming.

The last panel explored public policy implications of the shift to broadband video, including privacy and intellectual property issues arising from the ability to track viewer behavior and digitally reproduce copyrighted content. Panelists included moderator Paul Ohm, associate professor of law at CU; Ashlie Beringer, a partner at Gibson, Dunn & Crutcher; Mike Fricklas, general counsel for Viacom; Paul Glist, a partner at Davis Wright Tremaine LLP; Fernando Laguarda, vice president at Time Warner Cable; and Fred von Lohmann, senior staff attorney at the Electronic Frontier Foundation.

Fricklas, whose company recently sued Google over unauthorized posting of Viacom programming on its subsidiary YouTube, said he believes in fair use and is not in the business of suing people for original and creative use of video content. He said litigation could have been avoided by reasonable measures to filter user-posted content for obvious infringement.

“Building businesses based on infringement leads to chaos,” he said. “Innovation can’t just mean ‘distributing content without a license.'”

The network neutrality debate also ties into video distribution because of fears that content producers who also provide Internet access could use network management policies to slow down or block competing programming, panelists said. They also expressed concerns that targeted advertising as a means of funding video content could invade users’ privacy, even if the data collected is theoretically anonymous.

“You had better imagine that there is a dossier with your name on it, and that dossier has a lot of information about you,” von Lohmann said. “That can be used to deliver great ads, but the question is what else it can be used for.”

Gregory Maffei, president and CEO of Liberty Media Corporation, concluded the conference with a keynote address titled “Surfing the Innovation Wave . . . and Trying Not to Get Wiped Out.” The industry is in the middle of a “digital tsunami,” but the wave is cresting, he said. There are few truly successful free models, and the current competitive environment is unstable because free models are better at destroying competitors than creating sustainable businesses of their own.

“Free is a very powerful model,” Maffei said. “It grows quickly, it destroys value, but it doesn’t create a lot of value. The net of it is that you get a very unstable capital environment.”

Maffei predicted that just as newspapers have come to regret their initial decision to post stories for free online, Hulu will prove counterproductive to TV networks that are devaluing their own programming. He said his company is trying to focus on subscription and transaction models that create a sense of community and build relationships with consumers that go beyond price.

“The hardest thing is once you give it away,” Maffei said “Once it is free, it’s usually very hard to get the genie back in the bottle.”

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