EBU Technical Review : No. 278 (Winter 1998)
Internet hype?
Investors throughout the world seem to lose their grip on reality when they invest in companies associated with the Internet. Traditional investment criteria, such as the ratio between share price and earnings, are meaningless for most Internet companies, because almost all of them have yet to make any profit. Just like the Gold Rush in the 19th century, investors are gambling on the future potential for profits – in the knowledge that a few investors might become very rich, even if most investors will lose lots of money!
Are broadcasters in danger of being caught up in the hype surrounding the Internet?
It is difficult to assess the impact of the Internet on broadcasting. One problem is that incumbents tend to under-estimate the potential of new competing technologies. For example, in 1876, a memo circulated within the Western Union telegraph company said "This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value for us". Similarly, Harry Warner (one of the Warner Brothers) famously said in 1927 "Who the hell wants to hear actors talk?" Perhaps, these examples should be borne in mind by broadcasters who confidently assert that the Internet will have little or no impact on broadcasting.
There is no clear "business model" for broadcasters on the Internet. Even in the "commercial" world, most web sites generate little or no income. However, it is obvious that the Internet has great long-term potential for broadcasters. Many broadcasters already use the Web to offer programme-related information, as well as limited audio and video services. Indeed, some of Europe's most popular web sites are operated by EBU Members.
As the Internet is in its infancy, it is appropriate that broadcasters should spend modest amounts of money on "experiments" to identify the best way to use this new medium. However, large web sites are expensive to develop and to keep up-to-date. If your web site becomes very successful, you will have to pay for more hardware (e.g. servers) and for greater bandwidth connections. In other words, you may become a "victim of your own success".
Audio via the Internet has now become a practical reality. More than 1000 broadcasters are already providing such services. More than 40 million copies of RealAudio™; software have been downloaded over the Internet. Nevertheless, does audio broadcasting via the Internet make sense for broadcasters or for listeners?
Although there are millions of potential listeners on the Internet, typical audio servers can support only a maximum of 100 or 200 simultaneous listeners. Servers capable of handling up to 500 simultaneous listeners are available, but they are expensive and require broadband connections from the broadcaster to the Internet.
As each listener typically requires a continuous dedicated stream of data at 20 kbit/s, a 2 Mbit/s connection from the broadcaster to the Internet is needed for every 100 listeners. In the USA, 1.5 Mbit/s connections to the Internet typically cost about US $1000 per month. Telecommunications costs can be much higher in Europe – by a factor of 20 or even more! It is not surprising that these ongoing operational expenses have deterred some broadcasters in Europe from offering large-scale audio services on the Internet. How many broadcasters would spend $50,000 or more on a new radio transmitter that would serve a maximum of 200 people?
Looking ahead, the Web will be transformed by "e-commerce" which will allow secure on-line transactions. At present, handling charges (e.g. on credit cards) outweigh the cost of many services provided over the Internet. Future developments will permit low-cost "micro-transactions", allowing services to be priced at very low levels. Such mechanisms will permit those providing audio or video services over the Internet to charge users on a pay-per-use basis. Public service broadcasters will almost certainly continue to make some information freely available through the Internet, but "micro-transactions" offer the opportunity for broadcasters to recoup some or all of their costs.
Whilst the World-wide Web currently has serious limitations, it will undoubtedly develop to become a very important delivery mechanism for content providers, such as broadcasters. At present, many broadcasters consider the Web to be an adjunct to their normal services. In future, the Web will enable new types of service. Some services are predictable: for example, audio-on-demand and, eventually, video-on-demand. It is more difficult to predict the demand for completely new types of service because they have yet to be invented!
My personal view is that broadcasters cannot afford to ignore the Internet.
Philip Laven
Director
EBU Technical Department
European Broadcasting Union
