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“Until internet television, Hollywood never faced genuine competition”, writes David McCourt, chairman and chief executive of Granahan McCourt Capital, chairman and CEO of Narrowstep, a London-based internet television company, and Emmy Award-winning producer.
“The enduring success of the leading entertainment companies has been largely due to their stranglehold on distribution”, he writes. “Video readily downloaded over the internet has cracked the cartel.”
Mr McCourt answers your questions below.
I read your article and I think you make some very insightful observations. As someone who has admittedly been a bit late in joining all this internet craziness, what I don’t understand is the following: what is the difference between what you are describing as watching TV over the internet versus watching regular TV in my living room? Isn’t just a smaller screen? Why all the fuss?
David McCourt: Jon, it’s not about a smaller screen it’s about mobility, democratisation of the distribution channel, being able to pull down what you want to watch when you want to watch it, not being tied down to the network schedule, world wide content, niche content, and most importantly the “little guy” having a chance to produce a hit even if he doesn’t have a friend in Hollywood.
It will be a tragedy if Hollywood starts asking the government for protection from competition. Surely it ought to follow the example of Apple in creating a new business model?
Robert Kimera, Toronto
David McCourt: I agree with you it will be a tragedy if Hollywood starts asking the government for protection from competition, I think my answer to Jeff’s question earlier gives my view on that. You’re right Apple did create a great new business model didn’t they.
Very interesting piece. My concern is who is going to regulate TV over the internet and how do they plan to do it?
Jeff White, US
David McCourt: Your concern is who is going to regulate TV over the internet. Well that depends on where you live. You could see lots of country by country regulation, in the case of the US maybe state by state.
Europe has actually done a better job of freeing up that last bit of wire to your house. In the US right now there’s a debate called “net neutrality” that’s all about the cable and phone monopolies wanting to control the internet through regulation of the use of that last bit of wire.
In the UK for instance, there’s several more internet providers than in the US because they did a better job of freeing up that last bit of wire - let’s hope the US regulators spend more time focusing on gun restriction rather than internet restriction!
Should advertisers include a line for internet TV in their 2008 budgets?
Mike Yershon, London
David McCourt: Absolutely!
Is it possible that, with utter audience fragmentation, nobody will make attractive and sustainable profits in the future? After all, there are businesses such as the airlines, which after their monopolies were removed, simply became bad businesses.
Clive Munro, Florida
David McCourt: Audience fragmentation and bad businesses and too much competition are three different points. In this case the audience fragmentation is going to raise ad rates because the advertisers will know exactly who is seeing their ads. In your airline, example ticket prices went down - that is the opposite of what you are going to see with ad rates.
While I found your article insightful, I must admit that I am a bit confused on one crucial point. You talk about TV over the internet as this new medium for people to produce content over, but my question is this: isn’t what you call internet TV just another channel for Hollywood to distribute their movies and other content over and, therefore, won’t Hollywood simply continue to dominate yet another distribution channel?
David McCourt: Hollywood can’t dominate this distribution channel like they did the DVD or other distribution channels because the internet is open to everybody.
Although you Pat, could go produce a DVD on your own, how would you get it distributed? You would go to one of the big Hollywood studios and make a deal with them to distribute it. Otherwise you’d find yourself knocking on the front door of every store that sells or rents DVDs. This obviously wouldn’t work. That same content you produced could be distributed today world wide on the Internet.
The disruptive power of technology is undoubted but technology is simply the means for distributing content. The Hollywood majors owe their success to script writers, performers, programme and moviemakers. The question therefore is can they learn from their past marketing myopia? Will they fail to address the internet opportunity just as the Hollywood studios left the nascent US television market to radio networks back in the 1950s?
Charles Lovatt, Perth, Scotland
David McCourt: Charles I agree with you technology is a means for distributing content but Hollywood majors owe their success to not only the talent but as well to their lock on distribution. Why do you think America has a trade surplus in entertainment to every country on the planet?
Is it because Americans are the only creative people in the world or because they control distribution? I think you will see people from all different countries around the world getting real distribution of real entertaining content which will result in a democratisation of the entertainment world.
Youtube etc provides quantity, yet very little quality. TV networks act as an editing system (the ruthless pilot season/ selection process shows this). Hollywood need not fight it, it will win in the end; CSI is the biggest TV show in the world with crucially very high production value. Is user generated content not the biggest white elephant in the jungle at the moment in context of network TV?
Giles Greenwood, London
David McCourt: Giles, I think you have to look at this as two different types of entertainment not one as substituting the other. TV didn’t replace radio, it just added another means to entertain and inform the people. That’s the way you need to look at it. By the way, CSI, which has made a $1bn, was turned down several times before it was picked up by any network.
David, I’ve enjoyed your article, and share your views on the transformation on the network. I am, however confused by the statement that to deliver video the network needs to be reconfigured. I am working closely with the IMS industry, and our views are that major upgrades need to be in place to support real time video delivered anytime, anywhere. Many service providers are working on deploying IMS to meet the challenge.
Manuel Manuel Vexler, MS Forum, Austin, US
David McCourt: If you think back 30 years ago Manuel, AT &T boasted as having the most advanced telecom network in the world, and they were right - 99 per cent of their traffic was voice and 99 per cent of their revenue was voice.
When computers started talking to computers people like me built new networks to carry this data traffic. And we soon found out that voice could ride virtually free over these new data networks. i.e. Voice over IP.
Today the majority of the traffic is video. My belief is that someone will build a network around video traffic and you’ll see voice and data ride virtually free. A network purpose built around the majority of the traffic, will always be the most efficient and effective.
Most of the video that I’ve downloaded from the internet are clips of no longer than 10 minutes. How long will it take to download a full movie? Secondly, you talk about watching films and television on our computers - won’t people rather watch television on their big plasma screens?
David McCourt: You’re right; most video is “short form” because only one company I know of has the technology to deliver full length, TV like quality video and that’s London based Narrowstep. I am sure more companies will develop this technology over the years and then you’ll see more long form content over the internet.
In answer to your second question, This depends on how old you are and where you happen to be when you are watching TV. I personally watch all my TV when I’m working out in the gym so watching it on a laptop or cell phone is inconvenient.
My son and daughter watch TV, answer emails, instant message their friends and do their homework at the same time so for them on the laptop is perfect! And besides that, there are half a dozen companies that sell a wireless box you can put on top of your TV to display what’s on your laptop on to your big screen TV. The UK’s own Amino based in Cambridge, is an example of one of these companies.
In the Hollywood distribution model that does survive, there has to be venues for blockbuster films. Might direct digital distribution enable multiplexes to show the big pictures, as well as indie digital productions, and do so profitably?
David McCourt: Very good question Lee, the way the movie theatre model works today is someone drives a truck to each movie theatre and drops off big cumbersome reels of tape – only to be picked up the following week and delivered to another theatre.
With today’s technology you are right it makes sense for every movie theatre to “go digital”. This would not only allow blockbusters to be cheaper, but the average movie theatre that sits vacant ( for 16 of the 24 hours per day) could be used to show indie digital productions as well as lots of other locally and community produced content… and tickets would be priced based on demand, so everyone would benefit.
There is a strategic aspect to IPTV which goes beyond competition between traditional Hollywood studios and even Google and YouTube - it is that the world’s major telcos, faced with decreasing margins from their voice data revenues and seeking to horizontally diversify are moving into IPTV provision - whether through broadband network ownership or through developing the set-top technology. When will telcos move into online video content production and further erode Hollywood’s raison d’etre? How will they achieve critical mass viewers - acquisition or in-house organic productions? And who will determine future content or who will hold the commissioning power - the creative producers, the uncreative executives or online communities?
Twain, London, UK
David McCourt: You are 100 per cent right! Telcos are getting into the video business – and you are right that they must get into the video business because they are facing an increase in competition and lower margins on their traditional business.
If you look globally you’ll see that different telcos have different strategies. Verizon, the biggest US based local phone company is building a brand new fibre network to the home that will allow it to eventually dominate its service area. Telefonica, on the other hand is building one of the most advanced video portal strategies in their service area.
However, regardless of the strategy they choose, all will need to add video to their product offering to be a viable long term competitor. As to the last part of your question who will hold the commissioning power - unfortunately we all know too well the world doesn’t have an unlimited supply of creative people – energetic and creative people will always have a place in the entertainment world.