EBU Technical Review

No. 310 (April 2007)

Are you afraid of the future?

It is often said that “Old people are dangerous because they are not afraid of the future”. This implies that everybody else should be afraid of the future!

I have lost count of the number of articles in newspapers and magazines that have announced “the death of radio”, “the death of TV”, “the death of books”, “the death of newspapers”, etc. The fact that such doom-laden articles have been published frequently over the last 50 or more years probably gives comfort to those involved in radio, TV, books, newspapers, etc. However, it could be that the basic messages are correct – but the authors have under-estimated when “death” will actually occur.

The digital revolution has only just started – and it may have much bigger long-term implications than most people expect. In practice, people involved in “old-style” media may not be well-qualified to judge whether they will continue to have jobs in 20 years’ time. We must all bear in mind that H. M. Warner (one of the Warner Brothers) famously said in 1927 “Who the hell wants to hear actors talk?”. The answer seems obvious today, but we must recognize that film studios had built a very successful business out of silent movies. The addition of sound tracks massively complicated the entire business of film-making and, even worse, some of the most famous actors of the silent era were unable to make the transition into the sound era. It is important to note that, 80 years later, Warner Brothers is still a major force in the movie business – but it no longer makes silent movies.

On the other hand, sailing ships were replaced first by steam ships, later by diesel-powered ships and, for passenger traffic, eventually replaced by aircraft. Of course, there are now magnificent cruise ships which profitably carry passengers long distances in great comfort at leisurely speeds. But the age of passenger ships has passed.

The reality is that, so far, “new media” have not replaced “old media”: TV did not kill radio or, indeed, the cinema. Similarly, despite the protestations of Hollywood about the introduction of video cassette recorders in the early 1980s, Hollywood studios massively benefited from sales of video tapes in subsequent years – even to the point that movie studios made much more profit income from sales and rental of video tapes than from traditional cinemas. This demonstrates that some technological developments have unexpected outcomes.

When you hear somebody complaining that a particular industry is a dinosaur, you should remember that dinosaurs ruled the earth for more than 150 million years (which is probably much longer than the human race can expect to survive). Dinosaurs were successful for such a long period because they evolved during that time.

On this basis, it is reassuring to see that most broadcasters realise that they need to adapt to the changing environment. Just 10 years ago, many broadcasters saw the Internet as a threat rather than as an opportunity. Today, almost all EBU Members now have comprehensive websites and deliver some of their audio or video services over the Internet. Having rightly embraced the Internet, they can now deliver streamed audio or video services to computer users: the statistics typically show a significant surge in demand at lunchtime, which suggests that many users are listening or viewing at work – therefore representing an audience which, for various reasons, is not well served by traditional radio or TV services. Crucially, the Internet also permits on-demand services and podcasting that broadcast transmissions are unable to match.

Although such developments demonstrate the strong commitment of broadcasters to new technologies, the costs of services delivered via the Internet are roughly proportional to the number of listeners or viewers. This fact may not seem particularly striking, but it is entirely different to the cost structure of broadcasting where the transmission costs are independent of the size of the audience. Today, if a high quality programme about an esoteric subject gains an unexpectedly large audience, the production staff rightly celebrate their success. However, imagine a situation where a broadcaster’s Director of Finance complains about the delivery costs because “the audience is too large”! This may seem a ludicrous idea, but some broadcasters have already had to pay much more than expected due to the growing popularity of their Internet services.

My impression is that many broadcasters have not undertaken a cost-benefit analysis of their Internet services: some are delivering services to small audiences (e.g. less than 1,000 concurrent streams). Few broadcasters would build an FM transmitter to serve 1,000 people – but that is essentially what they have already done on the Internet. Even worse, the running costs of Internet services are high (production costs, software developers, servers and bandwidth) unlike FM transmitters which have low running costs. This does not imply that broadcasters should not deliver services over the Internet – merely that they should be aware of the true costs. As broadband delivery to homes becomes ubiquitous, Internet delivery will become a really important delivery mechanism. There are some ways in which broadcasters can reduce the costs of Internet delivery, such as multicasting, peering arrangements with ISPs or, possibly, by the adoption of peer-to-peer networks.

A similar situation occurs with the delivery of audio and video services to 3G mobile phones: operators of mobile networks have realised that one-to-one networks are unsuited to the simultaneous delivery of live audio or video content to many customers. At times of high demand, such as live coverage of major sporting events, the 3G networks simply cannot meet the demand. To overcome this problem, network operators have to turned to one-to-many technologies, such as DVB-H, DMB and MediaFlo, in which the same stream of data is accessed simultaneously by many users. In essence, they have rediscovered the benefits of broadcasting!

The key fact is that traditional broadcasters typically spend less than 10% of their budget on delivering their programmes to the public. As broadcasters turn to new delivery mechanisms, they will inevitably have to spend more on delivery. Unfortunately, audiences are fragmenting in the digital world – with the audiences for each service declining. This is a particular problem for broadcasters supported by advertising because advertisers are reluctant to pay more for declining audiences. Those broadcasters operating on fixed budget (e.g. a licence fee or government grant) also face a dilemma because for every extra €1000 spent on delivery costs, there is €1000 less for content creation – which is arguably the most important task of a public service broadcaster.

The environment is clearly becoming much more challenging for broadcasters. Businesses need to keep reinventing themselves so that they can react positively to the changing environment. If they do not do so, they deserve to become extinct.

Philip Laven
Director
EBU Technical Department

23 April 2007

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