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Television Strategic Investment Scenarios: Your Role as a Disruptive Innovator Dennis L. Haarsager Digital Distribution Implementation Initiative. CORE WORKING GROUP Ed Caleca, PBS Jeff Clarke, KQED Dennis Haarsager, DDII consultant; KWSU/KTNW, NW Public Radio Byron Knight, Wisconsin

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Television StrategicInvestment Scenarios:

Your Role as a Disruptive Innovator

Dennis L. Haarsager

Digital Distribution Implementation Initiative


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CORE WORKING GROUP

Ed Caleca, PBS

Jeff Clarke, KQED

Dennis Haarsager, DDII consultant; KWSU/KTNW, NW Public Radio

Byron Knight, Wisconsin

David Liroff, WGBH

Pete Loewenstein, NPR

André Mendes, PBS

Jim Paluzzi, Boise State Radio

A strategic investment initiative funded by the Corporation for Public Broadcasting.

Digital Distribution Implementation Initiative

JointRadio

TelevisionExternal


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Jon Abbott, WGBH

Brenda Barnes, KUSC

Rod Bates, Nebraska

Joe Campbell, KAET

Scott Chaffin, KUED

Beth Courtney, Louisiana

Vinnie Curren, WXPN (now CPB)

Tom DuVal, WMRA

Tim Emmons, Northern Public Radio

Fred Esplin, Univ of Utah

Glenn Fisher, KTCA

Jack Galmiche, Oregon

John King, Vermont

Ted Krichels, WPSX

Jon McTaggart, Minn Public Radio

Paige Meriwether, KUED

Steve Meuche, WKAR

Peter Morrill, Idaho

Meg O’Hara, WNET

Maynard Orme, Oregon

Allan Pizzato, Alabama

Lou Pugliese, onCourse

Don Rinker, Alaska

Meg Sakellarides, Conn. Pub R-TV

Bert Schmidt, WVPT

Jonathan Taplin, Intertainer

Kate Tempelmeyer, Nebraska

Tom Thomas, SRG

Mike Tondreau, Oregon

David Wolff, Fathom (now Sunburst)

Art Zygielbaum, Nebraska

Multidiscipline Experts Group


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Disruptive Technologies

  • Innovations that result in worse product performance, at least in the near term.

  • Bring to market a very different value proposition (typically cheaper, simpler, smaller and frequently more convenient)

  • Usually are the cause when leading firms fail – not sustaining innovations

From Clayton M. Christensen, The Innovator’s Dilemma


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ESTABLISHED

Photographic film

Wireline telephony

Full-service brokerage

Campus-based instr.

Medical doctors

MRI/CT scanning

Offset printing

Cardiac bypass surgery

DISRUPTIVE

Digital photography

Mobile telephony

Online brokerage

Distance education

Nurse practitioners

Ultrasound

Digital printing

Angioplasty

Examples of Established Versus Disruptive Technologies

From Clayton M. Christensen, The Innovator’s Dilemma


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Disruptive Innovation

  • “The pace of technological progress generated by established players inevitably outstrips customers’ ability to absorb it, creating opportunity for up-starts to displace incumbents.”

  • “There are times at which it is right not to listen to customers, right to invest in developing lower-performance products that promise lower margins, and right to aggressively pursue small, rather than substantial, markets.”

From Clayton M. Christensen, The Innovator’s Dilemma


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Public Broadcasting Today

  • “Everyone is baking their own cookies”

  • “Hail Mary” method of funding depreciation

  • Usage strong compared to other public service providers (11.8B person contact hours annually for public radio, 5.8B household contact hours for PTV)

  • Policy support of public broadcasting less assured

  • Our esteem is an asset that can be leveraged or squandered

  • Other public service entrants entering electronic media, usually using disruptive technologies


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Electronic Media Today

  • Conglomerates dominate ownership and control diverse distribution outlets, with both “horizontal” and “vertical” operations and pricing advantages

  • Users are beginning to take control of when they access programming

  • Subscriber-based economic models (e.g., HBO) are competing with ad-supported ones


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Television Today

  • Cable/DBS are gatekeepers for the main receiver in 85% of homes

  • Cable/DBS increasingly deliver original programming

  • Cable/DBS focus is on quantity vs. quality

  • Non-broadcast channels are on threshold of overtaking broadcast channels in viewing

  • Television advertising may erode as cable & DBS develop greater advertising options

  • No federal support for multicast; no active support for non-HD models


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Pubcasting’s Diverging Fortunes

  • Terrestrial digital transition is mandatory for TV, market-driven for radio

  • Content production entities are generally licensee based (with major exception of NPR)

  • Public TV viewing and number of members is steadily declining, while public radio listening and memberships have increased; revenues generally following the same vectors

  • Public radio players have explored alternative distribution platforms to a greater degree than have PTV’s


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Television In Five Years - 1

  • OTA terrestrial will be of minor consequence as last-mile distribution to mass audiences

  • Viewers will choose from increasingly customized, personalized programming options

  • Revenues from other than spot advertising will become significant and competitive

  • “Must convince” replaces “must carry” for multicast channels; some stations will be shut out of cable/DBS


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Television In Five Years - 2

  • Erosion of audience and revenue threaten existence of many licensees; may be fewer licensees

  • A variety of technologies, wired and wireless, to compete for delivery of services

  • Audiences will still value storytelling, but truly compelling content will continue to be scarce

  • First stations in the new mobile video/multimedia service will begin operation


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Plausible But Unexpected Wins

  • DTV killer application – content or service – that accelerates adoption

  • DTV universal set-top box works with a wide variety of digital services, including DTT

  • New broadcast models (rich media, mobile) prove economically viable


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The Closet of Our Anxieties

  • DTV DOA with stranded $1B+ investment; diminished credibility with funders

  • Minimal or no federal funding for public TV NGIS – capabilities drastically reduced

  • Early surrender of analog spectrum

  • Continued reduction of funding for public broadcasting (now seems likely for television)


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Strategic Investment Scenarios

Investments may be individual or collective


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Collective Investment Modalities

  • Toolkits – activities or tools licensees can use to achieve best practices without need for collaboration

  • Service Clouds – stations outsource significant activities created for specialized purposes

  • Colonizers – efforts to operate public broadcasting mission elements independently with or without station involvement


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Scenario 1 – Sustaining

  • Make strategic investments in initiatives that sustain the legacy (broadcasting) business

  • Tends to maintain operational independence

  • Preserves as much “gross tonnage” of public service as possible, at least in near term; lengthening the “glide path”

  • High investments in “toolkits,” somewhat lower investments in “service clouds,” little in “colonizers”


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Scenario 2 – Repositioning

  • Make strategic investments in initiatives that reposition public television in new directions consistent with historic mission

  • Capacity and scale created at collective level

  • Emphasis on editorial (programming) rather than operational independence

  • Accepts the current “glide path” but creates new “climb paths”

  • Increased investments in “service clouds” and “colonizers”


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Consultant’s TV Provocations

  • Form “virtual broadcast groups,” digital distribution companies that operate key functions of current stations across markets

  • Provide elective, centralized station operations services through PBS

  • Create public service “digital condominium association” with other state, national and international advanced networks

  • Task system economics panel with devising strategies to redeploy [insert ambitious amount here] to priorities


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Questions/Provocations for Integrated Media Professionals

  • Most broadcasters seem to treat the Internet as a sustaining, rather than disruptive, technology innovation. Most indicators, however, point to it being the latter. How do you design your services differently in each world?

  • If we consider the Internet as a disruptive technology for broadcasters, what investment and service strategies should we follow in delivering IP services?

  • How do we exploit the emerging Wi-Fi and (at least for joint licensees) DTV wireless data capacities?


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Contact Information

Dennis L. Haarsager, DDII Consultant

1019 Border Lane, Moscow, ID 83843-8737

208-892-9445 • e-fax 206-770-6100

[email protected]

www.technology360.com

Associate Vice President, Educational Telecommunications & Technology, Washington State University

Box 642530, Pullman WA, 99164-2530

509-335-6530 • e-fax 888-455-1070 • [email protected]


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Quotes Appropriate to Change

  • Where a calculator like the Eniac today is equipped with 18,000 vacuum tubes and weighs 30 tons, computers in the future may have only 1,000 vacuum tubes and perhaps weigh only half a ton. – Popular Mechanics, March 1949

  • We would rather be ruined than changed, We would rather die in our dread, Than climb the cross of the moment And let our illusions die. - W.H.Auden

  • The first principle is that you must not fool yourself - and you are the easiest person to fool. - Richard Feynman


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Television StrategicInvestment Scenarios:

Your Role as a Disruptive Innovator

Digital Distribution Implementation Initiative


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