Broadband media: Look before you leap

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Broadband media: Look before you leap

McKinsey Quarterly, 2001 nr 4

“The bad news: broadband’s technology, infrastructure, and economics are still inadequate. The good news: broadcasters are far more secure from attack than they were at the dawn of the World Wide Web.”

Main conclusions:

The article therefore concludes that

  • Television and cable networks would be risking a repetition of their experience with the narrowband Internet if they invested heavily in programming for interactive television or video on demand just yet;
  • The key to profitability for today’s television and cable broadcasters is reaching a large audience, but this won’t necessarily be true for home broadband entertainment as interactive technology lends itself to the capture of niche audiences;
  • Interactive television will require a huge shift in consumer behavior as most people treat television as “lean-back” entertainment, whilst interactive television requires active user involvement;
  • Challenges for broadband media are that the technology needed to deliver the services which need broadband in a cost-effective way have yet to be fully deployed and there is a lack of standard content management, production equipment and software;
  • Broadcasters will eventually revolutionalise home television and video entertainment, but given the current limitations of business economics and technology, it is not clear when that they will come;
  • Broadcasters should try to improve their longer-term prospects by testing the viewing and spending habits of various target audiences with tightly focused broadband pilot programs;
  • Broadcasters would benefit from entering into alliances with distribution partners in order to spread the risks and the costs, as well as to ensure distribution;
  • Neither broadcasters nor independent producers should be swayed by the current enthusiasm for broadband. The first movers among infrastructure providers are likely to be the long-term winners, but programmers probably won’t enjoy any such advantage.

Scott Christofferson is a consultant and Michael Gatzke is an associate principal in McKinsey’s Washington, DC, office.

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