Questioning Technology: The Muddy Road to Digital Television

In an effort to appease irate members of Congress, the major U.S. television networks have chosen to begin the era of digital broadcasting later this year with a token nod to high definition television (HDTV).However, it was clear from the recent flurry of network announcements that the HDTV decision was a halfhearted one that's more about making peace on Capitol Hill than a belief that anyone actually wants or cares about high resolution television pictures. In fact, today's generation of television executives see HDTV as a vast money pit with little upside for many years to come.Their problem rests with the broadcasting lobbyists who argued over the past ten years that a valuable new chunk of the public's airwaves should be given to existing television stations in order that Americans have the latest television technology. Now that the broadcasters have gotten the digital spectrum -- free of cost -- they don't want to deliver on those promises. Several key members of Congress warned broadcasters at a hearing last year if they don't provide HDTV they will either have to pay for or lose their spectrum windfall.With this cold dose of reality, the broadcasters are now faced with implementing a technology that's incredibly expensive for all concerned, whether it be the program producers, local broadcasters or home viewers who will be asked to pay several thousand dollars for a new HDTV set. When all the fog lifted from the over-hyped HDTV announcements of recent days, it became apparent that TV viewers who buy the expensive new sets will only see a few hours of true high definition programming in prime time each week.Worse yet, a timid Federal Communications Commission (FCC) failed to set a single technical standard for digital broadcasting. This resulted in NBC and CBS choosing a different HDTV broadcast standard from ABC and Fox. In non prime time hours, the networks will broadcast in still other technical standards. TV sets capable of receiving programming from all the broadcasters will thus become more expensive to manufacture and purchase.The picture gets even cloudier. The cable industry has another digital TV strategy. "We are going to digital to increase the number of channels for our viewers. The high def debate is one that troubles us," said Leo J. Hindery, Jr., president and COO of Tele-Communications, Inc., the nation's largest cable operator.The computer industry has still another vision. "We think the future of television is about using (an) appliance for information access, and communication, and the ability, ultimately, to blend those together into a new form of produced television experience, which includes interactive content," said Craig Mundie, vice president, Microsoft Corporation."It's chaotic out there," mused Howard Stringer, president of the Sony Corporation of America, in comments to the financial community at the recent Variety/Schroders Big Picture Media Conference in New York City. "The disaster -- or semi disaster -- for all of us in the manufacturing industry is the FCC has left it open to the broadcasters who, as you know, have been unable to make up their minds. Secretly, they don't want high definition -- at least not yet -- at current prices."To the amusement of many, the "spectrum grab" by broadcasters has left them in a position where they have to implement a new technology without seeing a way to immediately make money with it. When asked how ABC would profit from HDTV, network president Preston Padden quipped: "If someday it's possible to make some money from digital broadcasting, we wouldn't be opposed to that." At CBS, president and COO Mel Karmazin said his network will keep all options open. "We are not committing to do full high definition television until we see what the American public wants."Sony's Stringer said the cost of production equipment and home TV receivers will go up if manufacturers are faced with building products for multiple technical standards. "You've got to think of the cost of high definition in terms of production equipment, transmission equipment and receivers," he said. "Each one of those is affected in price according to which standard you use at the time. As the equation changes, one or the other of the three areas is impacted in cost terms. That's very unfortunate. The FCC, by allowing sort of open season, has exacerbated the problem."At the recent convention of the National Association of Broadcasters (NAB) in Las Vegas, a major subtext to the digital technology transition became the structural change it will eventually bring to the business of television broadcasting. Cracks between traditional media partners have already begun to appear. "Nothing should be sacrosanct," said ABC president Robert Iger, as he fired a shot across the bow of the longstanding network/affiliate station partnership during an address to broadcasters.Calling for "a new paradigm for our business," Iger said broadcasters must find a way to participate in pay-TV's subscription revenue stream and proposed a new look at the economics of the network/affiliate relationship. "We need to compare profit margins, and we need to share the risks," said Iger of the networks and their affiliate television stations. "The networks stood tall this year when it came to retaining premier high-cost, high-profile programming franchises, like professional football. We need to ask affiliates to do the same in standing by us."Iger also said "the notion of our programs running only on our networks is an anachronism, and it is now clear that repurposing expensive product is an imperative." The ABC president asked: "How long can advertiser-supported networks continue to compete for programming against cable services supported by dual revenue streams?"In the most basic terms, Iger is suggesting that local stations start paying the networks for expensive, high profile national programming rather than the current policy of the networks paying the stations to carry their shows. On top of that, the networks should also be allowed to simultaneously sell those same shows to cable and satellite outlets for additional revenue. Such a scenario could be the beginning of the end of the current system of broadcast television distribution in the U.S.Another potential blow to broadcasting's status quo came from Senate Commerce Committee chairman John McCain, who told an NAB audience that he would propose legislation that will allow direct-to-home satellite operators to carry some -- but not all -- local television stations on their subscription satellite delivery systems.The Arizona Republican said the federal government should not impose must-carry regulations on the satellite operators just as they are poised to offer true price competition with cable. Must-carry rules currently require that cable operators deliver all broadcast stations on their systems in a given television market. "My view on must-carry is that anything that impedes the ability of satellite carriers to compete is unworkable," said McCain.At the NAB meeting, there was also a shift away from the open antagonism that arose a year ago between broadcasters and the computer industry. ABC executives cited a key reason beyond picture quality that the Disney-owned network chose the more computer-friendly progressive scan HDTV technology over the interlaced scanning technology chosen by CBS and NBC. "It will better position us to adopt numerous multimedia opportunities created by the convergence of computing and television," said ABC's Iger.In fact, Iger broke ranks with many of his broadcasting colleagues by agreeing with the computer industry that the convergence of television and the Internet might soon be an important revenue source for his network, one with more potential than HDTV. "(The convergence of television and the Internet) offers communication, information and entertainment dimensions that appear limitless and I believe it will develop into a huge business," Iger said.Sony's Stringer agreed. "The most exciting revolution coming is the fusion of the PC and television set," he said. As a result of that belief, Sony teamed with Microsoft to collaborate on a convergence of personal computers and consumer audiovisual entertainment products. Sony will license Microsoft's Windows CE operating system for use in several home entertainment devices and Microsoft will license Sony's networking technology for use with certain versions of Windows CE. The idea is to create a seamless integration between PCs and entertainment electronics in the home.Despite all the hoopla about HDTV, viewers who choose to buy the expensive new TV sets will initially get a very limited lineup of prime time movies and film-based television programs from the networks. The rest of the program lineup will be standard definition fare, though it will come with better picture and sound quality.Sports, often touted as the "killer app" of high definition video technology, is so far absent from any network's digital broadcasting plans. "Sports is the most expensive and difficult to put in true high def," said NBC president and CEO Robert Wright, who would not commit his network to HD production of the Olympic Games in 2000. "We have no plans right now for football in HD," said CBS's Karmazin. "We've looked at the cost of it, but we haven't figured out how the economics will work out. We will move slowly."In fact, Karmazin said it will be tough enough for four of CBS's owned and operated stations just to get on the air this year with a digital signal. "Within the local markets we are running into difficulties," he said. "Community groups are opposing our tower plans. It's a challenge in every city we are operating in to get the construction done in a timely manner."Broadcast industry confusion over digital TV technical standards will dissipate later this year and a consensus will emerge, some veteran executives wishfully predicted. "I hope by later this year a consensus will develop with the consumer electronics industry, broadcasters and cable, the FCC and Capitol Hill as to what the standard is for DTV," said TCI's Hindery. "I think we will break a lot of hearts and waste a lot of money if high definition continues to mean different things to different people."Barry Diller, a television programming visionary who is now chairman and CEO of USA Networks, is taking all the turmoil over television technology in stride. All the conflicting standards, predicts Diller, will be sorted out in the coming months. His confident prediction: "Digital evolution over the next five years. High definition in some far distant future."

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