PatchworkMedia
Report


Managing ICTs: The Future of the NZ Boadcast Sector

An in depth look at the challenges facing the New Zealand broadcast sector and some keys
to sustainability moving forward.

PatchworkMedia Original

@JakeDavy

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INTRODUCTION

“In the electronic age of instantaneous communication I believe that our survival, and
at the very least our comfort and happiness, is predicated on understanding the
nature of our new environment, because unlike previous environmental changes, the
electric media constitutes a total and near instantaneous transformation of culture,
values and attitudes. This upheaval generates great pain and identity loss, which can
be ameliorated only through a consciousness of its dynamics. If we understand the
revolutionary transformations caused by new media, we can anticipate and control
them; but if we continue in our self-induced subliminal trance, we will be their
slaves.” (McLuhan, 1974)

Fast forward thirty-six years and this analysis is no less true. Managing
communications technology has fast become a vital strategic activity for any
organisation looking to enjoy sustained competitive advantage. This report will serve
as a guide to the theory and practice of managing communications technology for
managers of small and medium enterprises (SMEs) within the broadcast sector in
New Zealand. Broadcasting is generally defined as “the transmission of signals from
a central source which can be received by dispersed receivers over a large
geographic area” (Bignell, 2004, p. 318). Since the 1920’s broadcast media,
television and radio, has been by far the most consumed and influential type of
media in the world and has enjoyed tremendous popularity. This dominance however
is being threatened, and as we enter the age of high-speed broadband, internet
based audio and video is gaining a lot of ground. This report will examine the extent
to which these other forms of media are threatening broadcasting companies and the
questions this poses to their sustainability. It will look at various ways in which
managing communications technologies could encourage innovation within these
companies and help sustain competitive advantage. Thus the objective of this report
is to illustrate the benefits of managing communications technologies within the
broadcasting sector in New Zealand and how doing so can lead to sustainable
competitive advantage.
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DISCUSSION

Aside from TVNZ and Radio NZ, which are state owned, the rest of New Zealand’s
broadcasting sector is made up of private foreign owned companies. Understandably
the primary objective of these companies is revenue, making their target market not
the viewers and listeners, but the advertisers. CanWest, the Canadian company who
used to own TV3 and C4 reported that it received 99% of its revenue from
advertising which illustrates just how vital advertisers are for broadcasters
(Rosenberg, 2007). These advertisers purchase ad slots during scheduled
programming at a price that is determined by the shows viewer ratings. The goal for
broadcasters is therefore to attract as many viewers/listeners as possible in order to
entice advertisers.

Television
People “spend more time watching television than they spend surfing the web,
sending e-mails, watching DVD’s, playing computer games, reading newspapers and
talking on mobile phones put together” (An Interactive Future, 2010). Technology to
date has played a key role in televisions ability to sustain this popularity by providing
consumers with new and exciting things to enhance their viewing experience. The
transition from black and white to colour, the introduction of cable and satellite
television, the transition from analogue to digital, the ability to enjoy on demand
content and now the dawn of 3D television have all been big milestones. Each of
these improvements has opened the doors to new and exciting ways for programs
and advertisements to be delivered to consumers. The transition from analogue to
digital TV, for instance has resulted in increased bandwidth as well as the possibility
of viewer interaction with the television programs (Bignell, 2004). The future is
defiantly in the hands of the emerging information and communication technologies.

As this sector continues to progress deep through unchartered technological terrain

viewers and consumers find themselves faced with the new and emerging medium
of internet TV (IPTV). IPTV is the “distribution of television programming over the

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internet or other network through the use of internet protocol packet switching”
(Grant & Medows, 2006, p. 318). It has been gaining momentum over the past five
years and is estimated to have been present in as many as 69 million households
worldwide in 2009 (Grant & Medows, 2006). This sudden rise in the popularity of this
medium is threatening the traditional broadcasting companies who now must fight
with the IPTV providers for viewer ratings, and thus advertising revenue. The
success of these IPTV companies however is reliant on the presence of the
traditional broadcasters, as unlike their veteran counterparts IPTV companies do not
actively create new content. Thus the fates of these two types of broadcasters are
bound together and the future appears to be moving towards an amalgamated
medium that utilizes both new and traditional broadcasting methods.

The danger with transitioning into new technologies at the cost of an older
technology is that consumers could feel like they are being forced to migrate. This is
what occurred in America when they completely transitioned from analogue to digital
TV, some customers were not excited about the additional bandwidth or the
possibility of interactivity, they were happy as they were and resented being
pressured (Book, 2004). So while the future of the broadcasting sector is deep within
the new information and communications technologies landscape organisations
need to navigate very carefully.

What are the Main Threats Television Faces?

The internet, both fixed and mobile, is posing the biggest threat to television.
Advertisers are opting to advertise in cyber-space due to the low costs, greater
flexibility, and a higher rate of consumer engagement with their ads (An Interactive
Future, 2010). The rise of this threat is predicated on the huge increases in
bandwidth over the past two decades. In 1990 the average speed of the internet was
9.6kbs, in 2000 the introduction of broadband saw speeds to increase to 512kbs,
and now as we charge through 2010 speeds are set to increase to a staggering
100mbs or 100,000kbs (Bancroft & McEwen, 2009). This huge increase in bandwidth
availability has opened the door for the transmission of data rich content like HDTV
(high definition television) to be streamed over the internet, thus taking a lot of power
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away from traditional broadcast companies. It has also given birth to on-demand free
video content like youtube.com which is completely changing the way young people
consume their television. The apparent appeal of internet content like youtube.com
appears to be centred around its interactivity as it provides audiences with the ability
to discuss and comment on the content they are watching. This is a trend that is
really starting to threaten television. It is estimated that during the Oscars 13% of
people were online while watching the program, up from 9% the year before (An
Interactive Future, 2010). Similarly in Korea young people will routinely watch TV on
their phone’s while texting and in Britain kids bounce from platform to platform,
medium to medium, and view such a wide range of content. It is almost imposable to
target advertising at them directly as they often don’t engage with the content and
watch such a wide range of media (An Interactive Future, 2010).

Emerging ICT’s that could Benefit Television

• Addressable advertising is something that has been discussed for years but has yet
to be implemented. Given cable and satellite companies know where their
customers live they have the ability to feed location specific advertisements to
viewers (An Interactive Future, 2010).
• Digital TV decoders that can store content, such as TiVo and Mysky, provide
broadcasters with a lucrative advertising medium. Viewing habits and viewer
location can be analysed and appropriate adverts can be downloaded and stored
in viewer’s decoders and inserted into programs (An Interactive Future, 2010).
This will essentially allow for perfectly tailored adverts that will increase the value
of television advertising exponentially.
• For broadcasters who are using multicasting (e.g. TVNZ on demand) to combat the
rise of multimedia on the internet interactive advertising is a very real possibility.
In this scenario viewers would be able to click on and purchase products in the
programme, for example a designer dress worn by a character on an episode of
‘The Hills’ could be clicked on by viewers who will then be directed to a retail
website where that dress could be purchased.

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• Brian Roberts, the CEO of Comcast one of America’s biggest broadcast companies,
revealed that he feels the future is in multifunctional portable devices that allow TV
to “go where the consumer goes” (Hatch, 2010).
The emergence of smart-phones
like the iPhone and the development of superior mobile networks is pushing the
broadcast sector towards mobile devices in a movement that’s been dubbed “The
Mobile Revolution” (Steinbock, 2005, p. 1).

Television’s Key’s to Sustainability

According to Bancroft & McEwen, in the face of these new and emerging ICT’s
television companies are at a crossraod. The broadcasting landscpae is set to
change dramaticly over the next decade and as such these broadcasting companies
must either embrace these changes and use them as a springboard for renewal and
change, or continue as they are at risk of being left behind (2009). The future
appears to be in interactivity and mobility. Some broadcasters around the world have
already begun to experiment with these elements by integrating social media such
as twitter and facebook into their programming encouraging viewers to discuss and
give feedback regarding the show, and in some cases even email in pictures and
possible leads to breaking news stories. CNN is one company that is at the
foreground of this and has utilised this open channel of communication with its
viewers to bolster its content, for example it used photos of the Haiti earthquake that
viewers sent in when its own journalists were unable to get to the scene (An
Interactive Future, 2010). These organisations are leading by example and
demonstrating that innovation in the form of managing and implementing new
communication technologies is key in sustaining competitive advantage.

Radio

Until the induction of internet radio, radio broadcasting in New Zealand was stagnant
and its popularity was rapidly diminishing. The emergence of digital music and the
mp3 player created a new music culture wherein a large number of consumers were
choosing to be their own DJ’s and play their own music. Analysts in the U.S. even

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predict that by 2020 the last terrestrial radio transmitter will be turned off in America,
with the last in the UK being turned off in 2015 (Welsh, 2008). The insurgence of
internet radio has been huge for radio broadcasting, and has seen a rise in listeners
of commercial radio broadcasts that until recently were seeing a decline in ratings.
Welsh enforces this by advising that internet-only broadcasters had been enjoying
up to ten thousand simultaneous listeners per day, but are now down to two or three
thousand due to the traditional terrestrial radio broadcasters shift to broadcasting
online as well (Welsh, 2008, p. 66). Despite the visual appeal of TV and the rise of
digital audio like podcasts and mp3, “Radio remains an important part of the daily
lives of millions of people” (Grant & Medows, 2006). Like television however the
continued sustainability of radio broadcast companies hinges on their ability to
manage communications technologies and adapt to this new technological
landscape.

What are the Main Threats Radio Faces?

Like with television, the main threat facing radio broadcasters is the development of
the internet and the digital audio that comes with it. The popularity of digital music
downloading has exploded, with the sales of mp3 players growing from 3.5 million
units sold in 2003 to 32 million sold in 2005 (Garrity & Eliezer, 2006). The appeal of
digital music and players is that they dramatically enhance the accessibility of music;
consumers can have access to tens of thousands of songs wherever they go and
have total control over what they listen to. Podcasts however pose a bigger threat to
radio broadcasting than mp3’s as they offer listeners the same thing that they get via
radio broadcasts with the convenience of being on demand. This insurgence of
digital audio is taking listeners away from radio broadcasts thus diminishing
advertising revenue.

Emerging ICT’s that could Benefit Radio

• The rise in popularity of multifunctional devices like smart phones and the
creation of applications like Pandora appear to be the future of radio
broadcasting. Pandora is an iPhone app that allows users to tune into internet
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radio stations and stream audio live to their iPhone. To get an idea of the
popularity and importance of Pandora and applications like it, in the first two
days after its launch Pandora recorded a new user every 2 seconds (Welsh,
2008).
• In order to become more attractive to advertisers research is being done wherein
GPS transmitters will be placed in radio receivers that will provide broadcasters
with each individual listener’s geographic co-ordinates. This information will then
be evaluated and used to select which advertisements that listener will receive in
order to align the adverts with their specific location (Aumaitre, Carrillo, & Galán,
2007).

Radio’s Keys to Sustainability

“The general consensus from internet radio’s major players is that radio—over-the-
air, satellite, and internet radio —will find its destiny online” (Welsh, 2008, p. 65).
The emergence of multifunctional devices such as the iPhone and the development
of the internet are key in the sustainability of radio broadcasting. Broadcasters such
as Indie 103.1 a Los Angeles radio station (www.indie1031.com) are also paving the
way by introducing an interactive aspect to their online broadcasts and encouraging
listeners to send through requests directly from their media players (Welsh, 2008, p.
67). This innovative approach personalises the experience for listeners and
encourages listener loyalty. Thus the sustainability of competitive advantage for
radio broadcasters lies in the company’s ability to manage communications
technologies.

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CONCLUSIONS

• Given the broadcasting sectors reliance on advertising for revenue, the ability
to achieve sustainable competitive advantage within this sector is dependent
not only on an ability to attract viewers/listeners, but an ability to create
innovative and attractive advertising avenues.

• Television broadcasters have shown in the past that technological innovations

are instrumental for sustained success. The transition from black and white to
colour, the introduction of cable and satellite television and the transition from
analogue to digital all ushered in new ages of television that were instrumental
in the prolonged success of this sector.

• The introduction of IPTV, 3D television and internet radio illustrates how key
players in this sector value the importance of managing communications
technologies and view it as a necessary step in obtaining sustained
competitive advantage.

• The radio broadcaster’s ability to overcome the diminishing ratings of over-

their-air broadcasting by starting the transition to internet radio illustrates how
by successfully managing communications technologies companies within the
broadcast sector can obtain sustainable competitive advantage.

• The continuing development of the internet and the huge increases in the
bandwidth available to consumers is threatening the broadcasting sector.
Digital audio and video (like youtube.com, mp3’s and podcasts) are drawing
viewers/listeners away from broadcast media causing ratings to fall and
advertisers to invest elsewhere.

• Companies within the broadcasting sector need to explore new and emerging
ICT’s in an attempt to counter this rise in on-demand internet media. They
must aim to find innovative and new ways to both reach consumers and
create new avenues for advertisers.

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RECOMMENDATIONS

• Interactivity is one of the key areas in which television broadcasters must look to
innovate. The success of internet based media such as youtube.com lies in its
viewer’s ability to interact with the media in the form of discussions and
comments. Television broadcasters thus need to ask themselves how they are
going to provide viewers with this interactivity in order to sustain competitive
advantage.

• Mobility is another key area that television broadcasters need to examine. The
emergence of the iPhone and the drastic improvement in the performance of
mobile networks has created a whole new realm of possibilities for broadcasters.
Broadcast companies must thus obtain a way to utilise this new technology in
order secure a foot hold in this emerging new market.

• Radio Broadcasters must carefully decide how to proceed in the face of over-air-
broadcast-radio’s extinction in order to sustain competitive advantage.

• The rise of internet radio has opened the door to a whole new world of possibilities
for radio broadcasters. Interactivity again appears to be at the centre of listener
popularity and as such radio broadcasters need to look to innovate in this area in
order to sustain competitive advantage.

• The increase in the popularity and the development of portable, multifunctional

devices such as the iPhone appears to be the future of radio broadcasting. Radio
broadcasters must examine ways to best utilize this new medium.

• The increase in the amount of bandwidth available to consumers and the rise in
the capabilities of mobile devices has opened the door to many new and
innovative possibilities for advertising. Companies within the broadcast sector
need to look at these new and emerging ICT’s and analyse ways in which their
increased capabilities can be used to provide more target specific advertising
opportunities.

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REFERENCES

An Interactive Future. (2010). Economist , 15-16.

Aumaitre, A., Carrillo, V., & Galán, F. (2007). Radio system for mobile commerce,
information and entertainment services . International Conference on
Communication Systems and Networks , 39-44.

Bancroft, J., & McEwen, M. (2009). Technology and Broadcasters. TVB Europe , 14-
17.

Bignell, J. (2004). An Introduction To Television Studies (2nd ed.). New York:

Routledge.

Book, C. L. (2004). Digital Telvision: DTV and the Consumer. Iowa: Blackwell.

Garrity, B., & Eliezer, C. (2006). Apple's profit soars behind iPod's happy holiday.
Billboard , 118.

Grant, A., & Medows, J. (2006). Communication Technology Update. Berlington:

Focal Press.

Hatch, D. (2010). Comcast Sees its Future Beyond Cable, Beyond NBC Deal.
Congress Daily .

Maharey, S. (2006). New Zealand Broadcasting. Speech to Victoris University Media

Studies Student. Wellington: www.beehive.govt.nz/node/25546.

McLuhan, M. (1974). Making Contact with Marshall McLuhan. (L. Forsdale,

Interviewer)

Mediascape. (2007). Media Ownership. Retrieved May 26, 2010, from Mediascape:
http://www.mediascape.ac.nz/cms/index.php?page=media-ownership

Rosenberg, B. (2007). News Media Owners in New Zealand.

Steinbock, D. (2005). The Mobile Revolution . Londom: Kogan Page.

Welsh, E. (2008). The Future of Internet Radio. Streaming Media , 62-69.

Zink, K. (2008). Corporate Sustainablity as a Challenge for Comprehensive

Management. Heidelberg: Physica-Verlag.

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