How Will Channel BT Fund Itself?

TVFuture Recent discussions have made it clear that downloading shows via BitTorrent is by far the most popular way for Lifehacker readers to watch television. The advantages are obvious and often-discussed, but there's a question that doesn't get asked so often: in a 'Channel BT' universe, how is production of TV shows going to get funded?

Picture by revdancatt

Our recent post about the decline in mainstream TV viewing bought forth a lot of comments, but the overwhelming trend was along the lines of "downloading shows is easier, I can watch them when I like and I can see overseas stuff sooner. Also, TV networks suck." This remark from Warcroft is pretty typical:

TV just doesn't suit today's lifestyles. Personally, having a wife and two kids (3 and 18 months) most TV scheduling doesn't fit into what times we have free . . . Currently, the only channel that lets us (my family) watch what we want when we want is Channel BT. Give me an alternative to that and I'll jump on board. But I'm not going to pay for subscriptions or anything to be able to watch free-to-air programs. I shouldn't be punished because my life schedule doesn't fit into the commercial networks' schedule. They should be working to give me, the viewer, what I want.

The only real restraint on enthusiasm for Channel BT is the existence of download limits and the complexity of downloading, though that's getting easier all the time. The lack of a full-scale commercial alternative a la Hulu^ undoubtedly is also driving people towards P2P downloads. And while iTunes does offer some paid TV downloads in Australia, it doesn't yet work as a way of making people get involved with shows or brands they don't already know, or catching up with shows they've missed. (Foxtel Downloads has similar issues.) We want the convenience of search-download-watch, preferably without cost or hassle.

I'm not interested in stirring up a debate about whether BitTorrent (or P2P or file sharing if you prefer that label) is a useful advance from the point of view of existing media producers, or whether the often heavy-handed legal tactics used against downloaders are appropriate, or how it's all the fault of the commercial networks anyway. The technology exists and will doubtless continue to be used, so embracing it would seem more sensible than fighting it.

But is it possible to embrace it and also make enough money to keep producing TV content? Or do we need to accept that getting more choice of how we watch might lead to less choice of what we watch?

TV can undoubtedly be art, but TV is a commercial art form. Shows require money to develop, cast and produce. At this stage, we've got a great new method for distributing TV content, but absolutely no idea of how that's going to be funded — and without funding, there'll eventually be fewer shows. There are four obvious funding models being experimented with for moving conventional broadcast fully online at the moment, but each has disadvantages.

Ad-supported streaming or downloads

Advertising has funded the majority of free-to-air TV production for years, so why can't it just translate wholesale online? Firstly, technology makes it easy to skip ads on-screen (and torrents usually cut them out anyway). Secondly, TV advertising is built on a relatively localised model: even companies with global reach advertise products differently and at different times depending on the country. The net itself promotes hyper-localism, so global ad budgets seem rather unlikely. Many net users view advertising as entirely evil, but proposals for alternative sources of funding are a tad thin on the ground.

Selling whole series on DVD

Revenues from TV on DVD have grown dramatically, and many shows remain on air (or get a second bite, a la Family Guy) because of the projected sales of DVD box sets. But that hasn't yet translated into shows which can make significant DVD revenue without already having a network TV presence, let alone fund ongoing series (not occasional DVD specials) on that basis. It certainly helps, but it's not the whole solution.

Selling series as downloads

The same arguments apply as for DVD, with the added disadvantage in Australia of grappling with download limits.

Funding channels via subscription or government

This can be done via a government grant (as with the ABC); a licence fee (as seen with the BBC in the UK, and a model once used in Australia); or through paying for a subscription to a specific pay TV channel. All mean a relatively predictable stream of income, albeit one that can vary from year to year.

It's no coincidence that, with iView, the ABC is the most advanced provider of on-demand TV services in Australia, and that Foxtel is also dabbling in this area. However, the political pressures of running a government-funded service mean that no such channel can single-handedly come up with the range of entertainment conventional TV produces, especially if they are also charged with catering for more niche markets. As for pay TV, the relatively small size of the Australian market means that the number of shows it produces will inevitably be fairly small. Fine if you favour quality over quantity, but not everyone does.

Put that together, and you have a bunch of potential minor funding services, but no comparable income stream to the years when TV was the dominant media. I'll say it again: change is inevitable, so I'm not suggesting TV producers should (or could) stem the tide. What I want to know is where they should surf it to.

So that's what has occurred to me on the subject, but I want to know what our readers think. How can the business of TV production best evolve to work in an on-demand universe? Can you honestly say you'd pay to watch everything that took your fancy? What will the future of TV look like? Share your ideas in the comments.


Comments

    I use channel BT because it's so easy:
    1) Search and download to a shared folder on PC.
    2) PS3 streams video to TV.

    What I have noticed about BT shows is the first realeased, best quality version usually becomes the dominant one.

    SO... why doesn't a network release a high quality show to BT with thier advertisements in it an hour or so before the show airs. They would beat the competition, generate the initial wave of downloads and their ads are still being watched.

    Not only that, if they are great quality and known to not have any viruses etc, people will probably be happy to deal with the ads. I know I would.

      I would probably be happy with such an arrangement.

        If the media is in a non-DRMmed format and I planned on keeping a copy, I'd edit out the ads.

        I'd probably edit out the ads anyway, but that's just me.

    Yeah, I think most people using Channel BT don't really want to be pirates - it's just simply the best product.

    If the networks released shows themselves on to BT WITH some ads and just asked politely to only use that version and not redistribute sans ads, I think most would happily take them up on that. Of course there will be a percentage who will find the ad-chopped version - hopefully that would only be a small one.

    But unfortunately it ain't gunna happen with current shows - localised advertising would be impossible, and overseas sales (where the real dosh is) would be completely underminded. Also TV execs rely completely on metrics - Channel BT is by its nature so scattered it's very hard to look at numbers on how many people are watching what. So the people in charge don't want to try it because until they have a grid of audience numbers in front of them they don't understand it.

    But someone will do it soon with something new, cheaply made, and not connected to an existing TV network. They'll do an ad deal with a few places who are happy to broadly advertise internationally and use that to pay for production.

    With the right production budget level and a few advertisers willing to take a risk, it may just end up being a profitable experiment that leads other content to the same distribution channels. Its success of course won't be down to the distribution, it will all come down to something completely un-technical and age old - good storytelling ;)

    I still watch FTA TV, even though I have a 100Gb monthly allowance, which could absorb much of what I watch already. The fact is that I choose not to, because my allowance is valuable already. The majority of the stuff I want to watch will be available to me sooner or later, and there are few TV shows that I NEED to watch today or tomorrow. I am patient enough to wait, and why use my allowance on things I can watch on TV later?

    I know I am in the minority on this here, but my opinion is that whilst there is a sizable minority of BT users who regularly download TV shows, it is still a minority, and most people who watch TV either don't have access to channel BT, or don't have the knowledge or really don't care to download from channel BT. And with devices such as video recorders or PVRs, I need not be dictated to by programming schedules. I can skip ads using my remote (although truth be told, I'm too lazy to.)

      What else do you use your 100Gb on then?
      I only have 10Gb (+10 off peak) and I struggle to use that much in a month.. and currently I'm acquiring faster than I'm consuming!

      I don't have much spare time to watch TV of any sort, too busy living in the real world. But that makes Channel BT my only source of TV apart from the occasional live Sport..

      Channel 10 were ahead of the game on that point.. Live sport will always have a role to play on broadcast TV!

    The ratio of Channel BT viewers to traditional FTA viewers is not likely to skew to the point of affecting funding for many, many years if at all. I also believe that if that real shift occurs, TV stations will smarten up their act to win back people and advertising money (and so production money), therefore it's a moot argument.

    YAY!
    I got quoted in an article :D
    I love Lifehacker :)

    Best option for those that don't have the time to watch live FTA TV or want to pay for subscription is to buy a TiVo or similar device. Since purchasing ours we have watched a lot more TV than we ever used to and at our own convenience.
    Plus being able to fast forward past all those repetitive adverts is a blessing too!

    I posted this on my blog the other day:

    An average person in the US will see between 600-625 adverts (potential exposures as they call them) per day from all media sources including radio, billboards and the like, with about 400 coming from TV over the 4 hour TV watching average.

    I'm fairly certain it's similar in Australia.

    That means at 36 years I've seen over 4 million adverts in my life time (assuming I watched an average of 4 hours of TV since I was allowed to watch TV at age 5).

    Haven't I paid enough for this content already?

    Isn't it enough when people ask me what I'd like to drink at a restaurant I say "coke" without thinking? Or I know there's a glass and a half of full cream dairy milk in cadburys? Or that Beans Means Heinz?

    I watch a program a while ago, it was a made a few years ago talking about this very subject and how it would affect the market. I downloaded it via BT...
    The show makers should release the torrents with ads, either imbedded like you see 10 or nine logos emedded. or feeding/ pops throught out the episode at decisive spots. not massive intrusions like Video Hits. just like product placement, ad placement will be a deciding factor. Foxtel is onto a start with their very own player, but that will only carry them so far for so long.
    the sooner the TV networks wake up to their problem the sooner they will be making money again. Its only a matter of years before we all have super fast internet and no need for set top boxes and alike. IPTV in a commercial world wide distribution is only a few years away.
    I've been telling people for year the first company to stream video well over the net in a watchable format will win. eg Netflix did it and does it well. to me they're winning.
    subscriptions wont work entirely, but maybe a pay for extra service will. eg the adult channel ;)

    I agree with @Kato that we are still a few years off downloading having a large effect but that is is what makes it an ideal opportunity for the networks to try a number of different models to gauge which is the most successful. There is such a large percentage of the population that have no idea how to use BT that probably only 10% at most would download. Generally the others obtain illegal copies on DVD usually on overseas trips to south east asia.

    The current DRM downloads with limited time to watch is not the answer. Personally I wouldn't mind chipping in a couple of bucks per episode. Globally for some shows this would be enough to cover their production costs. For fringe shows though, they would never get made on this basis.

    I still watch FTA but when I like via the Media Centre so I can skip the ads.

    Why should we have to think up a way for them to make money? I say death to the big budget TV shows/networks and bring forth a multitude of independent creative productions.

    Just a quick note on Swil's comments.

    A lot of Tv rips available for download have advertising on the bottom third of the screen throughout the program.

    Most of it is for other shows on the network, but the fact is, it remains and is viewed by everyone who downloads the ripped show.

    Surely Tv producers can sell this advertising space, quoting download numbers to the advertising agencies. It won't be cut out by pirates and will remain the best electronic version of the show until the series is released on dvd months later.

      Now that's a decent idea. As long as they were of similar duration to the way it is currently used it would be OK. I'm sure some would try to turn it into a CNN headline non-stop commercial though.

      I was thinking this, but could be dangerous.
      Already those ads take up to a third of the screen.
      Just how much screen space can they take and how often will they be allowed?
      I can see those boundaries being stretched more and more.

        They're already pushing it, anybody else here watch downloaded supernatural?

    all tv shows should be officially released before broadcast on tv as .torrents and distributed centrally (via a single website or aggregator).

    deals should be made with ISPs to distribute the content with small incentives for customers to seed content and for costs to be embedded into regular internet plans.

    anyone should be able to create a television show and if a show is popular it should receive funding. such that an Aussie show which is popular in NZ means that the NZ ISP pays for it.

    this way production companies can still seek out talent and promote their shows but much more cheaply using the internet.

    no more ads, just good writers, actors and producers.

      Yep, pretty much what I was thinking.

      It would also solve some bandwidth issues.

      In the article it mentions old tv shows and series for download but would maybe not fit in people's download limit. If there were ISP hosted files it would lower outside bandwidth and these paid torrents should be outside people's monthly download limit. Well at least a central location, maybe in each state for these sort of purchases would work ISPs could maybe afford to not include them in the limit, especially if the copyright holders who are collecting the revenue subsidised the downloads.

      Also if ISPs are being forced to police for business will they get compensation for doing it? I bet it's not in the plan. On one side they want to get paid but they probably see it as a service ISPs should already be performing for them.

      They have paid enough to "lobby" US politicians to get this South Korea summit happening.

      These companies should have been working to build a torrent client with a paid method. Local hosting with decent quality.

      The issue is through sheer stubbornness they have decided not to offer a paid service that is a viable alternative to what is "freely" available at the moment.

    I've been saying the same as most of you guys for a long time.

    If TV networks released a good quality download (The same quality that could be recorded on TV), with advertising built in, I'd download that. happily.

    If they went so far as to build a service where I could download any of the TV shows I wanted, when I wanted, and watch them how I wanted, I'd even go so far as to pay a reasonable subscription fee.

    As soon as the big networks start to realise that the playing field has changed, and that the old rules just don't work anymore, we'll all be in for a much better experience.

      Absolutely agree. I've been saying for ages that an aggregated site that guaranteed quality, first-release downloads could readily charge a subscription (provided it's reasonable) and have people on board. This kind of model could actually reduce the costs of distribution and marketing for shows/films as online and social media outlets overtake traditional marketing efforts.

      The current situation is close to last century's prohibition laws, a growing percentage of the populace are being declared criminals because the law/market is failing to keep up with the demands/needs of consumers.

    The FTA channels/portals here have experimented with legal downloads (with localised advertising) of locally produced and overseas shows, but it was a FAIL.

    Very few people bothered, compared to how many watched it on TV. Underbelly 2 was a good example of this - 3 million viewers, less than 100,000 downloads.

    Arpoo7 tried with full streaming of Heroes episodes, but these were streamed from the US so the quality and streaming connection was imho crap, and they were old episodes that Channel Sellven had already aired (which Sci-Fi on Foxtel had aired over a year before).

    The numbers just don't add up for the FTAs and their portal partners, so they don't want to do it, and they are scared to do simultaneous download and/or streaming of new content anyway.

    Combine Free-To-Air programmes, live sport and news, and most of the continuously-replaying Foxtel back catalogue into one centralised subscription service for $40 or $50 a month (generally no more that what the basic Foxtel package is) and get more ISPs to give unlimited data to certain services and you'd have a huge hit on your hands.

    Essentially, a subscription Apple TV with a (web-based?) tuner, DVR and Blu-Ray player in it :) that works up to 1080p for those with the bandwidth. Perfect.

    I think that there should be a join industry / government funded project to bring a number of Streaming TV options into the Australian market. This would likely take the form of a short term "i-channel" (no rip-offs intended) for say 6 months, on which they deliver premium content and offer the users a number of options through which to fund their viewing pleasures.
    I can see a real potential to expand the advertising market to those businesses who are interested in direct marketing. IP Addressing would allow a business to choose the locality their products and services have the greatest relevance to (consider candidates advertising for a political campaign?) and only make those ads available to people from that locality.

    The challenge here is generating enough revenue from the advertising, and this would be the focus of the pilot channel. Users may be willing to accept a mandatory 30 second advertisement at prior to commencing viewing, as well as on page advertising for the program guide. Alternatively they may opt for keeping ad breaks in the show (as this is how many TV shows are designed) or even move towards a NFL style of "half time" adverts.

    Web advertising is dramatically cheaper than television, but until we have people taking up this challenge of "making it work for all" we will continue to turn to BT-Channel sources.

    IPTV should be able to collect info on our interests like Google does. Why cant this information be sent to the TV networks and when our downloaded shows have breaks the networks can insert local, personalised adds which they charge at a premium.

    Tv adverts support the station which in turn supports the advertisers. I have been visiting most of these advertisers for quite some time and the more customers they have, the more they want. From what I have calculated, I have spent $120,000, (yep, 120K) on (junk) food and more on other stuff. I'm guessing that the TV stations got some of that action, so what's the big deal weather I watch TV or youtube...As long as the economy is ticking over with us pre-programmed zombies, they'll always have money. :-)

    I can deal with the 2 month wait for Doctor Who - Although a christmas special does make more sense when watched in December, not March.

    But waiting almost two years to a direct-to-DVD release of Chuck - I'd rather BitTorrent, and watch it 3 hours later.

    An easy answer is obvious, the model is used everyday on almost any website you visit:

    Networks release high-quality BT versions of their shows, with access to content links being handled by locality specific mirror sites.

    I, in Australia, want to watch the latest Grey's Anatomy? Well I can download a high quality, legal version, all I have to agree to is being redirected to a torrent link page that has ads on it. The servers know where I am from my IP(roughly), so ad content can be attuned to match.

    Simple, yeah?

      I think that would depend on the cash-value of a BitTorrent pop-up advertisement. Remember, for the ad to be worth something, someone needs to click on the ad and buy something.

      Are you clicking on the Optus ad on this page?
      Half the people on this site probably block ads with plugins.

      Personally, I'm happy to pay but need sensible pricing for content.

      If free-to-air is currently funded by advertising, I'm quite happy to pay for the cost of the ad revenue they're losing and their cost of content-delivery.

      Note that this would be a metric fukc-ton cheaper per show/series than something like iTunes.

      This all comes back to the single problem with the Internet since its inception:

      There is no good way of making micro-payments.

      Google AdWords is the closest I've seen to a working micro-payments model.

      Any transaction for less than $1 is either open to fraud and/or has too high a transaction cost.

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