Introducing TV 2.0

Have you been to Quicksilverscreen.com? Amazingly enough, when I recently met with the CEO of one of the major movie studios, he hadn't gone there. As a voting member of the Academy of Motion Picture Arts and Sciences, every year I receive watermark-protected DVD copies of the movies contending for Oscars. But on sites like Quicksilverscreen.com you can watch the latest releases for free, alongside commercial-free versions of TV shows and music videos. This got me thinking about what the digitization of movies and television programs means for our industry.You don't need to look too far to imagine where this is headed. The shift to MP3 and similar formats cut the music industry by a third in less than four years, according to the Recording Industry Association of America. No one really knows where the bottom is, with dozens of alternate proposals floating about for the future of paid music -- from the iTunes 99-cent model to subscriptions that provide all the music you care to consume for a monthly fee to newer models that preload music-player devices with entire libraries for a onetime price. The lessons of the music industry are many. One, when your business model is caught between a high-margin price on one side (the CD) and free on the other side (illegal file-sharing technologies), the market forces will eventually push the pricing curve as close to free as possible. I believe the current iTunes model is an intermediary step between CD pricing and free downloads, but eventually the legal market will move to models that offer more music at less cost.The second lesson is that seemingly obvious truths and conventional wisdom are often wrong in the digital age. Who would have believed that consumers would move away from listening to music on home and car stereos and toward personal music devices and computers? The same conventional wisdom about needing television to watch video content could be equally wrong. If you believe that watching TV is inherently social, or something that we are willing to do only in our living rooms instead of on our PCs or mobile phones, watch out! The music analogy proves that old habits can die fast, and consumers will likely embrace multiple screen sizes and formats for watching movies and television.The third lesson is that bad business decisions make things worse. Lots worse. The music industry stuck its collective head into the sand during the early years of the MP3 revolution. Rather than recognize how consumers were embracing a new trend that could create new business opportunities, it chose instead to fall back on protecting the cash cow of CD sales, vociferously defending copyrights, going after the file-sharing software bandits and -- worst of all -- dragging its customers into court. This inflamed the pirates further and opened the door to more disintermediation of record labels at the hands of Steve Jobs or Radiohead, which released In Rainbows online with a name-your-price model. When it comes to movies, we now have the mirror-image model of what happened in music: a high-margin price tag on one side (movie tickets in New York are about $12 a pop) and free on the other. The one factor that could have "gated" the free sharing of movies online was bandwidth, but with more than 50 percent of U.S. Internet households possessing high-speed connections, this is no longer the case. And bandwidth continues to increase in speed and spread across devices (from PCs to mobile phones).Television is obviously different from movies because, with the exception of premium cable channels like HBO, the cost is hidden from consumers. Although the vast majority of U.S. households subscribe to a cable or satellite service, it's impossible to discern the cost of a single program on, say, the Sci Fi Channel. That content is wrapped up in a monthly subscription and therefore impossible to quantify in the same manner you would a CD or movie ticket. Perhaps the more important trade-off for consumers isn't free; it's commercial free. If commercial-free versions of their favorite programs are there for the download, the television industry is caught in a web similar to music and movies.Remember, it didn't take 100 percent of consumers downloading free music to topple the music industry. In the early days of MP3, illegal downloads were a relatively small percentage of the entire market for music. But few businesses can sustain a drop of 20 percent or more without a complete reinvention of the model. What happens to the ad-supported television model if, say, a quarter of consumers opt out of the current system for either free or low-cost downloads of commercial-free versions of their favorite shows? I believe we're about to find out -- and it's likely to be a bumpy ride.Bob Greenberg is CEO and global CCO of R/GA,

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Introducing TV 2.0

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Bob Greenberg