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Broadband Transforms Video Distribution

In a commentary entitled "How Broadband is Changing Video Distribution," Broadband Directions reports that it wasn't so long ago that the video distribution value chain was pretty straightforward. Producers created programming. Occasionally a new TV season would bring truly fresh ideas from these creative minds, but more often than not, it simply meant thinly-veiled imitations of last season's successful concepts. Nevertheless, the cost to produce these programs grew and grew as brand-name actors and other talent demanded and received sweeter and sweeter deals.

Cable and broadcast networks obtained the rights to these programs and then developed their schedules. Retail distributors like cable and satellite operators were largely free to decide which of these networks to carry, and then negotiated contracts for appropriate carriage rights. The fees paid by these distributors to the networks often rose each year, regardless of how popular the programming turned out to be. The retailers then packaged these networks into subscription service tiers. The price of these tiers rose at regular intervals, often leading to lots of hand-waving by subscribers and regulators, but little other action.

Advertising agencies bought 30-second spots, the price of which the networks increased each year, sometimes in the face of declining audience sizes. Advertisers then largely kept their fingers crossed that viewers would watch these spots, be influenced by them and buy their products.

At the tail end of the value chain, viewers were required to adapt their lives to watch their preferred programs at their appointed times, while suffering through often irrelevant advertising for products that, despite their frequent claims to being "newly improved", were more likely to be just smaller and/or more expensive.

However, that predictability has recently been upended by new technologies that enable consumers to gain unprecedented control over their viewing experiences. Broadband enables, for the first time in history, a high-quality, open video delivery network. Producers and aggregators of video not only have the ability to target and deliver their content directly to intended audiences, but also vast potential to monetize it. Meanwhile, consumers are able to access all this programming completely on-demand, while having it surrounded by interactivity opportunities that make it far more engaging than ever before.

However, according to Broadband Directions, the emerging market opportunity will primarily benefit Google, Yahoo, Microsoft, AOL, Apple -- not the broadband service providers who enable the consumer broadband connections to the Internet.

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