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Saturday, August 2, 2014

Is advertiser supported or pay-per-view business model better for gay civil rights?

VIDEO: many free over-the-air broadcast TV stations are running the ad warning viewers that pay cable and satellite TV comapnies are trying to take away free TV, but the ad doesn't explain about the complex issues surrounding retransmission fees still under negotiation and the planned FCC auction of over-the-air spectrum, which will be freed up when old analog TV transmissions are finally shut off soon. The campaign is sponsored by the National Association of Broadcasters, an industry grouping of the people who broadcast free to air TV. Posted at "keep my tv - KEYT," watched Aug. 2, 2014.

As somebody old enough to remember when over-the-air broadcast television first became broadly available in the 1950's, I clearly recall how early TV stations struggled to find a business model to make money because TV technology of that era was unable to charge each viewer individually for watching programs like a movie theatre could sell admission tickets. As a result, free over-the-air TV stations were forced to become entirely advertiser supported until other revenue streams became available, including the retransmission fees paid by cable TV providers, when cable TV technology became common and Congress passes a law requiring it.

In contrast, it was easy charge each household individually for early cable TV technology because it was physically attached to each house, but it did not permit charging customers individually for each program watched, except for a few premium channels that could be optionally enabled by adding or removing a physical electronic filter. As a result, cable TV adopted a business model of selling groups of TV channels with a few premium channels that viewers could opt to subscribe to on a monthly basis. Although the technology for pay-per-view is now quite common, cable TV channel packages are still what is being commonly sold.

The internet dot com publishing businesses and the emerging internet cloud services have been facing a similar struggle to find a successful business model to make money in an environment where internet audiences are used to accessing everything for free, except for having to put up with a few sidebar or banner ads, or worse forced video ads.

The only thing that has inhibited businesses from charging interest customers for content, instead of being advertiser supported, is the hassle factor of it that drives many customers elsewhere. Of course, as billing problems are eliminated, this could change in the future.

Likewise, both television and cable TV providers are being forced to compete in this new world of the internet cloud and their reaction has been two-old: first, they are trying to embrace it by transforming themselves in to content-providers and two, they have been lobbying Congress for laws to "protect intellectual property" and either support or undermine retransmission fees for cable TV providers, which could alter the future of who pays for cloud based content.

I hope to live long enough to see where the dust settles on this dual between large content providers and the small-fry authors and creative talent who actually create content people want to consume.

Having watched these battles over the last century, I can anticipate several possible outcomes, all of which could work and be stable, but none that I see as the obvious direction.

Instead of guessing at the outcome, I found it more interesting to think about what policies Congress should be adopting to help encourage things to go in a way that would prevent a few businesses from locking up all content to make more money at the expense of democracy?

For example, the original designers of the internet architected it intentionally in a way that would be both democratic and robust enough to withstand nuclear war -- after all this research was funded by DARPA (Defense Advanced Research Projects Agency) originally for defense communications applications.

The freedom of speech issue I see in all of this is, historically, neither the advertiser supported model of content providers, nor the pay-per-view business model enable to free speech required for minority groups to stay connected.

For example, in the early days of television, show would literally include in their show title the sponsor's name, including tobacco companies before Congress outlawed their advertisements on TV, The freedom of speech issues here are clear because no TV show would dare talk about the cancer causing agents in cigarettes, for fear of losing a sponsor, and Congress is limiting free speech, although for the noble purpose of saving lives, in a manner that could be abused in the future.

These changing business models for content providers are not new. For example, in the 1960's a number of mass circulation magazines, such as "Life" magazine, essentially gave away print subscriptions for pennies an issue with the expectation that increased advertiser revenue would pay to print and mail it and provide them a bigger profit than if they charges subscribers the full cost of production. Needless to say, they failed and went out of business for this and other reasons that are still be discussed in business school books today.

My bottom line fear is that over time, America's businesses are set up reduce competition to a point where there are only a few big players, which has the positive effect of creating economies of scale that can benefit both consumers and investors, but it can also have the negative effect of being abused to lock out new ideas and oppress minority groups.

I believe that to preserve America's successes, legislators must be wary of balancing the demands of those who want the "free marketplace" to be "every man for himself" with the demands of those who want a fully "regulated marketplace" or "totalitarian nanny government" that stifles innovation and the freedom of speech of individuals.