Thursday, February 11, 2010

Why Conan O'Brien does not like Sony and MPEGs

If there is one word to describe why Conan had lower ratings..? Timeshifting

Conan O'Brien's departure from NBC Universal was very widely reported. This might be one of the last TV schedule wars of our times. While low ratings were the chief reason behind the NBC decision to offer Conan a later slot (which was unacceptable to him), there was a bigger dynamic at play. Younger audience who are the core audience of Conan are far more comfortable at time shifting, or put simply, they record the shows in DVR and watch it later. This effect is not captured  effectively in the TV ratings. NBC executives were not expecting this time shifting phenomenon to be significant when they replaced Jay Leno with Conan last year.

Timeshifting is something that folks at Universal understand very well. They had sued Sony in 1970s when it came out with their version of video tape recording format, Betamax, which was arguably the first time-shifting device. After a bitter court fight, the Supreme court ruled 5-4 in the favor of Sony. A landmark decision which gave legality to record a show and watch it later for the consumer.

But apart from legal angle, there was another unintended consequence introduced by Time Warner Cable. TWC was a pioneer in digital interactive televsion.and wanted to integrate something like a DVR with the TV. They experimented and invested millions on their Full Service Network initiative. The FSN initiative was aimed at creating a on demand TV ecosystem and pioneered by TWC in their Florida market in mid 1990s. However, the initiative was stymied as a lot of the underlying technologies to make the vision real had not been standardized. The chief among them was a mechanism to convert analog voice and video signals to digital, which solved during the late 1990s with MPEG2 standard. By that time it was too late for the FSN initiative and it was shut down. They were too early into the market. However, it was just in time for two of the executives Mike Ramsey and Jim Barton who met while working at FSN. Well versed with the technical challenges, they saw the DVR opportunity and started a company which they called TiVO. TiVO was launched in the US in 2000 and now an approximate 30% of US household use the DVRs. It fundamentally changed the  younger audience's interaction with television. The time shifting phenomenon that is taking place,is something Universal foresaw in 1970s when they sued Sony.

Had the Supreme court had ruled in favor of Universal or MPEG2 standardization has been agreed upon a couple of years earlier, Conan might still be hosting the Tonight show.

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