Investment advisory and strategic consulting at the intersections of media, marketing and technology.

Broadcasters’ Pyrrhic Victory

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Whatever your take on the Supreme Court’s 6-3 decision in favor of broadcasters over upstart Aereo, it is very clear that the future of how the medium of television evolves will continue to be a tortuous one, as technological innovation and the US legal system ham-handedly attempt to keep pace with each other.  The Court’s surprisingly definitive, but ultimately very narrow ruling ensures that broadcasters can continue to harvest the seemingly limitless bounty of MVPD carriage fees without fear — at least in the near term — of the current regulatory system getting in the way.

But the broadcasters’ near-term victory over a scrappy, extremely innovative method of delivering (ostensibly free) over-the-air broadcast television signals to consumers looking for a straightforward way to watch them without the high cost of a multi-channel TV subscription bundle and/or simply more reliably and flexibly than an antenna, should not be construed as the final word on the future of television.

In fact, the decision is merely the murky beginning of the next phase of  regulatory re-definition of what the medium of television is, and the legalities of how and where consumers can access and receive it.  If anything, broadcasters’ immediate near-term win in this decision is decidedly Pyrrhic, especially over the longer-term course of now-inevitable Congressional scrutiny. 

Indeed, it is questionable as to what broadcasters truly “win” in this decision, especially over the shifting winds of the long haul

The extreme narrowness of the decision undoubtedly ensures a death-knell for Aereo as a standalone business, but oddly (as Justice Antonin Scalia tartly points out in his well-written dissent) does very little (if anything) to provide a guiding standard for how programmers, consumers and TV providers should interpret or apply incremental tech-enabled developments in copyright, recording, and viewing. 

Technological challenges to today’s well-defended model of TV delivery will continue to come with increasing velocity (punctuated, ironically, mere hours after the Aereo decision by Google’s announcement of its long-anticipated over-the-top video play called Android TV) — and broadcasters and their doppelgängers who believe they can hold all of it back indefinitely are denying the inevitable. 

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Strangely and importantly, the Court tackled none of the more foundational issues raised by the arrival of Aereo and its technology (and its likely progeny), but, instead, provided only a rather squishy and limited rationale that because it looks and feels a lot like a cable TV system — as it was defined in 1976— it should be regulated (and broadcaster-protected) as such. In other words, an inductive duck test precedent based on a 38-year-old definition of television distribution to determine the legality of modern-day enablements such as remote digital video recording, on-demand video, video placeshifting, over-the-top video, authentication, and, oddly, the very definition of what free, over-the-air, government spectrum-granted “broadcasting” is in this day and age.

Until and unless Congress, of course, takes the bait and begins the long-overdue process of rewriting the rules of television for the modern-day digital era, something effectively not altered since the early 1990s — just as Al Gore was inventing the Internet.  Which is the inevitable next step in this tortuous journey. (Just ask anyone in the music business.)

As we have said in the past, consumers are pushing hard against the rigid protective walls of networks, stations and MVPDs for more modern approaches to watching television.  The advent of “good enough TV" solutions for a cord-cutting, and increasingly cord-never-ing population is upon us, and the proverbial genie has long left the bottle. 

In addition, a very aggressive FCC is similarly pressing forcefully to redefine the use (and value) of broadcast spectrum, and to translate it into a more modern and comprehensive communications blueprint that envisions products and services that do far more than deliver reruns of 50-year-old TV shows.

If anything, the Court’s Aereo decision has simply bought broadcasters perhaps a year’s worth more time before the economic cracks in their collective armor start to grow rust.  Conceivably, just enough time to re-invent themselves before Congress and the public more brusquely do it for them.

Aereo & TV’s Ultimate Drama

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Even though some legal pundits doubted it would happen, the US Supreme Court has agreed to hear the case TV broadcasters have been pursuing against upstart antenna + cloud + streaming startup Aereo.  The full petition submitted to the Court (found here) is a fascinating read, and promises a lively oral argument in April - and a mother of all decisions come late June.

Although somewhat surprising given that broadcasters have lost every circuit decision so far, Aereo’s move last month to actually ask the Court to take the case virtually guaranteed it would - especially as it invoked the potential broader threats to cloud computing (think Dropbox, Google Drive, etc.) and media innovation.

(The US Second Circuit Court of Appeals ruling in 2008 in the now-famous Cablevision RS-DVR case opened the legal door for TV + cloud storage and all the innovation that’s come from it.)

Simply put, if consumers are allowed to buy antennas, DVRs and Slingboxes, there is likely no reason why they cannot legally lease them.  The case will, instead, hinge on whether the court reaffirms the view that Aereo creates private performances from technology leased solely for an individual’s personal use versus that of a public performance (as broadcasters believe) and that the “volition” (or choice) is entirely on the consumer (meaning recordings are only created/streamed if an Aereo subscriber initiates).  

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An Aereo victory would have far-reaching consequences tied to retransmission consent and the profitability of over-the-air (OTA) broadcasting, while a loss would cement the current structure of pay TV retransmission fees and potentially imperil numerous aspects of cloud computing/storage, especially with respect to media (in other words, nearly half of what you just saw at the Consumer Electronics Show this week).

If Aereo is found to be legit (which we believe it will be), it will hasten the advent of unbundled, "good-enough" TV solutions that would use a basic OTA broadcast bundle of programming (including multi-cast channels) as an inexpensive gateway to other subscription programming that could be added to it via over-the-top (OTT) and pay TV subscription.  Operators will waste no time in seeking to unbundle broadcast signals from their channel packages using an OTA antenna-like approach like Aereo’s (something Dish Network’s Hopper platform has been pushing for some time). 

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In other words, consumers will consider broadcast signals as the new base TV platform - with the option of “re-bundling” on top of it from there.  An OTA antenna + a Roku OTT stick is a potential “good enough” combination for some, for example.

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What will happen next will likely be more interesting - a bifurcation of TV/video content delivery.

Viewers who just want no-frills access to broadcast content can get it via OTA or OTT solutions. For those who want more premium bells and whistles - like authenticated online access offerings such as WatchESPN, live whip-around channels like NFL RedZone, or even NBC’s upcoming Gold Zone all-access Olympics channel - subscription programmers packages via pay TV providers will ready for the buying.

Thus, both programmers and pay TV operators will have an incentive to upsell viewers to the pay product.  (And broadcasters will still have the ability to derive both ad and subscription revenue).

You can also expect Aereo and other OTA solutions to offer their service through OTT apps through TV platforms like TiVo, XBox and Roku’s new “RokuTV” multi-input video portal (shown below).  And for broadcasters to bundle their basic OTA channels into their own apps for direct live streaming to consumers/viewers via broadband.

Of course, if Aereo loses, then it’s retrans hardball as usual - but only until Congress starts moving towards rewriting overall cable and broadcast rules - the inevitability of which is already clear.

These Are the Good Old Days

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A very intriguing working paper that everyone in the advertising industrial complex — not to mention every tech startup or venture investor with dreams of voluminous advertising-dependent business models — should take some time to read before their next client pitch or board meeting. 

It’s called The Theory of Peak Advertising and the Future of the Web,” — and its authors ROFLcon founder Tim Hwang and Electronic Frontier Foundation activist Adi Kamdar paint a somewhat wonky, but otherwise sobering picture of the economic “future” of digital advertising.  Which is to say, in essence: there may not be much of one.

The paper's thesis: online advertising has entered a state of continuous decline in effectiveness, and the existing ad-dependent business models of supporting digital content and information are, in turn, unsustainable. 

A smack to the head, for sure — but eminently credible based on four key observations that are increasingly hard to refute:

1) Younger audiences (especially those considered to be digital or mobile natives) are essentially hard-wired to skip, avoid, or otherwise tune out advertising.  (Anyone with children knows this implicitly).

2) Ad blocking or avoidance technology is pervasive and approaching ubiquity.  (How did anyone live before the age of the DVR?).

3) Click-fraud and automated bots are skewing — even gaming — the system. (If your “fat finger" has ever erroneously tapped on a mobile ad, you’re part of the problem.)

4) There’s simply too much advertising spread across an ever-increasing landscape of media, which, collectively, drives down overall consumer attentiveness.  (Quick: name the last three ads you saw before you clicked over to this blog post.)

The future of content and its economic underpinnings hangs in the balance, the authors argue, and a very different set of digital experiences awaits for consumers. marketers and publishers alike. 

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An eerie echo of a similar line of discussion about a decade ago when the first cracks in the mighty armor of print media were first discovered, debated and mostly minimized. 

And we all know how that’s been turning out.

(photos © http://peakads.org and Associated Press/Noah Berger)

Video Is The New Black (& White)

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TV traditionalists, take heed — today is the day when tech realities have finally come into your mainstream. 

Whether you pessimistically believe it’s beginning of the end of the medium-formerly-known-as-television, or optimistically think it’s merely the end of the beginning of the boob tube’s platform migration to modern digital fluidity — there is no denying that your grandfather’s TV business ain’t what it used to be.

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AOL’s $405MM purchase of video tech platform pioneer Adap.tv and digital video ad network YuMe’s $300MM+ initial public offering on the NYSE are industry watersheds that herald the forceful arrival of digital audience targeting, insertion and measurement capabilities into the formerly quaint linear broadcast TV advertising model.

As early backers of both companies during our Publicis/Denuo/VivaKi Ventures days, we congratulate our founder friends Amir Ashkenazi at Adap.tv and Jayant Kadambi at YuMe on the next steps in their respective journeys toward the future of television - er, video.

Le “Destruction Créatrice”

To the surprise of just about everyone in the fields of marketing and finance, two of the planet’s already-largest advertising holding firms eloped over the weekend to become the world’s largest marketing services conglomerate

Time will tell if and how this stunning corporate coupling will stand the test of time with clients, employees and regulators on both sides of the Pond. 

But one thing is certain: an important inflection point in modern media and marketing has been reached — and the nearly 20-year ascent of digital technology and innovation has brought us to it.  Creative destruction is afoot in the ad business, and no clearer signal can be found than the vows Monsieur Levy and Mr. Wren publicly exchanged Sunday.

We could opine at length here, but thanks to our friends John Ebbert and David Kaplan at AdExchanger, our fearless leader Tim Hanlon has done it here.

photos: Reuters; Associated Press: Francois Mori

New Wine in Old Wineskins

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To the delight of dozens of media academics everywhere, the Federal Communications Commission’s Media Bureau has finally issued its 15th update of the congressionally mandated Assessment of the Status of Competition in the Market for the Delivery of Video Programming — the noble annual attempt to define the American TV/video landscape in current and modern terms. 

Weighing in at a whopping 206 pages, the FCC’s benchmark video competition report promises to put measurable definition around the medium formerly known as television so that lawmakers can understand and regulate accordingly.  In a world, however, that is being whipsawed by both unprecedented technological innovation and heightened levels of strategic gamesmanship, it’s a daunting task — and basically a fool’s errand.

The alphabet soup of today’s defined video distribution mechanisms alone — MVPD, OTA, DTT, OTT, OVD, IPTV, CPE, VOD, and RS-DVR/NDVR (not to mention the broadband-, wireless- and IP-fueled permutations already percolating) — stretch the current governing framework of the Telecommunications Act of 1996 beyond credible limits.

Even the FCC itself can’t seem to draw any real conclusions from the rapid whirlwind of shifting boundaries and definitions.  It has fallen on outside watchdogs like Free Press and Public Knowledge to state the obvious.

Try applying such definitions to real-world business issues like TV/video audience measurement and ad-buying/selling currencies, for example — you just can’t.  And the incumbent broadcast, cable, DBS, and telco providers are more than happy to keep it that way.

Put simply, it’s time for a regulatory rewrite, and pronto — we need new wineskins for the various and sundry varietals that digital technology and innovation are bringing to the formerly quaint broadcast (and even cable) TV landscape.  Or folks like Google will simply write their own.

Read the report for yourself and let us know at what page you come to the same conclusion.

Prime Time for Big Data

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Big Data is hot - and seemingly everyone from the worlds of politics to sports to retailing is chasing ways to understand what blizzards of digital shards of electronic consumer behavior mean for the future of their fields. It’s revenge of the nerds - to the third power.

The digital transformation of media is no different, and it is coming to the medium-formerly-known-as-television faster than you can re-arrange the channels on your nifty new smart TV.

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Divining actionable insights from TV set-tops and an exploding array of video consumption devices and conduits will soon be mission critical activities for anyone in the video business food-chain - and smart actors won’t sit around waiting for whatever becomes of Nielsen and Arbitron to define it for them.

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Among the smartest are the folks behind our advisory client Integral Reach, who we congratulate on their exit to interactive media technology stalwart Rovi this week.  

Big Data viewing data and analytics - it’s not easy, and it’s potentially fraught with peril.  But this acquisition (and other deals to come) is clear evidence that it’s coming soon to a TV/device near you.

Have Device, Will Travel

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The consumer mobile device revolution is fully upon us, and while flummoxed corporate CIO’s everywhere scramble to re-org their legacy command-and-control enterprise computing strategies for their employees accordingly (whada’ya mean I can’t use my iPhone for work?!) — business travelers are also forcing the issue when they’re out on the road working for the Man.

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Business travel sucks, but the promise of at least being able to watch a little bit of TV or a movie can certainly help deaden some of the pain.

As a recent article in the New York Times validates what road warriors already know: the days of relying on in-room TV walled-gardens or sub-optimal airport bar monitor environments for out-of-home video entertainment are over.

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While legacy hardware-dependent providers like the no-longer-bankrupt LodgeNet try to quickly adapt to app-fueled device-accessible content ubiquity, opportunity abounds for next-gen multi-screen connectivity providers — especially in the travel, transportation and hospitality fields — to provide enhanced quality, service and security to consumers who simply want the ability to kill time by binge-viewing House of Cards on Netflix, burning through a stack of TiVo Stream recordings, or watching the big local home team playoff game (via Sling) literally from home.

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Hotels, airlines, and airports all collectively have a small window of opportunity to enhance and improve consumers’ ability to access the entertainment content they want while traveling. 

Basic first-to-market, pay-as-you-go broadband providers like GoGo and Boingo seem to be more like NoGo for the discerning/demanding traveler - unless you find answering email more interesting than streaming a TV show or movie.

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But next-gen satellite-rooted technologies like Row44, and ViaSat’s Exede seem to be more sturdy, and the future is bright for them and others who see bandwidth-gobbling video as the eventual table-stakes for consumer travel satisfaction in the years ahead. 

For those business travelers who remember simpler times, the build-out can’t happen soon enough.

second photo: Matt Roth for The New York Times

Mobile Payments Reality Check

As we have argued for some time, the concept of mobile payments will happen in our lifetime - once the retailer "so what" problem is addressed, and once the first generation of over-hyped game-changers shakes out. 

And don’t even ask when the actual consumer finds a real compelling reason to adopt the behavior on a regular, consistent basis.

While the battle to solve a problem that may not even exist continues unabated, the FTC continues to wisely anticipate the issues that will likely affect consumers when that magic day (or year) happens. 

In its just-issued report Paper, Plastic…Or Mobile?, the Commission calls out three important issues that bear watching and preparation to the litany of aspirants in this potentially gigantic space:

1) how consumers can resolve disputes in cases of fraudulent payments or unauthorized charges - including the growing issue of "mobile cramming,” which the Commission will address in an upcoming industry roundtable on May 8

2) the need for strong data security measures to ensure security throughout the mobile payment process; and

3) consumer privacy (of course).

There’s a pony in here somewhere - the FTC is just concerned that consumers don’t get lost on their way to the barn.  

The various industry players have been gifted a consumer protection roadmap by the FTC.  They ignore it at their own peril.

"Good Enough" TV

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One of the unmentionables among professionals in the television industry right now is the unavoidable groundswell of actual legitimate alternatives to classic MVPD pay TV bundles - which continue to get more expensive by the month.

Recent advancements like Terk’s elegant Roku-ready HD over-the-air receiver (below), and Aereo’s ballsy expansion into 22 new markets outside of its current New York City-only base are only the latest beats on the drum.

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Shaving, cutting and “never-ing” the cable cord is really happening - despite what legacy incumbents might otherwise have you believe.

It certainly doesn’t mean the classic pay TV subscription bundle model of television is going away anytime soon - it’s a pretty compelling and cost-efficient smörgåsbord of live/linear, on-demand and time-shifted viewing options that is a convenient one-stop, quality-of-service-guaranteed video entertainment bundle - that many American “grown folks” have become quite well-adjusted to.

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But all bets are off with the under-40 set - the growing group of folks who just want their video content when and where they want it - preferably without the messy commitment part.  For them, accessing TV through their Xbox, streaming videos on their tablets, place-shifting live sports, and watching movies just about anywhere is not only the norm - it’s expected

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To them, content is still king - but they ain’t crossing no damn castle moat to get it.  And seers like Aereo’s Chet Kanojia (below) and Roku’s Anthony Wood (remember ReplayTV?) understand that in spades.

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Legacy TV provider dudes who fail to abide this new reality, may find their all-or-nothing video bundles simply too much for the growing masses of frugal youngins’ who find more simple/basic combinations of over-the-air broadcast, online video and easy mobile access just “good enough” for their modern-day entertainment needs.

Apps (Not Ads)

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Whenever a startup founder or venture investor bounds into our offices waxing prophetic about the future of “mobile advertising” and/or the scalable potential for targeted display ads across the burgeoning population of smartphones and tablets, we already know it’s going to be a short conversation.

The broader and far more complex possibilities of sophisticated, entertaining and (God forbid) useful mobile *applications*?  Pull up a chair - we’re listening.

And endorsing.

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We’re positively giddy in congratulating our advisory client Toura - one of the industry’s leading mobile application development platform firms - on their acquisition by Grapple, Europe’s leading mobile innovation agency. 

A compelling combination of two sets of very smart people who are now even better positioned to help marketers and media firms on both sides of the Pond take their increasingly important mobile application activities (not ads!) to the next level.

(photo: Grapple)

Ironic Simplicity

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They say a picture is worth a thousand words (whoever “they” might be), and the ad for the Apple iPad Mini on the back cover of last week’s (December 3, 2012) Bloomberg Businessweek is an exercise in how minimalism works beautifully in the most ironic of ways.  Even the most die-hard Luddite can appreciate what Apple’s latest creation is capable of in this simple creative execution - gloriously rendered in that supposedly dying media form of magazine print.

Can’t wait to see what television ads eventually look like for Apple TV.

If You Watch It, Does It Count?

Let’s face it: the explosion of digital video choices and consumption environments available to the average US consumer (whoever that is) is simply overwhelming the formerly-known-as-TV industry’s ability - long controlled by the opaquely anachronistic Nielsen measurement system - to accurately keep score.

Like millions of proverbial trees falling in a vast forest that nobody’s around to hear, American consumers are accessing video content in a myriad of ways that lie firmly outside the artificial measurement boundaries constructed by the buyers and sellers of television decades ago.  And how that reality is accurately accounted for - both now and in the fast-splintering future - will determine the fates and fortunes of everyone with an economic stake in the business. 

A fact that is finally starting to dawn on some of the folks who have most to lose.

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If you want to hear the latest on this industry pot-boiler of an issue, join the Vertere Group’s Tim Hanlon for a major discussion about the present and future of television measurement - “Measuring the Multiplatform Viewer: Challenges and Solutions” - at the ITVT-produced TV of Tomorrow Show - Intensive 2012 on December 10, 2012 at midtown Manhattan’s Sentry Centers 730 Third Avenue

This two-part session will explore the need for new measurement technologies and strategies that can keep pace with changes in consumer viewing habits and media marketplaces.

Panelists in the first half (“Challenges”) of the session will explore the challenges faced by media buyers, publishers of advertising-supported online and mobile video, and other stakeholders in the advanced-TV and advertising ecosystems, in their efforts to measure the effectiveness of advertising on non-traditional video platforms. They will also attempt to identify the ways in which a lack of effective measurement tools has hindered the development of these new platforms.  The all-star cast includes leading industry influencers such as: GroupM Next’s Director of Emerging Communications Mike Bologna; PrecisionDemand CEO (and former Grey media buying chief and Nielsen marketing head) Jon Mandel; TVB Chief Research Officer (and former Turner Broadcasting and Interpublic research chief) Stacy Lynn Schulman; and A+E Networks EVP of Digital Media and Business Development Dan Suratt.

Panelists in the second half (“Solutions”) of the session will be drawn from companies that are attempting to solve the measurement challenges identified by the first panel. The panelists will respond to the questions raised by the first panel, describing their companies’ measurement strategies—but also attempting to answer the broader question of how the measurement marketplace is evolving in light of the issues raised by the first panel.  Those on that hot seat: Bill Feininger, SVP/ Media Measurement, FourthWall Media; Joan FitzGerald, VP/TV and Cross-Media Solutions, comScore; Cathy Hetzel, President, Rentrak; Harvey Kent, Chief Media Strategist, Mediaocean; and George Shababb, President, Kantar Media Audiences North America.

This will be an exhibition, not a competition - so please, no wagering.

 

Can TV Broadcasters Have It Both Ways?

If TV broadcasters feel like they are under assault, they’re right.  Disruption is (literally) in the air - and the dual-path revenue gravy train of government-protected free airwave ad revenue and cable programming-like retransmission carriage fees is headed for derailment - courtesy of technology advancements that require a fundamental re-think of how Americans can access TV/video programming, and how the business model will and should work.

On one side, broadcasters are apoplectic over Dish Network’s (now award-winning) "Primetime Anytime" Auto Hop automatic ad-skipping feature in its Hopper Whole-Home DVR, which allows consumers to bypass commercials - at their own choosing - in any of the four major network prime-time program offerings.   A functionality that broadcasters say threatens their ability to sell advertising - the stated linchpin and life-blood of their decades-old, free over-the-air business model. 

On the other side, broadcasters are howling with displeasure that game-changing technology advancements like Chet Kanojia's scrappy Barry Diller-backed Aereo TV - and now, Dish Network’s just-announced Hopper add-on chestnut, the USB Digital OTA Tuner - are enabling consumers to hive out ostensibly free broadcast signals from their increasingly costly multi-channel cable/DBS/telco television bills that have been fattened in recent years by carriage fees from broadcasters with dual revenue stream cable-envy.

So which is it? 

While the broadcasters dig in their heels and courts start to sort it out, network operators aren’t sitting back and waiting to see what transpires.  Dish Network, in particular, leads the revolt - the USB OTA tuner being the latest salvo - showing MVPDs of all stripes how to easily pull out over-the-air signals from the (supposedly) free airwaves, and de-couple them (and their carriage fees) from pay TV channel bundles

Have a look at these screen shots of how elegantly it works, and see how broadcasters need to seriously (and quickly) revisit their assumptions about unfettered dual-stream revenue in the years ahead.

photos: Mid-Continent Communications; Dish Network; Aereo; Scott Greczkowski, SatelliteGuys

The FCC’s “Future of TV” Cheat Sheet

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Anyone with a vested business interest trying to understand where the medium of television - or better, video distribution - is headed, should take an hour to thoroughly absorb the Federal Communications Commission's recently released Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, which was quietly released a few weeks ago.

It’s a dense 204 pages, but it will reward the diligent reader with what is effectively a definitional roadmap of the commission’s thinking and leanings with respect to a frenetically changing industry that seems to defy classifications every few months.

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If you can’t afford the time or bother, you can re-read the prescient and most excellent 2009 book Television Disrupted: From Network to Networked TV, by tech translator Shelly Palmer - and then contribute your thoughts to the FCC’s upcoming 15th version of the competition report, which the Commission is accepting outside commentary for now.

There will be a pop quiz on all of this in your workplace very soon.

(top photo: Amb3e Association For Recycling Old Electronic Appliances, Portugal)