1. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 1 THE ROCKY ROAD TO DIGITAL v. 9.0 THE MEDIA ENVIRONMENT: PRINCIPAL DRIVERS OF CHANGE

2. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 2 What we’re going to talk about... Principal drivers of change in the media environment Some consequences of those changes Opportunities for public broadcasters Priorities

3. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 3 “With most information technology innovations, we have consistently over-estimated the speed with which they will unfold and under- estimated their eventual impact.” (attributed to Bill Gates)

4. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 4 And yet, the direction of change in the media environment is clear: None of us should be surprised by what will happen in the next several years. These changes will affect us all, as individual citizens and consumers, and in how we do our work to fulfill our missions.

5. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 5 It is not an overstatement to say that the transition from analog to digital technologies is changing everything - content creation, distribution, content packaging, how our audiences access our services.

6. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 6 Despite Bill Gates’ caveat about over-estimating the rate of change, in recent months we appear to have arrived at a “tipping point” at which the rate of change in the media environment is accelerating exponentially.

7. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 7 Depending upon your point of view, the emerging media environment is either: 1) An ideal alignment of the stars, in which it will be possible for public service media organizations to address the needs of their audiences far more effectively than in the past, OR

8. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 8 2) It’s a “perfect storm” of disruptive technologies, in which marketplace forces will prevail, making it increasingly difficult to sustain legacy public broadcasting business models and to address the public interest.

9. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 9 At the very least, we are at what Intel chairman Andy Grove has referred to as a “strategic inflection point”, which is that point in the life of a business or institution at which fewer and fewer of the old rules apply. We know that if we continue to do business by the old rules, there is a high probability of failure. But the new rules haven’t been written yet.

10. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 10 Principal Drivers of Change

11. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 11 Principal Drivers of Change Computer processing power continues to double every 18 months at no increase in price. (Moore’s Law) The cost of digital storage for text, audio, video data is dropping by 50% every 10 months Advances in compression continue, squeezing increasing amounts of information down same-sized channels or ”pipes”, increasing choice

12. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 12 Principal Drivers of Change Conversion from analog to digital technologies For cable, one analog channel = eight digital channels Replacement of analog broadcasting by digital television and radio broadcasting increases number of broadcast program services

13. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 13 Principal Drivers of Change Digital file formats facilitate cross-platform exchanges, manipulation of content for display on various devices from cell phones to large- screen HDTV displays convergence of functions e.g. cell phones and handheld devices which “do everything” Shift to Internet Protocol provides universal language for voice (VoIP), audio and video

14. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 14 Principal Drivers of Change Bandwidth to homes, schools, businesses continues to increase broadband now in more than 30% of US homes, emerging as audio and video distribution platform side-by-side with broadcast, satellite and cable fiber to the home replacing copper for video, telephone, broadband service

15. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 15 Principal Drivers of Change Verizon’s (and other Baby Bell’s) “Fiber to the Premises” maximum capacities fiber-optic cable 400,000 mbps coax 850 mbps copper twisted pair 10 mpbs consumer offer FiOS - 30 mbps DSL - 1.5 mbps

16. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 16 Principal Drivers of Change Broadband Over Powerline (BPL) FCC approved nationwide rollout in 10/04 last “100 feet” are wireless no need for individual truck-rolls also useful to power companies to monitor their systems

17. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 17 Principal Drivers of Change Shift from wired to wireless technology omnipresent wireless connectivity with cell phones, WiFi, WiMax, PDAs as universal handheld multimedia devices for data, audio, video, telephony cities deploying universally-available wireless principal driver of economic development, educational access

18. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 18 Principal Drivers of Change Satellite distribution of audio, video and data provides increasing number of channel choices (e.g. DirecTV, DishTV, Sirius, XM)

19. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 19 Principal Drivers of Change Technologies which ignore geography (e.g. Internet, satellite, wireless) erode geographic market boundaries exacerbate battles between wholesalers and retailers over who delivers services directly to consumers e.g. Sirius/XM; Comcast/PBS kids channel; PBS.org; NPR.org local becomes global, e.g. audio/video streaming on line Undermines foundation of network/member station relationships

20. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 20 Principal Drivers of Change the wholesaler/retailer relationship True Value Hardware has 6000 member stores worldwide owned by individual storeowners, a retailer- owned buying cooperative “True Value is no longer selling products on- line” Ace Hardware has 5100 member stores worldwide 3/12 thru 4/30/05 - order on-line; free shipping if using “ship to store” option

21. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 21 Principal Drivers of Change proliferation of GPS (Global Positioning System)-equipped receivers/display devices facilitates delivery of location-specific content and services evolution of home media servers

22. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 22 Principal Drivers of Change increasingly sophisticated database management and data mining capabilities enable personalization/ customization to match audiences with content in which they are interested assisted by collaborative filtering, recommender systems, relationships engines (“others who ordered this book also ordered..”)

23. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 23 Principal Drivers of Change sophisticated search tools required to find stuff on the Internet, which is turning into a map of the world as large as the world itself Google and Yahoo audio/video search services, soon Microsoft check out http://video.google.com/

24. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 24 Principal Drivers of Change http://search.yahoo.com/cc “Options: Find content I can use for commercial purposes. Find content I can modify, adapt, or build upon...... This Yahoo! Search service finds content across the Web that has a Creative Commons license. While most stuff you find on the web has a full copyright, this search helps you find content published by authors that want you to share or reuse it, under certain conditions.”

25. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 25 Principal Drivers of Change miniaturization, wearables, incorporate ever-smaller computer devices into everyday objects, including clothing

26. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 26 Principal Drivers of Change Development of “cognitive” or “software defined” receivers has potential to vastly expand signal- carrying capacity of over-the-air spectrum replaces “hard mapped” frequency assignments with intelligent receivers operating like cell phones or in-home wireless phones, changing channels invisibly to assure optimum reception could facilitate sharing by additional users of already -occupied spectrum without interference, e.g. by unlicensed devices

27. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 27 Consequences

28. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 28 Consequences Audiences becoming used to accessing whatever content they want, when they want it. Shift from real-time to non-real time use of media content using DVRs/PVRs, video on demand Broadband facilitates on-demand distribution, emerges as real time/non-real time audio/video/interactive distribution platform (view Comcast spots)

29. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 29 Consequences Increasing capacity of packaged media (e.g. HD-DVDs) Proliferation of iPods, MP3 players, podcasting, soon video iPods see Videogames emerging as content platforms for education and training, as well as for entertainment, storytelling, on-line connectivity check out Sony PlayStation Portable

30. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 30 Consequences accelerating audience segmentation/ fragmentation technology facilitates aggregation of self- identified, self-selected communities of interest organized around media content and services

31. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 31 Consequences Inability of legacy audience measurement tools to track increasingly-complex media use behaviors Nielsen having difficulty tracking use of DVRs, VoD, broadband, let alone tracking viewing of hundreds of conventional video choices, multi- tasking with Internet use ratings, *reported* viewership of individual “channels” will continue to decline sample-based measurement being replaced with proprietary direct measurement technologies, e.g. VoD, TiVo

32. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 32 Consequences Erosion of effectiveness of interruption marketing, e.g. commercial advertising, traditional on-air fundraising challenge for PTV: Develop alternatives to traditional on-air fundraising before passing tipping point of core audience alienation

33. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 33 Consequences lowered threshold to entry for content creators, distributors barrier to entry to high technical quality also lowered plummeting prices for HD production, post- production equipment reducing cost of “conventional” production as well

34. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 34 Consequences technology facilitates interaction between content/service providers and their audiences audiences no longer necessarily anonymous to communicators or to each other “markets are conversations” - e.g. the “blogosphere” modifies mass comm model; evolving to “mass customization” facilitates interactivity, not just two way but peer-to- peer

35. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 35 Consequences need to understand viewers’ and listeners’ increasingly-complex media use behaviors initial findings of CPB-funded NPS research

36. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 36 Opportunities Identify and exploit opportunities provided by geographic location, local retail presence, physical presence in community Exploit new opportunities to connect audiences with content and services in which they’re interested

37. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 37 Opportunities Increasing importance of station’s curatorial role, trusted “intelligent agent” representing known editorial sensibilities, “concierge,” guide

38. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 38 Opportunities “The Long Tail” phenomenon (session at 3:30 today) “The Long Tail rebellion” (re: “Eyes on the Prize”)

39. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 39 Opportunities need for new rights protocols to facilitate cross- platform as well as extended shelf-life distribution check out (Lawrence Lessig/USC School of Law); The Berkman Center for Internet and Society at Harvard Law School “Copyright and Digital Media in a Post- Napster World: 2005 update”

40. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 40 BBC Creative Archive Initiative (Paul Gerhardt/BBC) free access to BBC content for learning, for creativity, for pleasure members of public will be able to download cleared TV and radio content, and will be encouraged to modify and create own versions to be shared (“You’ve heard of the long tail - this is the long march”) They’ve developed a new license, based on “the creative commons” “we want our audiences to rip, mix and share their BBC”

41. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 41 BBC Creative Archive Initiative tentative rollout: nature and science in ‘05; news in ‘06; sports in ‘07; drama in ‘08 not everything immediately - based on user demand hope to foster a culture of sharing content and user creation, side by side with conventional professional production 18 month pilot (4/05 start) will test user demand, understanding of and compliance with license terms; impact on existing and potential enterprises

42. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 42 BBC Creative Archive Initiative objective is “to work in partnership with other broadcasters and public sector organizations (e.g. Channel 4, British Film Institute, British Library, Open University, Imperial War Museum, National Museum of Science and Industry) to create a public and legal domain of audiovisual material for the benefit of everyone in the UK” hope to have Creative Archive fully operational by 2010

43. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 43 Opportunities TiVos/DVRs, VoD as opportunities, not threats to increased viewing

44. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 44 Opportunities Exploration of new mission-consistent business models subscription models (e.g. Consumer Reports on-line) permission marketing (“opt-in” - junk mail is direct mail in which recipient has no interest)

45. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 45 Opportunities Create mission-appropriate alliances with for-profit media Create for-profit subsidiaries Google advertising model

46. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 46 Opportunities collaborations with other public service organizations (e.g. universities, libraries, museums, cultural institutions) evolution toward on-demand digital libraries creates opportunities to make common cause

47. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 47 Opportunities public broadcasters emerging as “public service publishers” (see Dennis Haarsager’s ) position public broadcaster as provider of production and creative services, telecommunications services to other public service organizations

48. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 48 Priorities stay focused on mission secure expanded rights to content exploit emerging distribution platforms Video On Demand, Satellite Radio (XM, Sirius), Home Video, Broadband, Podcasting secure cable carriage for digital broadcast channels Recent NCTA/APTS carriage agreement assures post-transition full-bandwidth DTV carriage, full- bandwidth carriage of one station per market during transition within duplication ceilings

49. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 49 Priorities increase audience research efforts to track increasingly-complex media use behavior collaborate with like-minded public service organizations (universities, libraries, museums) stay focused on mission

50. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 50 What we’ve talked about... Principal drivers of change in the media environment Some consequences of those changes Opportunities for public broadcasters Priorities

51. PBS/Las Vegas - 4/13/05 DAVID B. LIROFF, VP/CTO WGBH BOSTON 51 THE ROCKY ROAD TO DIGITAL v. 9.0 THE MEDIA ENVIRONMEN T: PRINCIPAL DRIVERS OF CHANGE