The Slow Death of Broadcasting
03/06/2007 1:13 PM
Today, Verizon and its Bell brethren got word that the Federal Communications Commission will try to help them get video broadcast rights in disparate municipalities around the U.S. I have two words for you: "Who cares?!"
The traditional, commercial video world needs to be bifurcated into two distinct sectors: production and distribution. For the first hundred years of video technology's existence, both video production and video distribution were very capital-intensive businesses. Those very high capital costs created huge barriers to entry. That's why there's so much wealth in Hollywood, where the content gets produced, and at the cable networks, where that content gets distributed.
A few years ago, I frequently wrote about how capital barriers to entry for video production have collapsed with the advent of quality inexpensive digital cameras and cheap computing power. That explains all the current buzz about user-generated content.
But capital-intensive commercial content production isn't going to change. We "end users" will never be able to finance big, episodic commercial content, and video production will always require staffs of actors, managers, producers, and so on. That's partly why I keep saying that video production and content ownership are safe havens in the ongoing video sector disruption.
More important to investors, the next phase of the video revolution isn't about production. The next phase is all about distribution of that video content. And there's no protection -- save for regulatory -- for those content distributors. All those video-distribution platforms like Comcast and Verizon and satellite networks like DirecTV cost tens of billions of dollars to build.
The problem for these video-distribution companies, which I've also been writing about for years, is that the Internet's ability to deliver video over standardized connections (provided by these same companies) is driving the cost of distribution to zero.
Companies like Joost and BoomRev.com (full disclosure: I'm founder) are distribution outlets the likes of which have never been conceived by these old world video distributors. The costs to host and deliver quality video content (and by quality, I mean both the HD-quality video of Joost and the infinite programming options at BoomRev.com) are collapsing, as the video is streamed over the same Internet connection that you use to read this Web site.
We'll continue to see a lot of blustery proclamations about copyright protection from both the production and distribution sectors. The commercial content owners should and will be paid by any site (or other distribution technology that hasn't been invented yet) that distributes this content as it generates enough traffic to go mainstream. The studios and Google's YouTube are simply fighting over the details of that revenue-sharing.
The content owners' longtime distribution partners are political entities, as the opening paragraph of this post underscores, and we can expect Comcast and Verizon to stop fighting each other and turn their sights on the real threat to their payback on wasted video-distribution platforms. They'll soon enough figure out that the real threat is open-Internet distribution of the content, which they're accustomed to having government-enforced oligopolistic control of distributing.
In fact, when they finally start working together in D.C., that's probably the time to start shorting them. The market will finally start discounting the fact that they have zero chance of ever getting the return on those bad broadcast investments. I've been saying it for years: Broadcast is dying. Joost and the rest of 'em will put it out of its misery.
At the time of publication, the firm in which Willard is a partner was net long Google, although positions can change at any time and without notice.