May 7, 2006

Paying For Content [10:16 pm]

Someone Has to Pay for TV. But Who? And How?

Philips’s pay-to-surf proposal may be the first of its kind, but we should expect to see other ideas that would not have appeared in days past, when advertising-based television thrived. Today, the digital video recorder is slowly, but surely, tunneling through the television industry’s foundation. Ten million homes had DVR’s in 2005, according to Forrester Research; the number is expected to jump to 15 million this year, 30 million next year and 42 million in 2010. Scientific-Atlanta, which supplies set-top boxes to all the major cable companies, reports that fully half its boxes going out today are equipped with DVR’s.

What this means for traditional advertising can be divined in data collected by TiVo, which has 4.4 million subscribers. Davina Kent, a TiVo vice president, said that when its customers watch recorded programs, they skip 70 percent of the commercials.

This has not escaped the notice of advertisers. Josh Bernoff, a principal analyst at Forrester, predicted that “next year, you’ll see significant decline in TV ad spending as a result of digital video recorders.”

The television industry has not figured out how best to respond. Four years ago, Jamie Kellner, then head of the Turner Broadcasting System, remarked in an interview in CableWorld magazine that viewers who used DVR’s to fast-forward past commercials were committing “theft,” then a moment later described it as “stealing the programming.” He did allow trips to the bathroom as a noncriminal exemption.

[...] WOULD indisputable evidence that DVR’s facilitated ad-skipping make a difference if the Sony case were decided today? Paul Goldstein, a professor at Stanford Law School, thinks that it might. “If you were working with a clean slate, and everything was the same except for the ad-skipping rate — that’s a compelling fact that could have made a difference,” he said.

Randal C. Picker, a law professor of the University of Chicago, pointed to the commercial availability of network programs at places like iTunes as another enormously important change to be considered by the court if a case like Sony were litigated today.

How to pay for free television is the overarching but unanswered question, Professor Picker said. Speaking as a viewer, he said: “I want the other guy to watch advertising. But we can’t all not watch.”

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A Great Line [3:34 pm]

From an article analyzing the upcoming Google/Microsoft search spat: Goliath vs. Goliath  [pdf]

“Just because they’ve killed a couple of people already, you can’t automatically convict them of a third murder,” said Robert H. Lande, a University of Baltimore law professor who has closely followed Microsoft’s antitrust cases. “Of course, if you’re Google, you’re going to be nervous. They fear what Microsoft will do to them is exactly what Microsoft did to Netscape, to RealNetworks.”

In those instances, Microsoft used its lock on operating systems to dethrone the technology companies that dominated Web browsers (Netscape) and streaming media (RealNetworks).

But Google is a much different rival.

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