Would the big U.S. TV networks sell their stations?

Earlier today, TVNewsCheck ran a story about the positions of the Big 4 U.S. television networks (ABC, CBS, Fox and NBC) on ATSC 3.0. The Advanced Television Systems Committee (ATSC) administers the U.S. standard for digital terrestrial television broadcasting, and ATSC 1.0 is the system currently in use. ATSC 3.0 is intended to implement capabilities that are limited or missing in the current standard, including support for image resolutions beyond HD. Most importantly for many broadcasters, however, is that ATSC is intended to bring mobile TV reception to parity with the fixed HDTVs that we use today, The broadcasting industry realizes that an ever-increasing percentage of its audience is watching television outside the home on smartphones and tablets, but today, access to those devices is mediated by the mobile phone carriers (AT&T, T-Mobile, Sprint, Verizon, etc.). Broadcasters want direct access to those devices and viewers, and are hoping that ATSC 3.0 will give them that access.

The transition to ATSC 3.0 won't be without problems: Broadcasters spent many billions of dollars on new cameras, production equipment and transmitters to move from analog to digital television. Moving from ATSC 1.0 to 3.0 probably won't entail that level of investment, but it will still be expensive for broadcasters. In addition, smartphone manufacturers, mobile phone carriers and consumer electronics companies will have to be convinced (or required by law) to support the new features of ATSC 3.0 in their products. That will take time--potentially as long as ten years.

According to TVNewsCheck, both ABC and CBS have gone on the record as withholding their judgment on ATSC 3.0. Both NBC and Fox support ATSC 3.0 in principle, but both are waiting for more details of the standard to emerge before making a commitment. That led me to wonder whether the network broadcasters actually want or need to make the investments needed to support ATSC 3.0 in the television stations that they own.

All of the top four commercial television networks in the U.S. own and operate several television stations in major cities; in the industry, these are called O&Os (for Owned & Operated.) For example, all four networks own and operate stations in New York, Los Angeles, Chicago and Philadelphia. In Dallas-Fort Worth, all but ABC own and operate their own stations; in San Francisco-Oakland-San Jose, all but Fox own their own stations. The local stations are a big source of revenue and earnings for the networks; for example, in 2013, CBS's network had gross revenues of $8,645 billion and operating income of $1.593 billion, while its local Owned & Operated stations, both television and radio, gross revenues of $2.696 billion and operating income of $807 million. On a percentage basis, the local stations, while not the most profitable unit of CBS, made a much bigger profit than the network (30% vs. 18%.)

On the surface, it seems obvious that CBS, and the other big networks, should keep their stations. However, when you look further, the choice becomes less clear:

• The major networks could easily get $1 billion or more for each of their stations in the top U.S. markets, and those sales would be taxed as long-term capital gains, not ordinary income.
• The networks are already getting a significant amount of their income from retransmission fees charged to cable, satellite and IPTV video operators. They get those fees directly from the video operators in the markets where they own stations, and indirectly in other markets through the fees that they charge their affiliates for carrying their programs. If the networks sell some or all of their stations, they would get affiliate fees from those stations without any of the costs of operating the stations.
• If the networks no longer own over-the-air stations, they would no longer be directly subject to FCC rules. That means no more multi-million dollar fines for "fleeting expletives" or unplanned nipple slips. The networks would still have to abide by FCC content rules to protect their affiliates, however.
• Over 90% of U.S. households already get their television via cable, satellite or IPTV. Over-the-air reception is increasingly an anachronism.

As little as ten years ago, it would have been unthinkable for the Big 4 networks to sell their stations--if anything, they aggressively wanted to buy more. However, since then, we went through the 2008 Great Recession, which hammered local ad revenues. Network television viewership has been declining for several years, and ratings for many of today's successful network series would have guaranteed their cancellation just a few years ago. Now, many industry analysts are forecasting that digital will supplant broadcast television as the biggest recipient of advertising revenue within the next few years. If the Big 4 have the choice between spending billions of dollars to upgrade their stations to comply with ATSC 3.0, or making billions of dollars from the sale of their stations, it's looking increasing likely that sales, at least of their smaller-market stations, will make more sense.

The HDTV business is in a crisis--and Apple wants in?

Fortune is reporting that the HDTV market is in crisis mode. According to the latest numbers from NPD, worldwide TV shipments fell by 8% year-over-year in Q1 2012, the steepest drop since Q2 2009. Shipments of LCD TV sets fell in Q1 year-over-year for the first time ever. LCD shipments fell over 3% and plasma TV shipments fell 18%, on top of an 8% decline in Q4 2011.

According to the article, thanks to dramatic price drops, everyone who wants a big-screen TV most likely already has one. According to Paul Gagnon, NPD DisplaySearch's director of North America TV Research, "At present we see that 70% to 80% of households have a flat panel set." In addition, consumers have rejected 3D and connected TVs that were intended to boost sales. In general, Gagnon says that consumers aren't replacing their flat-panel TV because they've failed, but rather, because they want bigger ones. When they go to the store, they see that prices have dropped, and they can buy a bigger set for the same amount of money that they spent for their smaller set the last time. Other features besides screen size are secondary--given the same price, consumers will go for the bigger set with fewer features, rather than the smaller one with more features.

Given this environment, what's the market opportunity for Apple's rumored TV? The company can probably make a go of it with a niche product, but it's difficult to see Apple being willing to fight for market share with price-sensitive buyers, which is where the volume is. As much as Steve Jobs thought that he's "cracked the TV problem," if he were alive today, he might consider whether HDTVs have become another high-volume, low-margin business like PCs, from which Apple is weaning itself.

DirecTV, Dish are under investigation by the Justice Department

Bloomberg is reporting that DirecTV and Dish have both received civil investigative demands, similar to subpoenas, from the Justice Department requesting information on both companies' pricing contracts with cable networks. What makes this story relevant to eBooks is that two sources have told Bloomberg that the DOJ is seeking information about "Most Favored Nation" (MFN) clauses in their contracts with content providers, the same clauses that the DOJ is seeking to eliminate in its price-fixing case against Apple, Macmillan and Penguin. In the pay-TV case, the DOJ is trying to find out whether cable, satellite and IPTV video services are using MFN clauses to prevent Internet video distributors and smaller startups from getting rights to distribute cable networks.

Separating the medium from the message

Wikipedia defines the word medium as follows: "In communications, a medium is the storage and transmission channel or tool used to store and deliver information or data." It's the means of getting information from point A to point B, not the content or structure of that information. However, it's virtually impossible to consider a medium without including its usual content and structure. For example, we have expectations of what we're going to hear when we turn on the radio, and what we're going to see when we turn on the television. We don't expect to find the nameplate and headline of a newspaper on an inner page; we expect to find them on the front page.

Content and structure have been an integral part of our understanding of what a medium is, until we got to the Internet era. The Internet is a medium that can reproduce the content and structure of radio, television, movies, compact discs, books and newspapers. The Internet decouples the physical medium from its content and structure.

The Internet's flexibility is both a blessing and a curse. It makes it relatively easy to copy the content and structure of other media, but history shows that copying one medium into another isn't a successful long-term strategy. Radio copied theater, concerts and vaudeville, but it didn't come into its own until unique styles of entertainment were developed specifically for radio. Television initially copied radio and the media that radio itself originally copied, but like radio, television didn't take off until artists started taking advantage of television's unique capabilities.

The Internet can be a replacement for today's radio and television, with the added benefit of time-shifting, but with its sometimes tinny sound and small displays, it's a poor substitute. You can make a website or app look just like a newspaper page, but experience shows that people read in a different way online than they do in print. Despite apps, most magazines available online look just like their print editions, with a few additional features. These "digital magazines" are often very hard to read, requiring lots of zooming (some readers only allow one level of zoom), panning and scrolling.

One can argue that webpages are themselves a unique form of structure, if not content; with the exception of interactivity, they're an amalgam of text, audio and video forms that existed well before the web itself. What are some of the other unique capabilities of Internet media that can differentiate them from existing forms?

• Interactivity: Video games and interactive CD-ROMs predate the web, but the web brings interactivity to a new level, and mobile apps are accelerating the trend.
• Multi-way creation: Instead of the "one creator to many consumers" model inherent in incumbent (old) media, the Internet enables many creators to reach a few or many consumers. It also enables creators to interact with each other, and makes the roles of creators and consumers fluid--one can become the other, and one can play both roles simultaneously.
• Support for most kinds of existing media: The temptation to simply copy one medium's content and structure onto the Internet is great, but the ability to integrate the capabilities of multiple mediums into a single composition is very powerful.
• No gatekeepers: Creators can reach consumers and other creators inexpensively, without having to go through distributors, retailers and networks.
• Low production and distribution cost: The Internet has helped to drive the cost of the software and services needed for content creation down to a tiny fraction of the prices paid by old media companies, and Moore's Law has driven down the prices and increased the capabilities of the devices needed to create and access the content.

Simply taking a radio show and moving it to the Internet, either as a webcast or simulcast, won't cause the Internet to displace radio; it only creates a poor substitute. The same goes for television. Magazines that simply reproduce the content of their print editions in electronic form aren't reversing their downward circulation and advertising revenue trends--the best they're doing is slowing down the decline. Newspapers aren't adding enough extra value on the Internet to make their paywalls work.

One-to-many media don't work on the Internet, or more accurately, they don't work well enough to maintain the business models of incumbent media companies. Native Internet media have to be highly interactive and incorporate an audience of content creators, not just content consumers. If any content consumer can instantly and painlessly become a creator of virtually any kind of content, and if consumers of that content can in turn create their own content, that's when Internet media becomes very different than any incumbent media.

Twitter, YouTube and The Huffington Post are all early examples of true Internet media, although they have limitations:

• Twitter's is the kinds of content that can be delivered in-line with its 140-character messages (which itself is a limitation).
• YouTube's is the amount of effort necessary to create a video that doesn't look amateurish.
• The Huffington Post's is that it's very text-based; the HuffPo is adding more video, but it's primarily produced in-house and represents a regression to the "one-to-many" model. Also, anyone can submit posts to the HuffPo, but that doesn't mean that they'll be accepted.

If you think about how those three companies' models can be mixed and improved, you can come up with some very interesting new visions of Internet media.

ivi TV could be "off the air" soon

Yesterday, a Federal judge in Seattle dismissed a suit filed by ivi TV, the company that sent programming from broadcast stations in New York, Seattle, Los Angeles, Chicago and other markets over the Internet without permission. The court ruled that ivi improperly filed the case in Seattle to avoid being sued by broadcasters and networks in New York.

FilmOn, which followed ivi into the U.S. market, was enjoined from retransmitting most U.S. broadcast networks last year. The Seattle lawsuit was the only thing preventing the broadcast stations and networks from demanding the same relief from ivi. Now that the way is clear for a trial in New York, ivi could be enjoined from broadcasting most of its stations and networks in as little as a week.

Ivi can still argue that the U.S. Copyright Office gives it the right to retransmit broadcast signals, but most of its subscribers will drop the service while the arguments go on. It's unlikely that ivi has the financial resources to fight a drawn-out court battle, so the Seattle court's decision is likely to be the beginning of the end for ivi.

Apple TV vs. Google TV: A clear choice for consumers

Now that Apple TVs are showing up in stores (and are being snapped up by customers), and Logitech has set a ship date and price for its Google TV set-top box, consumers will have a clear choice between the companies' fundamentally different approaches to user interaction.

Apple TV takes over the living room screen while you're looking for content, but once you press "play", it gets out of the way, and you watch television as you always have. However, it doesn't interact in any way with your existing cable, satellite or IPTV set-top box, and your existing video signal doesn't pass through the Apple TV box.

Google TV, on the other hand, turns television into a content source for the Internet, and turns your big-screen television into an oversized Internet browser. Your existing video signal passes through the Google TV box. It overlays a search bar and search results on live television. It puts web pages on the television screen, with the live television image as a small "picture-in-picture" overlay.  If you're a Dish Network subscriber, Google TV takes over the electronic program guide functions as well.

The fundamental question for consumers is: Do you want to browse the Internet on your living room television? If you do, Google TV is the way to go. Or, do you want to watch television on your television and simultaneously browse the Internet through a tablet or laptop? If so, Apple TV should be your choice. The "wild card" in all this is the fact that Apple TV runs iOS and could run third-party apps in the future. This would dramatically increase the functionality of Apple TV, although it would still be a separate content source, not a television pass-through device.

Many people believe that Apple's long-term game plan is to make much of the content that's currently available through cable, satellite and IPTV set-top boxes available through Apple TV, thus competing directly with the existing service providers. If that happens, Google TV's ability to pass through video from existing set-top boxes would no longer be an advantage.

As a practical matter, I think that the price difference between Apple TV and Google TV, and Apple TV's inherent ease of use, will be the most important factors driving sales for the holiday shopping season. Apple TV is $99 complete, while Logitech's Revue running Google TV will be $299.99 (Dish Network subscribers can buy it for $179). The Revue comes with an ugly QWERTY keyboard as its remote control; a slightly more elegant optional remote control can be purchased for $129.00, and an HD video camera for webcasting and videoconferencing will cost $149.99. (Sony's new remote control for its Google TV implementation looks like it was designed by the same team that did the Pontiac Aztek.)

My suspicion is that in-store demos of Google TV are going to go "off the rails" as soon as people pick up the keyboard and try to use the TV as a web browser. Apple TV is point-and-click simple, but when consumers realize that they have to type in order to use Google TV, interest is going to drop very quickly. I could be wrong, but I think that Apple TV will win the battle, at least this holiday season.

New Media Financing, Part 3: Controlling the Costs

More than a decade ago, I was working on a project that involved producing original 30-minute in-studio television programs. The cost of the shows had to be low enough to allow them to be bartered (given to stations free), or even aired through paying the stations for the time. I approached a number of producers in Los Angeles and said, "Here's an outline for the show, our budget is $300,000 per half hour, can you do it?" Not a single one would touch it for anywhere close to that budget, even though the series wasn't going to be technically difficult to produce and wouldn't require "name" talent.

It costs a lot of money to produce a network television show--according to The Hollywood Reporter, between $2.5 and $4 million per episode for an hour-long drama, while half-hour comedies are significantly less expensive at around $1 to $1.25 million per episode. For those costs, you get professional union talent both in front of and behind the camera, the best equipment, first-class music and sound, excellent post-production, and so on.

At the other end of the spectrum are user-generated videos like "Keyboard Cat" and the "Numa Numa" guy, shot and edited by a single person with a camcorder or webcam. The cost is virtually nothing, and sometimes, very rarely, a huge number of people watch them. But could you get a million or two people to watch the "Numa Numa" guy for 30 minutes a week, for 13 weeks?

Network television shows are very expensive to produce, but if they catch on, people will watch them over and over for years. They generate advertising revenues from day one. They can be sold to other countries and syndicated to local television stations, even while the original run of the series is still on the network. They can be packaged into DVD collections and resold. They can run on Internet sites like Hulu and generate more advertising revenue. The entire network series production system is based on creating these kinds of shows. The series that don't make it, that last a season or less, are a sunk cost, never to be heard from again. It's a little bit like the venture capital business, except that even a failed venture might have valuable intellectual property that can be licensed or sold, while a failed television series has virtually no residual value.

But what if the production model reflected reality? What if costs were based on the expectation that a show will fail? What if producers put real money into a show only once it was proven to be a hit? You'd see a very different model for funding series production, the model that I think needs to be applied to the Internet.

In the "Look out, she's about to blow!" model, everyone gets paid Union scale, not X times scale, until the show is a proven hit. DSLRs replace 35mm film; multicamera shooting techniques replace single-camera, decreasing the number of setups and saving both time and money. Teams are light and shoot fast. Sets go virtual; why make huge investments in practical sets when you can create them digitally and then build them once you know you've got a hit? Also, you don't have to tear down virtual sets. Editing and post-production are done on the desktop.

I can already hear a chorus of network executives and producers saying "That will never work! The production quality of our shows will be diminished, and we'll never get them to the point where they'll be hits. It'll be more expensive to upgrade production standards midstream than it would be to set high standards from day one."

But just because network executives and studios would find this an unacceptable way to approach production doesn't mean that it's unacceptable. For the Internet to take off as a platform that can generate its own hits, it has to be able to deliver compelling programming that will bring viewers back again and again. That requires more than a camcorder and an idiot jumping off a roof. It means operating as "close to the bone" as possible in order to keep costs in line with potential revenues, and to only ramp up costs once revenues can support them.

Coming Wednesday: Open-Source Set-Top Boxes?

The FCC is going to release its long-awaited National Broadband Plan this coming Wednesday. Details of the plan are leaking out, and broadcasters are the group that stands to lose the most--see Harry Jessell's column on TVNewsCheck for an analysis of and link to a speech by Reed Hundt, a former Chairman of the FCC and one of the architects of the new Plan.

One element of the plan that's been leaked will also have dramatic impact on cable operators...at least if I understand its intent. The FCC will propose a new type of set-top box that will provide equal access to cable and Internet programming. The FCC tried to open up the set-top box business several years ago when it required cable operators to provide customers with CableCARDs (conditional access/tuner devices) that could be inserted into set-top boxes and HDTVs from consumer electronics companies. The cable industry fought implementation of CableCARD tooth and nail, and even today, most CableCARDs don'y allow subscribers to access pay-per-view and other two-way services. As a result, the entire CableCARD program was stillborn, and cable operators continue to equip their customers with tens of millions of proprietary set-top boxes.

On Wednesday, the FCC is likely going to propose that CableCARD be swept aside and replaced with software-based set-top boxes, HDTVs, home theater PCs and other devices that can provide customer authentication, decryption and tuning for digital cable systems without proprietary hardware. These devices will also have Internet connectivity, and will be able to provide access to Internet video in the same device and using the same user interface (interactive program guide) as cable channels. In essence, these new devices would elevate Internet video to the same level as cable channels.

I'm now diving into wild speculation, but here's what I think the FCC will also propose: These new set-top boxes and compatible devices could be purchased by consumers and used on any digital cable system. That means that consumers could move from area to area and use the same set-top box. They would no longer have to pay any monthly equipment leasing charges to cable operators, since the boxes would be configured and made compatible with different cable systems via software and firmware changes.

I know that all of this was supposed to happen with CableCARD and didn't, so why would it happen with this new scheme? It might not--the cable industry will fight it ferociously, especially the part where they have to give equal access to Internet video programming suppliers. The advocates for an open approach have nowhere near the political clout as the cable operators and broadcasters who are going to fight the Broadband Plan. However, the time has come for "soft" cable set-top boxes; the capability to do just about everything they need to do in software has long been there, and the cost of the processing power and memory they need is very low, especially compared to when CableCARD was first proposed.

Set-top boxes that don't require a truck roll in order to install, can be provisioned by consumers and can be upgraded and reconfigured in software would save an enormous amount of money for cable operators. Companies like TiVo and Arris could make a real business out of selling consumer set-top boxes. Any Blu-Ray player with an Internet interface and the horsepower to support Internet video applications could readily be adapted to become one of these new set-top boxes. In the long run, a software-based open design makes more sense for everyone.

Cable Networks 2.0 (or 3.0)

The cable network model that we all know, which was based on the broadcast television model that we all know, is this: A centralized organization acquires programming, schedules and distributes it to affiliates (broadcasters) or cable operators. The network produces some of its own programming (or most of it, if it's a news or sports channel), but it acts primarily as an aggregator, scheduler and dsitributor.

It was a wonderful model for 1925, or 1949, but it's completely obsolete today. It was based on the technical limitations of the dawn of the radio and television eras, limitations that no longer exist. It was effectively impossible to have a two-way conversation between media creators and consumers prior to the Internet and broadband speeds. Now, we've got the means for that two- (or N-) way dialog. The cost of production and distribution is a tiny fraction of what it was even thirty years ago, which was in turn far less expensive than what was being done in the 1960s. YouTube...well, you know all about YouTube, and Vimeo, and Dailymotion, and, and...

My point is that the one-way, centralized network model is obsolete. I don't believe that a new, one-way network will be successful. Future cable networks will have to bake an open, two-way model into their architecture from the very beginning. What does that mean?

It means that the network becomes more of a curator than an all-powerful programmer. It selects and makes available content from external producers, internal teams and viewer/producers (since viewers can now easily be their own producers). It also enables viewers to curate their own programming and make their own selections.

The production process will become far more distributed. Viewers with a few thousand dollars and a high degree of patience can create content that looks as good as anything seen on broadcast television or cable. Field production is simple; it's done thousands of times a day. Studios can be built and sent anywhere. A shipping container can be turned into a perfectly functional television studio. Put it on a fast-and-dirty foundation and you've got a permanent studio. If you want room for an audience, there are a lot of older movie theaters out there being underutilized or gathering dust. Extend the stage, put in LED and fluorescent lights to keep the heating load down, and voila, instant studio!

You may argue that this model has already been tried, at Current, and it hasn't worked very well: Current TV just laid off 80 staffers, shut down production on some shows, and is consolidating two Los Angeles facilities into one. However, the problem wasn't with the production model, it was with trying to fit that model into a conventional cable/broadcast channel. The most-watched shows on Current have been InfoMania and SuperNews: Fairly conventional (from a structural point of view) 30-minute productions that viewers can find easily and that are repeated many times during the week. The bulk of Current's airday has been taken up with brief, four-to-eight minute videos, many of which are submitted by viewers. The problem is that it's been impossible to know exactly what's going to be on when. If you happen to tune in when they're showing a video that's engaging, you're likely to stick around for a while, but if you don't like what you see when you first tune in, you're unlikely to wait around for something better.

The problem with Current TV is that it's programmed from the top down, just like any other cable network, even though viewers contribute a lot of content. Current also has a web presence that allows a more egalitarian approach to programming (in other words, watch what you want, when you want), but with serious limitations: Cable operators prohibit Current.com from running its on-air feed live, or from making programs available prior to their airdates.

That brings me to my last point: The cable network of the future will reside primarily on the Internet, not on cable. So long as the cable operators can dictate terms of when and where programming can be shown, no cable network can become a truly two-way operation. That's why Current is struggling, and why Hulu is only a shadow of what it could be.

In the future, the cable network will be equivalent to the "curated feed", but the open ecosystem will reside on the Internet.

OWN: DOA?

Last week, Oprah Winfrey bid a tearful farewell to her show, telling viewers that she will end her run on syndicated television in 2011. She said that the reason she's leaving is that 25 years are enough, but plenty of industry scuttlebutt contradicts her. Discovery Networks has been working with her on a new cable network, the Oprah Winfrey Network (OWN), which will replace Discovery Health in 2011. The launch of OWN has already been delayed twice, and there's been a revolving door in the management suite, with most executives only lasting a few months.

The oft-repeated rumor is that David Zaslav, President & CEO of Discovery, read her the riot act: Bring her show to OWN and help to get the operation under control, or lose the network. The first shoe dropped a couple of weeks ago, when she sent some of her top managers to take over key positions in OWN, and the second shoe dropped last Friday, with her announcement that she'll be leaving her syndicated show. Zaslav's ultimatum may not have been THE reason why she's leaving her syndicated show, but it's a pretty good reason nonetheless.

The question is, what is she going to? Women's networks on Cable have had an upward struggle: Oxygen, in which Winfrey was a partner, launched with high audience expectations that were never met, and ended up being sold to NBC Universal. Will OWN fare any better? Unless it pursues a radically different model than that of today's cable networks, it won't. That's the topic of my next entry.

Disintermediation, again

Kim Masters was on NPR's "Morning Edition" this morning talking about the concerns that motion picture exhibitors (theater owners) have about the movie studios' plans to change their "release windows". Release windows are the order in which movies are released to different channels, and how long each channel has exclusivity. The issue is a seemingly innocuous request made by the studios to the FCC for "selectable output control" on set-top boxes, Blu-Ray players and other devices. Selectable output control would allow the studios to control whether, when and how much a movie or other video program could be played on a compatible device.
Consumer groups and consumer electronics vendors oppose selectable output control because the studios could use it to prevent their content from being recorded on DVRs and other devices. Now, the National Association of Theater Owners (NATO) has filed opposition to the studios' request because they fear that the studios will use selectable output control to make movies available in the home at the same time that they're in theaters.

I don't support selectable output control because it takes away consumer choice and negates thirty years of progress in consumer electronics since the Betamax decision, but the theater owners' opposition to the studios is more an effort to hold back the ocean than a friendly, consumer-oriented action. Extremely few movies make money in theaters today; theatrical distribution is most valuable for promoting films for future sale as DVDs and Blu-Ray discs. As the sales of DVDs erode and Blu-Ray fails to pick up the slack, the studios are forced to look at online digital distribution as a viable alternative. However, for digital distribution to generate the kind of revenue that physical media does, the movies have to be available much sooner, and that means cutting into the theaters' release window.

Whether or not the studios get selectable output control, theaters' release windows are going to erode; it's just a matter of when and how. When theater patrons are forced to go through metal detectors and hand over their cellphones before going in to watch a movie (as shown on a recent edition of CBS's "60 Minutes") in order to prevent piracy, theaters are not long for this world.

The studios are looking for any and every way to increase revenues, including cutting out the middleman, even if the middlemen are movie theaters. The same thing is happening with broadcast television. Comcast is close to buying 51% of NBC Universal from General Electric, which will give it control of the company. NBC has done such a superb job of running its broadcast network into the ground that it may become the first broadcast network to become a cable network. CBS and ABC are beginning to demand a cut of the retransmission payments that cable operators have to pay broadcast stations for the right to transmit their programming. Those retransmission payments have become the only thing keeping some stations on the air in this recession. Add to that the practice of some networks demanding "reverse compensation" from stations: Instead of paying stations to carry the networks' programming, the networks demand that the stations pay for the right to carry the programming.

Network television affiliates are an endangered species, because the networks can make more money, at lower cost, by dealing directly with the cable and satellite operators. For Comcast, the deal becomes almost a no-brainer, since it would control both the network and the cable systems. It will have to sell off the NBC owned-and-operated stations in cities where it has cable systems; the next step would be to take NBC to cable in city after city as network affiliate agreements expire.

Fifteen years ago, we were talking about disintermediation in retail and wholesale distribution brought about by the Internet; now we're talking about it again, this time in media. The future of theatrical motion picture exhibition and free broadcast television hang in the balance.

Update, December 5, 2009: According to the December 2nd edition of the Chicago Sun-Times, a patron at the Muvico Theater in Rosemont, IL was arrested and spent two nights in jail for videotaping four minutes of "Twilight: New Moon." She claims that she was actually videotaping her sister's birthday party at the theater, and the video on her camera (a still camera that records video segments) supports her contention. Nevertheless, the theater's managers pressed charges against her under a little-used law designed to punish film bootlegging. She faces up to three years in prison. I've lost whatever sympathy I still had for theater operators after this mind-boggling incident.

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Returning from NAB

I'm now back in Silicon Valley, organizing my thoughts about the NAB conference that ends today. Here are a few thoughts to get started:

First, the final attendance count was 105,259, of which 28,310 came from outside the U.S. Press attendance was 1,296.

This year, the organizers expanded the charter of NAB to make it cover everything about content, but I think that the result is that the show is getting too diffuse. What had originally been a show focused on broadcasting now also covers filmmaking (from tiny independent films and documentaries to studio tentpoles,) podcasts (both audio and video,) Internet radio and streaming media, IPTV and more. NAB is probably still the foremost broadcasting, audio/video production and post-production show in the world, but the spectrum of topics and range of products available is getting too broad. Want a bag of three USB cables? You can find them on the show floor, along with products ranging up into the millions of dollars.

In the past, NAB tried to segregate products into physical areas. They still tried to do that this year, but odd products kept cropping up everywhere. There's simply too much demand for exhibit space to maintain any meaningful separation by function or application.

The reality is that the same product can be used for lots of things: A camera light can be used for a TV news interview, a video podcast, a short film or an epic. Almost any production or post-production tool has multiple applications. When a prosumer camcorder can be used for B-roll on a production that uses cameras costing hundreds of thousands of dollars, the walls that previously clearly separated applications start tumbling down.

So, should NAB continue to pursue its "come one, come all" approach to content? Lots of people like it, but I suspect that some of NAB's core membership, broadcasters, are grumbling that it's simply too hard to see, or even find, the products that are relevant to their businesses. The tent, so to speak, is getting uncomfortably large.