Why Networks Are Toast

Not anymore…

This morning I took part in an online discussion entitled “How Do We Adapt To TV’s Digital Collision” on the Guardian website.

I started by saying “TV is dead”.

I like this for two reasons:  First, there’s nothing like throwing a little gasoline on the fire to get a good discussion going. Second: it’s true.

TV is not dead in the sense that no one is going to watch it anymore. That is clearly ridiculous. It is dead in the sense that the old business model (the current one) no longer fits with the current technology. One of them is going to die, and it isn’t going to be the technology.

Let’s look at the old model for a minute:  TV networks found things people were interested in watching – like a baseball game, for example.  They paid the baseball team (or league) for the rights to broadcast the game, set up their cameras and put the game on the air.  To offset the cost of producing the game and transmitting it, they sold off slices of the air time to advertisers who wanted to put their message in front of the viewers.  The more viewers a game or event could garner, the more the network could charge for the slices.  The network made money and the baseball team got something as well, and so did the advertisers, hopefully.

This is the traditional model. A lot of the participants this morning were pretty much talking about how to migrate that model to iPhones or online.

This is where it all falls apart because the basic model is wrong.

It is wrong because it is incongruent with new technologies.

In the ‘olden days’ the networks had two things that no one else had – 1) the ability to produce the content – which was then both complex and expensive and 2) the abililty to put it into people’s homes, which was limited by the broadcast spectrum or the limits of cable access.

Both of those barriers are now gone.  Anyone can produce television with next to no effort or gear and anyone can get access to 2 billion homes for free on the web.

Finito.

Many years ago, my first business partner was a Swedish self-made billionaire genius named Jan Stenbeck.  He was the Richard Branson or Ted Turner of Scandinavia.  We launched the first commercial TV network in Sweden called TV3.  To get it, you had to put a dish on the top of your house. It came in by satellite.  Stenbeck bought lots of programming and produced lots of programming. He was among the first in Europe to show The Simpsons (thanks to the genius and foresight of Russ Kagan from icptv).  But even with all that, very few people actually bought the dishes. No dishes, no viewers. No viewers, no advertisers.

So Stenbeck went out and bought the rights to ice hockey.

Now, owning ice hockey in Sweden is like owning the World Series and The Superbowl or the World Cup.

People across Sweden were outraged. Ice Hockey had always been on SVT, the state broadcaster.

Now, Stenbeck said, ‘if you want to watch ice hockey, you can see it on TV3. Or not see it. Up to you’.

The following year, pretty much everyone in Sweden had screwed a TV3 dish to their roof.

Pretty good lesson, huh?

So here’s where it goes now.

Major League Baseball (or the Mets or whomever) already own the rights to the game.  It’s theirs.

The ‘dish’ is the web. And everyone already has one screwed onto the roof (so to speak).

Why does any baseball team ‘need’ a network, actually? What do they offer?

Nike could buy the rights and put the games on Nike. com

If you want to see the world series, the only place you can see it is at Nike.com

Or you could just see it at MLB.com or Mets.com

Who needs a network?