Media Dojo

Andrew Heyward speaks fluent television, having been President of CBS News from 1996-2005. He’s also highly conversant in cloud computing. A senior advisor to Marketspace LLC, Andrew co-wrote with Marketspace Chairman Jeffrey Rayport a public policy study on cloud computing, sponsored by Google, which argued that there are eight fundamental elements for “enabling” the cloud to realize its full potential. While policy-makers can play a supportive role, the cloud, like the roll-out of the Internet before it, is taking shape on its own, in ways largely mediated by market forces.

[Editor's note: http://www.marketspaceadvisory.com/cloud/]

The big issue, however, isn’t policy so much as cui bono? Deciding who benefits and who pays in a cloud-based environment won’t be announced in a press release announcing a policy initiative. It’ll require similar block-and-tackle work to build an ecosystem as we saw in Internet circa 1995-2005. The paper lays that out on page 4 of the executive summary:

“Despite such an exhaustive array of benefits and the already high rates of consumer adoption, the cloud remains in its early stage of development. To become the next computing paradigm – democratizing computing resources for the masses – the cloud will demand an ecosystem. That ecosystem will go far beyond the obvious examples of providers of cloud services (operators of data centers) and their customers (individuals and organizations). It will require sustained innovation from digital device manufacturers, bandwidth providers (cable cos. and telcos), and content companies (media, content and software makers, among others).”

I spoke with Andrew about the potential implications as they might apply to the cable television industry.

Media Dojo: Who was the intended audience for the paper?

Andrew Heyward: The paper was intended for an interested lay audience. That’s why it spent a lot of time looking at what was standing in the way of adoption of cloud computing, what could accelerate its adoption, and what are the policy implications. So, the final audience was policy makers on Capitol Hill.

MD: How does the money flow in today’s cable television industry?

AH: The simplest taxonomy is that a studio creates a show and sells it to a cable channel like TNT as part of the line-up. The channel is carried on cable systems owned by companies like Comcast, which pays fees back to the channel, who pays the studio. Of course, it’s a lot more complicated when you factor in revenue shares from advertising, but that’s essentially the historic structure.

MD: What is changing with professional video content?

AH: Professional video now comes in multiple flavors. You have video that was created from the start for online consumption, like the “programs” on Blip.tv. Then you have video that was created for traditional distribution that ends up online in a parallel life on a site like Hulu. An emerging consumption trend is that people have become used to an online experience and now want similar features with professional video such as the ability to share, the ability to tag, to comment or interact in numerous ways. This is common on the web but still primitive or non-existent in traditional video environments like cable or especially broadcast television.

MD: How does the maturation of online video affect the today’s television industry?

AH: The biggest change is that long form online video has become a legitimate competitor to traditional distribution. That means the TV business must successfully navigate two countervailing ideas. The business was built on aggregating audiences through scarce distribution channels based on compelling content that wasn’t available elsewhere. So television distributors could charge those viewers directly through subscription fees or indirectly through advertising in order to fund the ecosystem.

To the degree that online video becomes a separate major source of entertainment and information; it stands the chance of disintermediating the distributors which are the broadcast, cable and satellite networks. At that point, the cable provider will ask why it’s paying for something that people are going to download for free anyway. Here’s where the Internet is a great disruptor because it allows content creators to bypass these filters/barriers to production and then distribution.

While this is happening on the industry side, on the demand side you have people wanting to become their own media programmers. That trend is coupled with growing consumer expectations that content is going to be available online and they’re going to be able to do things with it. So professional content creators are wrestling with the dilemma that they need to make video available to customers how they want it and when they want it. But in the short term, they must try to do that without jeopardizing or cannibalizing the traditional business model that is based on exclusivity and scarcity.

MD: Where does cloud computing fit into this matrix?

AH: Cloud services can help companies that have dramatic demand cycles by allowing them to “rent” extra computing capacity only when they need it. But the real innovation is that the cost of distribution is coming down to virtually nothing.

[Editor's note: I've posted several times my belief that the game changer from cloud computing is far lower costs for HD-level video production/distribution combined with the ability to make video streams as interactive as any other form of Internet content. Speaking with Andrew I thought that cloud computing will unmistakably surface whether the true competitive advantage of today's big video players is based on their control over the creation of compelling content or their control (now slipping) over content distribution. I'm not looking for a press release to announce when we cross that line. I'm listening for an "A-List" video content creator like a Spielberg to publicly state that it's more important for their work to debut online than on screen or on TV. It hasn't happened. But it's a matter of time.]

Comments are closed.