Kennard to broadcasters: Change or perish

"We are entering what I believe will be the most exciting era [of television] ever. Audiences will be empowered in ways never done before to paint their own landscapes of entertainment and discovery," Kennard said in his keynote this morning at the National Association of Broadcasters convention here.

Kennard pointed to the merger of Broadcast.com and Yahoo as a signal that change is already here for traditional broadcasters, and that instead of feeling threatened by these challengers, they should create and seize new opportunities.

"These Internet companies are taking the step to jump from the PC platform to the TV platform. That's why some say that these companies will in the long run end up putting all of you broadcasters out of business. Once again, people are writing the obituary of the broadcasting industry."

But instead of killing broadcasting, this coming era of broadband will enable new opportunities--if corporations adjust their business models, he said.

"[Competitors] will be rushing into this future with all sorts of creative new business plans that don't rely on the mass market model of advertising. They will be relying on subscriptions, ecommerce revenues, and all sorts of other ways?to boost the bottom line."

Kennard suggested that broadcasters have the advantage of owning a distribution mechanism that features historically popular content. By contrast, Internet companies such as Yahoo need to offer richer services. And unlike phone or cable companies, they don't need to invest billions to reach their audience. Digital television is the key to unlocking new partnership opportunities, he suggested.

"DTV is not just about TV as we know it. I think its going to be a lot about data," he said. Technical issues remain, though, such as being able to pass DTV signals through a cable set-top box and to the digital television in its original state. However, Kennard emphasized that the FCC will work to facilitate discussions on those issues so as to make the transition to digital television a painless one for consumers.

Broadcasters should look back into history for a lesson about how the transition to digital television, with all its complexities, should be managed. Noting that the first TV transmission was actually a phone conversation transmitted over copper wires--basically, an interactive experience--he said: "Here we are, 72 years later, and we find ourselves back where we started."

At the same time that DTV opens up new partnership opportunities, Kennard warned that the Federal Communications Commission wouldn't look favorably on mergers that reduced the amount of competition in the marketplace.

"With the onrush of technology making convergence more and more possible, inevitable, really, you must understand that convergence is not synonymous with consolidation. Convergence means more choices. It means new media companies like Yahoo will be bursting onto the scene. It does not mean that these new industries will be controlled by a handful of giant conglomerates," Kennard said.

Affiliates of the four major networks--ABC, NBC, CBS, and Fox--are slated to begin digital broadcasts in America's top 30 markets by November. By 2006, the FCC has mandated that no more analog television signals be broadcast.

Broadcasters don't expect to have much more than a few hours of HDTV programming per day because of the added cost of producing such material, and thanks to prices ranging from $6,000 to $10,000, there aren't many HDTVs in homes to receive the signals anyway. But several lower-quality channels delivering new interactive data services could take the place of any one HDTV channel and deliver revenue, and therein lies the question.

Analysts and industry insiders alike say that network affiliates aren't really experienced with setting themselves up to be data service providers, even though most are intrigued by the opportunity.