First published in 2000, this article seemed pretty cheeky at the time. Back then the television business was still so profitable, and complacent, that the title – “The decline of television” – was stating the unthinkable.
In 1995 I built the ABC’s first website. It was for a television program about information technology entitled Hot Chips. As far as I can be sure Hot Chips was the second TV program in the world to have a web site – the first being the BBC’s The Net, also a program about computer technology.
At the time very few people in television had thought much about the Internet at all. It was perceived as an interesting phenomenon but maybe just another fad like CB radio. Whatever the talk about its potential, the reality was that less than one percent of the population had Internet access and in TV terms, a one percent audience is just one notch above no audience at all. In those early days it was not at all easy to argue the case for why a TV show should have an online presence.
As it happened, a few months before I began work on Hot Chips I’d chanced upon George Gilder’s 1994 book Life After Television. In it he argued that the information revolution would inevitably lead to the end of television-as-we knew-it. He also predicted that this would happen much sooner than anyone expected. At the time most of my TV colleagues found this idea simply incredulous but Gilder’s core arguments and reasoning have proved remarkably salient. By 1999, 21% of all Australian households had Internet access, the ABC was actively treating the Internet as an output medium in its own right, and the hot topic in TV boardrooms around the world was how to prepare for “digital convergence”.
“Digital convergence” is the buzzphrase for the notion that you will soon be able to use one device to access any type of information or entertainment you wish. This notion implies profound changes to the conventional boundaries between differing mass media. What will it mean when consumers can use the same device to read a newspaper, listen to the radio or watch TV? What if that same device can also be used to make telephone calls, send mail and do shopping or banking? All of these things can already be done rather clumsily on the Internet. It is only a matter of time before Internet clumsiness gives way to seamless convergence. The coming communication revolution will affect every form of media, but none more so than television.
Most of us take television for granted. It’s literally a part of the furniture of our everyday lives. The suggestion that television is under any imminent threat seems absurd only because when we think of television we think of what we use it for, which is mostly as a convenient source of news and entertainment/infotainment. We don’t think of television in terms of what it actually is, which is essentially a distribution service offering only a very limited set of choices, rigidly delineated into pre-set timeslots.
Television has been the best available technology for the distribution of audiovisual news and entertainment for so long that it is easy to forget that it wasn’t always so. Between 1930 and 1950 the cinema enjoyed a very similar status. In the then developed world, the treat of going to the movies was almost universally regarded as a regular part of weekly life. An evening at the cinema would almost invariably begin with a newsreel of the past weeks events, followed by the main feature attraction for the night. Special matinee screenings were presented for children and one of the most common staples was a weekly serial. The advent of television didn’t change this formula very much. It simply made it accessible via a more convenient medium.
This is why the digital revolution poses such a threat to television. The threat is nothing to do with people suddenly losing their appetite for news and entertainment, but everything to do with the advent of a much more convenient and flexible way to obtain that news and entertainment.
In industry terminology this concept is known as “video-on-demand”. It is about being able to watch whatever you want to watch, whenever you want to watch it, while at the same time enjoying VCR-type controls such as “Pause” and “Rewind” over the show you are watching.
The technology to do this has existed for a number of years. AOL-Time-Warner demonstrated a working experimental version as long ago as 1995. I was lucky enough to see it first hand and found it truly impressive. (I’ve subsequently seen a number of articles from various commentators describing this trial as a failure. Don’t believe them. This trial proved both the do-ability of the technology and the concept). Video-on-demand is one of the most seductive and instantly appealing technologies I have ever seen. Cost and bandwidth are the only obstacles preventing its widespread introduction, but not for much longer.
Since 1957 the cost-to-power ratio of computer hardware has dropped on average by 50% every 18 months. The phenomenon is widely referred to as Moore’s law. While not a law in any scientific sense it has over the past 40 years proven to be an extremely accurate measure of the rate of progress in chip technology. Within the computer industry it is regarded as an almost axiomatic benchmark. It drives the R&D and investment strategies of all computer hardware and component manufacturers. The logic is self-fulfilling. If you know your competitors are likely to double their performance within 18 months and you want to stay in business, then the only course of action is to make sure your company is in a position to match them.
The other impediment is the provision of high-bandwidth to the home. The enabling technologies for this are well established and not particularly expensive. The major obstacle is not to do with technology or cost of technology but with politics. Telephone companies are in no particular hurry to deploy high-bandwidth to the home because it implies a fundamental change to their business models and is a direct threat to their ability to extract monopoly profits. Even so, the commercial pot of gold to be had from the provision of high bandwidth to the home is so great that even the monopoly Telcos will not be able to delay its advent for very long, at least in the democracies. If there is to be a bottleneck, it will be not be about technology but about politics.
The Achilles heel of television.
The inherent weakness of television has always been the indirect relationship between the viewer and the broadcaster. Because there has never been any way to make individual viewers pay for the parts of the service they actually watch, broadcast television is based upon a business model which forces viewers to pay indirectly.
Most public broadcasters are paid for by taxation (or from a compulsory licence fee which is more or less the same thing), regardless of whether the taxpayer watches public television or not.
Commercial television is paid for by advertising, but the costs of this advertising are incorporated into the price of consumer products. Each time a consumer visits the supermarket or purchases any advertised product they contribute to the costs of commercial television, regardless of whether they watch it or not. Commercial television networks rarely acknowledge this reality. (Their standard argument is that they don’t charge the public so how can the service not be free).
However this indirect financial relationship between the individual consumer and the broadcaster is the Achilles heel of television. It places an upper limit on the revenue base. In the case of the public broadcasters, tax-payer funding will always be limited by the huge number of competing demands on the public purse. For commercial television, the unspoken reality is that there is a ceiling on the value of advertising to an advertiser.
The real product that commercial TV networks actually sell is the audience. In industry jargon, profitability is all about the number of “eye-balls” or “bums-on-seats” that can be delivered to an advertiser and with very few exceptions a big audience is much more profitable than a small one. This is the reason that commercial television is often described as a ‘lowest-common denominator’ medium. Programs for niche audiences simply don’t help the bottom line.
The public broadcasters also face a pressure to deliver sizeable audiences. The size and demographics of their audiences are not the sole yardsticks that matter but they remain a very important factor when justifying the relevance (and need for continued funding) of a particular service.
In effect, both public and commercial free-to-air television are highly dependent upon the ability of the medium to attract a mass audience. If for some reason this mass audience were to sharply decline, it would mean a total collapse in the financial viability of the existing free-to-air business model.
Since the early 1980’s the audience ‘share’ for free-to-air television has been in a slow but steady decline. This decline has been driven largely by the advent of alternative forms of entertainment such as the VCR, the home computer and pay and cable TV. This small decline has already impacted on the bottom lines of commercial TV networks because smaller audiences directly translate into lower revenue from advertisers. Most TV networks have responded with a very hard-headed approach to containing or reducing the costs of local content and by placing a much greater emphasis on amortising the costs of quality programs via co-production arrangements with international partners. For independent program-makers this has translated into a much tougher environment in which to make a living.
Yet the decline in the free-to-air television audience thus far is trivial compared to what is likely to happen over the next ten years.
Half a century ago the introduction of television ended the golden years of cinema. In one stroke television took away the mass cinema audience, not only devastating the revenue stream from the box office but at the same time dramatically increasing the cost of producing films that would attract people back to the cinema (wide-screen epics, colour, even social-marketing efforts such as drive-in theatres). It took decades for the cinema industry to recover and it will never again enjoy the dominance it had prior to television.
Something similar will happen to television over the years before 2010. Free-to-air television will survive, but only by learning to concentrate on the things it does better than any other distribution medium, just as radio and the cinema have done. The golden years of television should be thought of as what they were – a product of the best available technology at a particular time in history.
[This series was originally published on ABC Science Online in April 2000 – seven years before the release of the original iPhone, and ten years before the original iPad.]
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