What is the future of Internet TV?

In his latest column, The Future of Internet TV (in America) Robert Cringely talks about the success of Hulu and the two dominant modes of distribution: streaming (RTSP) or download (HTTP). Hulu is firmly in the streaming camp while Apple and iTunes are in the download camp. (YouTube acts like streaming in that no download is left that’s easily accessible, but in fact it’s a download mechanism, not streaming.)

Now, I’ve been a long term fan of the download model, being very taken by the efficacy of RSS for this type of distribution. So much so that I helped invent a technology for doing commercial distribution through RSS feeds. Cringely tells of the unsatisfactory experience attempting to stream from Hulu – with rebuffering needed several time, even after they dropped the quality of the stream. RTSP is hard to do well because so much of the delivery channel is beyond the control of the “broadcaster”. But like established business models, they try and shovel their old model into the new channel. Rarely works like that.

By the way, Chris Albrecht has a column on the topic over at NewTeeVee.com with the clever name, Hiccups in the Stream, That Is What They Are.

We love the idea of streaming video over the Internet directly on our television sets. The issue is, when you stream video to your house, you open yourself up to problems you don’t get with progressive download. With streaming you need to get a continuous bandwidth to cover the signal or there are hiccups or temporary freezes in the stream. This can happen on cable systems during peak periods when more people are sharing the neighborhood bandwidth.

Hulu is undoubtedly getting very popular, and will become more so now that Disney are joining the group (with Fox and NBC-U). However Cringely looks at what is a viable business and Hulu, YouTube et al fail. RTSP is expensive, but more importantly, advertising supported media on the Internet has no possibility in covering the cost of production any time soon.

In other words, the model that has sustained television for its life is probably not going to sustain whatever we’re going to call the same thing delivered via the Internet. Funding will have to change. Personally I’d prefer to pay the equivalent to advertising-revenue-per-viewer for a show (because it’s a relatively low 25-75c per viewer per show) and skip the advertising.

Cringely’s suggestion is that Apple, or Google, could easily chip in say $3 billion or so a year for programming production and commission the same shows as are broadcast now (or, in Fox tradition, the same shows with different names) from the same producers that produce the best entertainment now.

This is something I’ve hypothesized on myself so when Cringely is on the same page, I have to go re-examine my thinking. It worries me to agree when so often I don’t.  

Let’s say a 13 episode half season costs from  $32.5 milliion (Friday Night Lights or Mad Men) to say$ 60 million per 12 episodes. There can be some substantial saving if these series were made outside the Hollywood Studio system – probably halving the real cost, but let’s not go there right now.  After all Cringely’s problem is that we can’t pay all those folk in the value chain from non-existent advertising revenue, while they do all get a small, slice of an iTunes Store sale. 

For easy math, let’s say the average hour of “television” is going to cost 50 million per 13 week season, or 200 million for a year’s programming. As we saw in my earlier post about how the numbers stack up for new media, programming in that price range rates 4-5 million viewers (or it’s produced more cheaply or cancelled). Some programming, like the Daily Show, is very viable at 10c per viewer per show.

There is cheaper television. The Daily Show’s $5 million a year deal with Comedy Central buys about 80 TV hours a year. (161 half-hour shows in 2008) so Apple or Google  pick up for $5.5 million or so per year. But the Daily Show is not Prime Time.

$200 million per Prime Time hour per year. $3 billion buys you 15 hours a day or Prime Time Television, with Network standard production and the expectation of Network size audiences. Keep in mind that Prime Time for the networks has been considered 22 hours a week, or an average of around 3 hours a day, not 15 hours a day.

Scale those numbers to Cable size budgets and audiences and an Apple or Google, putting in just 10% of their available cash-on-hand could create the equivalent of a five new Prime Time channels each.

It still seems that NBC-U, ABC-Disney, Fox and CBS need downloadable sales and rental channels more than ever. Clearly they don’t have the power in the argument.

Do I think Apple would ever go directly into the production business? Probably not “willingly” – as a first preference path – but as a bargaining ship against any network that wanted to withhold content….? It’s a very interesting thought. If Apple felt that commissioning the content themselves was in their best interest, they’d do it in a heartbeat. They have the money, it’s only a matter of a decision.

OTOH, I don’t think that will qualify for being ‘new media’ any more than I think Hulu does. My definition, What is New Media anyway?, came to the conclusion that new media is where there is a direct connection between the viewer and the producer. Having Apple commissioning shows would have Apple as the gatekeeper, rather than the network and their advertisers. I suppose getting the prissy advertisers out of the loop might improve the programming by allowing to be more real.