Why TV Lost the War

In the early days of interactive, many people assumed television and the Internet would eventually merge into some form of interactive TV. Many of our PowerPoint presentations back then employed words like “convergence” and “interactive set-top box,” and an argument was spawned in the industry. One side argued that television would come to dominate the way we viewed the Internet. The other side argued that TV would eventually be subsumed into the computer.

Neither side was right. TV never made the Internet very appealing, and because of the way television executives insisted on packaging their content, the Internet never had a great interest in showing TV. The loser, in the end, was television, and I think we can learn some important lessons from this loss.

There’s no question that television content is far superior in production values to anything on the Internet. When was the last time a banner ad made you laugh? You probably can’t even think of an example. When was the last time one made you cry? Never (unless it was one of those early Java ads that crashed your computer).

The problem is The Schedule. Because of the culture of the television industry, TV executives consider their power over The Schedule to be their main source of power. They determine who makes it onto the schedule and who doesn’t. They determine which show goes up against which competitor. They tell advertisers what times of the day they can advertise. They make viewers wait, gathering up one big audience at one time, to see specific content. The Schedule is power.

Because of this axiom in the TV industry, the executives have always refused to let go of this binding schedule. Across the country, some local TV affiliates actually let you watch streaming video of their content. But you can use this only like you would a TV — there’s no additional functionality. You can’t choose what you watch or when to watch it. It eschews every value and unique benefit of the Internet. The executives think they might eventually get some additional ad revenue out of this, but it remains a bankrupt strategy.

What users really have wanted is a medium that would allow them to choose what they watch and when they want to watch it. I happen to like the television show “Judging Amy,” but it’s rare for me to be watching television on a Tuesday night. The TV execs have lost the opportunity to exploit my potential ad revenue.

Some Reasons

The way the content contracts work might have a lot to do with this. Production houses, studios, networks, actors, syndicators, and others are all involved in various forms of royalties. The contractual obligations become too onerous when they start allowing people to view the show singly. With the current types of deals done in television, a single person calling up an episode of “Friends” might incur thousands of dollars in royalty payments to various parties. This, of course, should make networks begin to restructure deals.

The other reason is competitive in nature. Why, for heaven’s sake, would a rational TV network give its viewers greater flexibility to watch competing networks? When they have The Schedule laid out in a single, chronological line, they theoretically can prevent channel surfing. This rhetorical question underlies the main argument TV executives have employed to stymie their budding interactive-TV content divisions.

The answer, of course, is that they will get repeat viewership and many more people watching their strongest content. But this goes to the very heart of their insecurity. They don’t want a real marketplace of viewership to show to the world that they have only a couple of good TV shows in their lineup. They want to sell ad space all day long on their network. As long as all the networks cooperate, making their commercial breaks start and stop at about the same time (a conspiracy?), they can make advertisers do this.

The final reason, one that shouldn’t be underestimated, is the maintenance of predictable revenue streams. It would be very difficult to sell advertising to companies when you can’t entirely predict how much traffic a given show will attract. But the television industry is in luck. Another medium has pioneered in addressing this issue for the industry and has come up with some great solutions: The Internet sells media in precisely this way, using individual impressions and performance as metrics.

Someday, a TV network — most likely the one with the strongest and most consistent lineup of content — is going to figure this out and blow up the model. Will it be TV, or will it be the Internet? I suppose it’ll be both.