“Television Is The Internet, The Internet Is Television”: Barclay Knapp, President Of NTL, Speaks
The following is an edited version of the Worldview Address, delivered by Barclay Knapp, President and CEO of NTL, at the Guardian Edinburgh International Television Festival, on Saturday.
In 1905 Albert Einstein began the “creative destruction” of classical Newtonian physics with his theory of special relativity, proving that space and time could stretch and bend in ways that Sir Isaac Newton’s physics failed to predict. His later formulation of “General Relativity” set the standard for how light, matter, gravity, and energy are interrelated – forming the basis of how the large-matter physics of the planetary universe was viewed for most of the rest of the century. In the 1920’s, a similar revolution began on small-matter atomic physics with the development of quantum mechanics.
Equally revolutionary, it challenged all historical notions of how atomic particles behave. It was so bizarre that it gave rise to concepts such as “The Uncertainty Principle” and proofs that light is composed of both particles and waves. When Einstein viewed the ambiguities of quantum mechanics, he said, “God does not play dice with the universe.” He proved that general relativity and quantum mechanics couldn’t both be right. He then set about trying to find a “Unified Theory” that brought together planetary physics of General Relativity and atomic physics of Quantum Mechanics under a single framework. He spent the last 30 years of his life on the project. He failed.
Now, assume that television is equivalent of General Relativity and the internet is Quantum Mechanics. Not too much of a stretch since the development of each of these technologies has been, in terms of their effect on our daily lives, as earth-shattering as Einstein’s discoveries. Looking at where the “convergence” of television and internet technologies is leading can be our own elusive quest for a “Unified Theory.”
In other words, what are the common laws and principles of our own industrial universe that will govern how these two powerful and world-changing forces will be brought together in the future?
Four Forces
The unifying theory in physics needs to bring together the four known forces – gravity, electromagnetism, and the strong and weak nuclear forces. As we look into the future of our industry, the four forces of convergence that need to be brought together are:
1- Broadband – the growth of broadband connectivity
2 – Internet protocol and digitalization – the universality of the Internet protocol, or IP, and digitalization
3 – Storage/Retrieval – the continued improvement in storage/retrieval technology, and
4 – Personalization – the rise of personalization software and technology
These forces are influencing both television and the internet.
The effects on the internet have been more visible lately; but the effects on television are about to become visible very rapidly. Since I have been invited to give this lecture at the Guardian Edinburgh International Television Festival, I will concentrate on the effects these forces will increasingly exert on television.
Broadband
Today virtually every UK household has access to a broadband network – a technology that enables ordinary phone lines to carry more traffic, faster.
The need for broadband has been one of the bottlenecks of convergence. As long as the web has been accessible only at dial-up speeds, you can’t really use it for video, and as long as the TV gets its stuff over the air, you can’t really use it for IP – so there’s no prospect of convergence. Today, though, the UK has the most extensive set of broadband digital networks in the world.
Two-way, digital high-speed fibre-cable networks pass well over half of all UK households now – rising even higher over the next three years. Digital satellite and digital terrestrial cover the rest, albeit with only one-way communication, a factor that will become increasingly problematic.
DSL is coming, but it will take a few years to iron out the kinks. On a percentage basis, the UK is far ahead of the US in broadband connectivity, where less than 20% of all households have access to the same fiber-cable networks as we have here. Digital satellite is at at earlier stage in the US than in the UK, and DSL is slightly ahead. There is no digital terrestrial in the US. Continental Europe is even further behind.
Internet Protocol (IP)
The second major force – the growth of Internet protocol (IP) and digitalization – is really the engine behind the web. Today, 25% of UK households and 50% of the population regularly access the web. I predict that these percentages will go well above 90% in the next three years. IP makes this possible, because it serves as a common language for both producer and consumer.
In seven short years, IP has standardized the packaging of all types of information, so that it can be transmitted by virtually any “pipe,” to virtually any device, and viewed using a common and simple “look and feel.” Digitalization as a subset of IP is no less a revolution, as has been most recently demonstrated in the music industry.
Digitalization substantially reduces the costs of production, storage, reproduction, and transmission – in the extreme case to near zero. These paired forces brought us MP3 and Napster in the music world. The video equivalent of Napster is on its way, my friends.
Storage and Retrieval
Early next year, NTL will deliver true Video-On-Demand. VOD is a great example of the third major force – the continued rapid improvement in storage and retrieval technology. Storage is getting so cheap and servers are getting so fast that anything can be “parked” efficiently and then “shipped” instantaneously – when hooked up to a broadband network. IP and digitalization insure further that the material can be changed and manipulated with ease all along its route.
Finally, the cost/performance curve is such that everyone already has this technology right on the desk top (PC), and soon will have it right on the set-top (TV). Now things really begin to get interesting.
One of the early experiments in quantum mechanics “proved” that an electron could be in at least two places at once. No less weird in the convergence world is the soon-to-be-realized phenomenon that television can be both “live” and “taped” at the same time.
By buffering a few seconds of video in a VOD server or set-top we can offer the viewer stop, rewind, and fast forward capabilities on live events just like on a VCR. But the weirdness won’t stop there, as we’ll see in a minute.
Personalization
The final major force – personalization software and intelligent agents – is less evident to us today but is coming on strong. Intelligent software is already hard at work in something companies call customer relationship management. This software gathers all information about you from all available sources and builds a profile of your habits, needs, and desires. These profiles are then used to deliver back to you stuff specifically tailored to those habits, needs, and desires.
Intelligent software will soon be used proactively by you, too. Using “agent” software you build your own profile, and then you send your own personal agent out to the web to do your bidding in accordance with your profile. You might have seen this at work already with search engines that do comparison shopping for you, hunting out the best deals around the web. It’s coming soon to an electronic television programming guide near you. Not only will you tell your intelligent EPG that you like Clint Eastwood movies and send it out to VOD servers everywhere in search of Dirty Harry, but actually, it will already know that since it will have “watched” what you watch and figured it out.
The Collision
The developments taking place in all four forces of convergence are taking them on a collision course. What happens when they collide? As I’ve said, they’ll change both television and the internet fundamentally and continuously.
Rather like atom-smashing, but in the media world. We’ll have fission – the blowing apart of some elements, and fusion – bringing them together. We’ll have new many, many new concepts, and some, like the neutrino, will have a life so short it will be impossible to measure. Others, like plutonium, or re-runs of Monty Python, will be with us forever – for better or worse.
One outcome of this collision is that a customer will be able to intelligently select his or her desired programming, from virtually any source, whenever they want.
Now we have started our “atom smashing” in earnest. First of all, the notion of a “channel” begins to disappear, and with it concepts like programming schedules and prime time.
Since programmes are often made up of segments – think of your favourite “news magazine” show – maybe even the concept of a programme disappears. My kids now listen to as many music “clips” via their PC and MP3 player as they listen to whole songs or CD’s on a CD player for that matter. Is the television equivalent that far away? How long do we think it is before we can “tune in” just to a funny monologue, or better yet, make our own compilation of “goals of the day?”
The same techniques that allow users to find their favorite goals also allow them to avoid things as well. Like adverts.
What is possibly even more significant is what won’t happen. Consumers will no longer rush home for Coronation Street. They won’t schedule their lives around their favorite programs, or sit through commercials they didn’t ask for.
Programmers will no longer be able to develop shows for a particular time slot – with the guaranteed audience that goes with that time slot. Is there a “mass market” for public service to address or advertisers to reach? Will millions of people ever gather in one place at the same time to watch the same program ever again? In today’s world, some of this can sound scary to all of us. But the news is not all bad. Actually, the news can be very positive, it’s just telling us a very different story. No-one who is prepared to think broadly – beyond the confines of 20th century broadcasting – need feel threatened.
Toward a New Theory
When customers start to become interactive and make selections instead of passively viewing whatever’s on, they can be tracked – allowing them, in turn, to be targeted by their preference.
A good example would be a hypothetical “mountain biking” channel. Consumers will express preferences, either directly by profiles they create for themselves or indirectly through the other programmes and segments they select. What I’m talking about here can just as well apply to pay-per-view screenings of Royal Shakespeare Company productions, operas from around the world, or police dramas like Cracker and Morse.
Mountain biking is my proxy for both mass market and niche programming. So let’s say a pattern emerges that a significant number of viewers are interested in mountain biking. Two entrepreneurs with an eye to the main chance can start a mountain biking channel – one to source the content and one to call the mountain bike manufacturers to become sponsors.
Why will this be attractive? For starters, it will be cheap to produce. Secondly, the audience has self-selected and is therefore highly interested and involved. Third, since the show will be “stored” on disk and viewed on demand by the mountain biking enthusiasts, there is no fleeting inventory to worry about. An advert on this show lasts a long time.
Even better, the show allows what I’ll call “reality” advertising. The mountain bikers on the show will be using named bikes in real situations, will wear Nike gear in real weather, etc.
For basically the same reason Nike pays Tiger Woods vast sums each year, Trek bikes will pony up a lot to sponsor a mountain biking channel – real people using their equipment in real situations. But wait a minute, this sounds like what the internet already is.
You can certainly go to a mountain biking web site (or it gets displayed to you when you do a search for mountain bikes on Yahoo!). You’ll see “programming” for mountain biking enthusiasts, banner adverts for Nike and Trek bikes, a pretty long shelf life, etc. What’s different?
Well compared with today, the difference is action. The web site is static – the user must click through to see the different frames. There’s no action, no entertainment value. The user is forced not to be passive.
The TV channel, by contrast, is active, and therefore allows the user to be passive. The user chooses the show from his remote control and then sits back to be entertained. Of course, with our new forces he can also become active if he wants to. He can also pause the show, go back or forward, or bring up an interactive frame around the show and do the same clicking he would do on a PC.
But the differences between the web site and the TV show will be fleeting. Remember that broadband and our other forces affect the Internet, too. With a cable modem, those herky-jerky video clips from the web site now become full motion, television quality, and full screen when viewed on your PC.
So what is the difference between the internet and television in a new world governed by forces such as broadband, IP, storage, and personalization? Nothing. And that is my Unified Theory. Broadband is the force that changes internet into television, while IP/digitalization, video storage and retrieval (or VOD), and personalization are the forces that change television into the internet.
It might seem like the forces are weighted toward the internet. After all, one need only to add our broadband pipes and the internet becomes television, whereas television needs to embrace three powerful forces to begin to recapture ground from the internet.
But that view is shortsighted. I should really restate my theory as follows: in the future, as these forces continue to exert their influence, television is the internet, and the internet is television.
Our two mountain biking entrepreneurs are already ahead of us. They neither create a TV show or a web site, rather, they create programming that is compelling to viewers and sponsors. They create programming that fits the new forces rather than fits a particular medium. Their show has both compelling video and interactivity, and has both useful product information as well as adverts and entertainment.
Their show changes all of its content periodically in response to viewer’s e-mails, chat rooms, and click throughs. It points its viewers to other interesting or useful content, say shows on kayaking or hiking. It covers all of the big mountain biking events, including the (hypothetical) World Cup of Mountain Biking.
And since the World Cup of Mountain Biking is a prime time, mass market event on both sides of the Atlantic, our mountain biking entrepreneurs simulcast it with ABC and ESPN in the States, and with BBC and British Eurosport in the UK. We need to go back to our physics analogy for a moment, however, to really prove my Unified Theory.
We left Einstein and Heisenberg scratching their head over the incompatibility between planetary relativity and atomic quantum mechanics. In the early 1970’s, a mathematical idea know as string theory, coupled with a new view of how many dimensions there are in the universe came to the rescue. String theory resolved the conflict between particles and waves by postulating that “vibrating strings,” like those on a violin, are the smallest element in the universe – the string is the particle and the vibration is the wave. In addition, a new theory was developed that there are really six more dimensions at the atomic level than the three spatial and one time that we all experience at the human level.
Together, string theory and these hidden dimensions are combining to produce Einstein’s dream, a true Unified Theory for the universe as a whole. So what are the equivalent of strings and hidden dimensions in our world of media convergence? My argument is that “pictures,” or visual representations, are our strings – the perfect unit of communication, information, and entertainment.
Visual representation is at the core of human interaction. We use everything else, e.g.,text, music, etc., to convey pictures in our mind’s eye. Cave painters recognized this. “Live” or “moving” pictures are then the atoms of our world – the building blocks upon which we build our communication, information, and entertainment. Its why television, movies, and events like sport and coronations capture our attention and sway our opinion all out of proportion to anything else.
The sentences, paragraphs, and stories contained in newspapers, magazines and books are the textual equivalent – but again only to convey the same “pictures” mentally. Thus television starts out with an inherent advantage over the internet in our unified world because it is better suited for the “perfect” unit of communication – the moving image.
The “hidden dimensions” of our world are the invisible layers in programming content that are becoming exploitable through the fusion of our four forces. For a better explanation of this, we need to go back to our hypothetical World Cup of Mountain Biking. It used to be that the World Cup of Mountain Biking was carried exclusively on ABC in the US and on BBC in Britain.
Since we are speaking hypothetically, assume the BBC showed it on a new commercial channel, and the main advertisers on the multi-day event were Procter and Gamble and Guinness. Thirty five million households in the US tuned in and eight million in the UK, one third of the total in each country. Thirty-second advertising spots sold for millions.
But when Guinness advertised, their audience was actually out in the kitchen fetching a Budweiser. When Procter & Gamble advertised, their audience was basically bored to tears and not paying attention. The whole audience was so big, the reasoning went, it was still worth it. But who really knows? Our entrepreneurs know. Remember they are experts in both the visual and the interactive world. They know exactly which mountain biking events appeal to which demographic, and indeed, psychograhic, group.
They know, for example, that the “Survivors!” segment of the World Cup appeals primarily to a psychographic group called the Machiavellians. They know exactly which sponsors want to reach those groups – self help publishers for our Machiavellians, for example. And they know exactly what kind of information and advertising their audience will respond to.
These are the “hidden dimensions” of mountain biking content. Armed with this knowledge, our entrepreneurs bid twice as much as ABC and ITV for the rights to the next World Cup. They are vilified in the press and their recently IPO’ed stock drops 60%. They then proceed to exploit the hidden dimensions.
First, they go to Guinness and P&G and say that they can have 10 different adverts each reaching different demographic and/or psychographic groups in the same number of 30-second spots and for the same price. They can do this because the four forces allow them to “package” the show in virtually an unlimited number of versions – including the adverts – and to transmit only the appropriate version to the appropriate target. In addition, the show is the perfect marriage of a web site and television (what we call Enteractivity with an E, or Intertainment with an I). Therefore, for the two minutes before and after the regular advert, our entrepreneurs will sell the interactive “frame” around the TV screen to Guinness and P&G for their “banners” and click-through buttons.
P&G can now directly appeal to their bored customers when they start paying attention again and Guinness can specifically target Budweiser drinkers when they get back from the kitchen. Since the programme is almost inifinitely packageable by target audience, the entrepreneurs can sell the same 30 seconds to Ford, Nike, Trek Bicycles, and even the local bicycle shop in Watford. – slicing the audience in thinner and thinner wafers – but creating more and more value on a per-viewer basis.
Next they go to Yahoo! and sell highlight clips, time trials, and a stats package for delivery via the PC. They then go to Orange and sell the same thing for third-generation mobile phones. The inventory is virtually infinite not only by audience target but also by sponsor, customer, device or any number of other defining characteristics.
Remember also that the storage and personalization forces give that inventory a very long shelf life. With all of that in hand, our entrepreneurs turn around and arrange the simulcast on ABC and BBC for the “broadcast” audience, and they in turn arrange with their respective partners ESPN and British Eurosport for the “pay” audience. ABC, ESPN, BBC and British Eurosport agree to pay the same price they used to pay for exclusive rights because they can begin the slicing and dicing all over again.
The BBC can slice and dice the content to fill up its 48 new digital channels, including BBC 21, BBC 33, and BBC 46 that are screaming for something, anything to show. Our entrepreneurs paid twice as much but reaped five times the reward by exploiting the hidden dimensions.
The traditional dimensions in television are limited inventory of time, limited shelf life, crude targeting if any, and a single device – the TV (and maybe radio). The new, hidden dimensions are unlimited inventory, long shelf life, accurate targeting, and multiple devices – TV, radio, PC, mobile, pager, billboard – you name it. In other words, If it can transmit information, something from the World Cup of Mountain Biking can be put on it.
Although I took a television example to illustrate hidden dimensions, examples abound on the internet side as well. Bloomberg for instance, in the financial arena. There, Michael Bloomberg has taken quantitative and textual information and exploited every possible dimension, including television entertainment.
I used television as my primary example because the opportunity to exploit its hidden dimensions is so much larger and immediate, and again that’s an advantage that the medium has over the Internet in our new converged world. It’s a lot easier to create lots of exploitable segments when you start with a mass audience like television than it is to build a mass audience from a lot of disparate segments like the internet.
But to truly thrive in the converged world, one must not think first in television terms and try to extend that to the internet or vice versa. Disney’s failure with its Go portal and Microsoft’s failure with WebTV are two great examples of this sub-optimal approach. Rather, in the future, one must think like our entrepreneurs think – in converged terms first.
This approach starts with customers, segments and sponsors and the links between them, and continues with links to complementary customers, segments, and sponsors. This approach assumes that the content will be optimized up-front for every medium and device – not optimized for say TV and then retrofit for the PC and mobile.
This approach starts with the “perfect unit,” the visual image, and builds the communication, information, and entertainment values around it. This approach views websites and TV channels as equivalent. This approach views portals and networks as equivalent. This approach views TV’s, PCs, fixed phones, and mobile phones as equivalent.
They’re all just different ways to give customers what they want, whenever they want it and on whatever device… or as my physicist friends would say – they’re all just different means to get perfect units of communication to customers over every possible dimension. In other words, a perfectly unified approach for the new converged world. NTL’s approach.