Talking with Bram Cohen about P2P TV

At Foo Camp yesterday I was chatting with Bram Cohen (remixed version at right), the inventor of BitTorrent, about what it will take for the TV industry to embrace P2P distribution. Unlike music and movies, where the industry is terrified of piracy and lost revenues, TV could easily use P2P to extend its "free-to-air" ad-driven business model.

The logic goes like this:

1. Most TV is already free, so nothing is being "stolen" in file-trading.
2. Most television content owners want to reach more viewers for their advertisers.
3. One way to do that is via more distribution, which is expensive in broadcast
4. BitTorrent provides distribution for free

So if there were a way to let the content circulate on the P2P networks with advertising intact, this would seem like a Good Thing for all involved.

There are, however, another four reasons why this isn't quite as neat a fit for the networks as it appears at first glance:

1. Networks rightly assume that people will strip out the ads and circulate "clean" versions.
2. Even if the ads remain, most are designed for a specific time and place. "Now on sale" may not be true weeks later, and local ads don't make sense elsewhere. Unlike broadcast, P2P content can be viewed at any time (yes, the same is true of DVRs, and the advertisers aren't happy about that, either).
   
3. Local network affiliates often have geographic exclusives to certain shows. BitTorrent ignores geography.
4. Networks are concerned that widespread file trading of television content would compete with the fast-growing market for DVDs distribution of TV series. Although only a fraction of TV makes it to DVD, they don't always know which shows will make the cut at the start, in the broadcast window, so they don't want to limit their options by letting the files circulate online.

One can, however, imagine solutions to all of these:

1. Content owners could release the video in a protected form that makes it difficult to strip out the ads (you could even make it difficult to skip them). That packaging could also be smart enough to report back when played, giving networks more solid viewership numbers than they can get in broadcast. Alternatively, networks could just rely on revenues from product placement in the content, which is impossible to strip out.
2. They could only use ads that work well nationally and over a period of weeks. These tend to be ads for brands, rather than specific products, but there are plenty of those.
   
3. Quoth Bram: "Stop doing geographic exclusives." Indeed, many networks are moving away from that.
4. Make those protected videos expire after six months or so, so they won't be around to compete with the DVD if and when it comes out.

Let me be clear that these are my arguments, not Bram's. He's no fan of DRM (more on practical than moral grounds) and is hoping that more content-owners come around to the benefits of letting their video circulate freely without restrictions. And there some sign that's beginning to happen, with new examples including that of ADV Films, which distributes Anime in the US, using BitTorrent distribution for trailers and other promotional material. Bram now has a half-dozen people working with him to further commercialize the technology, making it easier for others to follow ADV's example.

I suspect it will take some form of content protection, such as the above, to get the networks to follow suit (they are, as you might imagine, incredibly risk-adverse when it comes to their golden geese). But one way or another, that day will come. The economic efficiencies of BitTorrent's distribution model are too compelling, especially for non-mainstream fare. The question is not if, but how and when P2P TV takes off.

Comments

[Barry Ritholtz]

What you are essentially asking is whether TV, like Music, Film, Newspapers, and pretty much any other "old" media will be forced, to adapt to the disruptive power of the internet.

The answer to that is a definite yes -- its inevitable.

As an asset manager, I wonder which Network will be smart enough to recognize the inevitablitiy of this first? Who will make a break from the "united front" of the their broadcast peers?

If you can be the first to get where everyone else is going anyway, it only makes good business sense to do so.

I would take a serious 2nd look (in a good way) at making an investment in any firm that shows they are THAT smart and forward looking. (Most of the rest are likely short sales . . . )

[chuck]

i'd say product placement plus some brand symbol in place of a channel symbol (especially for goods that are not ok for tv advertising) should provide sufficient revenue to finance production of tv shows. then those could be just given away via bittorrent or even printed on DVD and sent to everyone willing to watch it for free.

http://www.mindjack.com/feature/piracy051305.html

[Dr. TV]

Rather than being geo-centric, ads should be person-centric. Imagine a commercial feed with multiple layers, where each layer references a storage location for a commercial for a different national brand. Which ad do you see? It all depends on your individual characteristics and preferences (geographic location, TiVo ratings & season passes, bookmarks, other downloads) and the ad that the company assigns to that storage location.

[brian]

The efficiencies of p2p work primarily because download and upload speeds are vastly different in the US. While most cable modems/dsl reach dl speeds of up to 5 Mbs, most upload speeds are capped at below 512 Kbs.

[Mike Dixson]

Better than content only being available for a limited period to get around some adverts time specific nature they could build into the format to make the advert content more dynamic.
So watching the show this week might show promotions for this week and watching it next week would show promotions for then.
It would make even *more* money from advertising and make it an appealing outlet for their shows.

[wi]

2 things:
- the internet allows much better targetting of ads, so presumably you can make ads that the person actually cares about.
- product placement. watch any tv show these days and marvel at the number of products that are placed in your average 22 minute period. quite remarkable. now imagine similar product placement with internet level distribution.

[chris anderson]

Wi,

To your first point, it is certainly true that one can imagine "smart" wrappers for video content that could call home and slot in ads dynamicaly that were targetted for time, geography and individual interests. That infrastructure doesn't exist yet, but it's clearly an attractive option down the line.

As for product placement, I did include that in the list of solutions (point 1) above.

[T J Neville]

Be careful what you wish for.

No doubt, P2P distribution system will take off, and this will profoundly change the economics of commercial TV. But some of the biggest “hits” may well be in the economics of niche product.

Keep in mind that most non-broadcast programming - which today is most TV viewing - is NOT funded exclusively by advertising. Most niche cable/satellite channels (e.g., CNN, Discovery, Comedy Central) count on dual revenue streams: they receive roughly half their revenue from monthly per sub basic cable/satellite fees. This leads to all kinds of weird anomalies (e.g., Fox News receives roughly half its funding from non-viewing basic subs, many who hate it - check out www.StarveTheFox.com.)

What’s more, some major sources of innovative programming (e.g. HBO & C-SPAN) depend exclusively on subscription fees. Even “free” broadcast networks count on syndicating their series through domestic (wholly owned) basic cable channels, and internationally (… so they too tap into basic sub fees from multi-channel platforms around the world….and unlike DVDs, these deals are more predictable, multi-window and multi-year.)

Forced to rely just on advertising revenue, many niche channels - and the original programs they fund (e.g., The Daily Show) - would suffer substantial economic hits: advertising revenue only pays half the freight, and the price/value metrics of sponsorship/product placement are currently too loosey-goosey).

Would these channels completely disappear? Probably not - many are absurdly profitable (…because they are heavily subsidized by non-viewers!). Top talent like Jon Stewart & Bill O’Reilly may have to take big pay cuts (…but they can always write more books.) It’s the people making real (lower rated) niche programs on these niche channels who depend more on this monthly basic subsidy, and they may find themselves no longer gainfully employed.

All of this will probably eventually work out as new broadband distribution models evolve. But getting from here to there will be messy – both for major media companies, and niche program developers trying to feed their families – and may well make what’s happening in the music business look trivial

[ReindeR Rustema]

Your reasoning starts off with The Networks and then you try to rescue their position by inventing some way to employ new technology to continue the current model of selling attention to advertisers. Attention bought from viewers with 'content'. This sounds extremely 20th century to me.

Why not reason the other way round... Do viewers like advertising? Do they protest if they do not see advertising? I doubt it. What they appreciate on their screen is original work that touches them. You need money to produce this, before it can get distributed. Distribution is no problem, as the BitTorrent technology demonstrates.

It is the cost of production that is prohibitive. Currently distribution needs to be 'closed' (with that horrible DRM and such schemes) to get a return on investment for the producers. It seems to me that consumers do not like this, they prefer to have freedom. Digital technology is on their side, any DRM-scheme that is invented will be hacked sooner or later.

The real question therefore is, how to finance the production? The BBC makes good stuff with taxpayers money. They do have extra revenue from selling their productions on DVD or to 'Networks' elsewhere, but it looks like they are embracing the model of giving away what they make. There are sponsored little commercials for download on the web. The production is paid for by the sponsor the distribution is not the problem, just 'bring it out there' and it will circulate by itself.

Sponsoring can be done by taxpayers, arts funds, advertisers, a collective of subscribers and any combination thereof. The distribution is sort of sponsored by the consumers who use BitTorrent to download it.

I see no future for The Networks.

[Sapphire]

No need for the producers to figure out how to keep the adverts current, just sell the ad space on the digital format separate from the ad space in the Over-air format!

They could also offer a consumer subscription service. Recently, fans of Star Trek offered to PAY to keep their show on the air, with digital delivery, something like that COULD be done, and subscription fees coupled with broad based Ads that "wrap" the shows instead of interrupt the shows could make the entire affair viable!

[Don]

How about "Watch ads and answer questions related to ads before downloading ad-free program torrent" solution?

This solution not only makes sure that people have watched ads before downloading,but also allow "specific time and place" and "geography" because ads are placed on server,not in programs themself,and both geography and place can be determined with client's IP address or system information.

As for DVD problem, I have no idea.The only things that I'm sure is that DRM is NOT the solution.We consumers hate that.

[Rick Mason]

Bit Torrent is too freaking difficult to use, to make it a widely acceptable tool in the world of Television... You can't have consumers thinking about file sharing when what they really want it television. I think that Dmitry Shapiro at Veoh Networks has the right idea. Abstract the P2P layer of a proprietary P2P network, and offer a TV interface on top of it. If anyone wants the beta, you can find it here:

http://www.veoh.com/download/

invitation code : Veoh-Notify-1

Rick

[Matt]

Chris Bick one of the developers at Wurld Media points out that its LX Systems technology could possibly do this more efficently than Bittorent ..

"LX Systems could fit this role as good if not better then BitTorren. First, we have geographic information about all of the peers on the network. Second, we have streaming built in so users would have the option to stream or download the video. Third, if the content provider wanted DRM protect their content we have a lot of expirence in that area."

[david]

I think you need to look carefully at how most television content that ends up on the Internet is currently getting there: someone sits at their computer with a TV tuner card installed and caps the program as it's broadcast. There are organised release groups very active in this area and most of their content ends up on bittorrent within an hour or so of initial broadcast.

I'm not sure if any of your solutions deal with this base issue. The content's already there; it's already affecting the networks. The issue is how they co-opt the downloading-for-free audience and convince new Internet viewers to get their (whether ad-supported or fee-based) copy and not the cost-free and ad-free one.

The issue is more along the lines of whether people are prepared to pay for their television content / reward the networks for their effort when they can *already* get their content for free. Or rather, is there a critical audience mass who will pay the networks enough to make it worthwhile? Is an 'iTunes' for TV a viable business model? There are a number of published surveys that suggest people will be willing to pay for downloadable TV, but how that might translate into reality when it comes to it is yet to be seen.

The other issue that I don't think you discussed is not geographical exclusives with regard to advertising, but geographical syndication to foreign markets. If a network is going to release a show online for a fee in some form, how will that affect syndication rights when it comes to sell that show abroad? Will we start to see worldwide premieres of new shows in the same way that we now do so with the big movies?

[realist]

this won't work... first run television shows are *leased* by a network or individual affiliates (friends vs. maury povich). the production companies/studios will not have any benefit in this because they do not rely on advertising - they rely on hard cash - where as the network makes the gamble with advertising. SO if the product were distributed via internet, you wouldn't need a network, so the distribution could start with the studios/production companies but you would have to reinvent their core competency. hollywood is stuck in 1985 and won't be changing soon. sales managers are still flying out to nebraska on the company's dime to sell i love lucy to a local affil for $100/week.

[SliMan]

Ive been mulling this one over in my head for 6 months now. The implications are huge. The advertising company who lands this baby (p2p tv) will lead the world in advertising technology. Using peoples internet connections to stream TV broadcasts on a p2p network will minimise a network broadcasting infrastructure to one server, they probably could benefit with a little more bandwidth, But one server would be enough for a single channel worldwide. The p2p file database would slowly grow with the networks popularity and the streams could have markers set in the show to download adds during watching and trigger at a certain point during wiewing. For every con with this theory there are 20 pro's. Like the add demographics would be an easy one to overcome, for instance upon installing your p2p tv client you would be asked to answer a few questions to what your interests are or use a smart add detector that detects users ASL & the type of shows you watch. This is the age of the computer and everythng is plausable and possible.

[matt schulte]

I would like to officially announce the launch of a new meme.

"It's not the screen, it's the filter."

That's where the opportunity really lies, and the innovation still lags the need.

[startupgr]

Should we also look at it from the advertisers' point of view?
I just do not think advertising over P2P would be able to support production if the Networks are out of the picture. Don't forget
we are moving into the long tail of advertising as well here.
Even if we assume all mechanisms are in place for an advertiser to attach his ad on a piece of content based on its genre, viewer profile, geography, time etc, do you think the revenue generated per download will be able to support the niches. And this new way of distribution is all about niches isn't it? It will mostly be niches than any kind of mainstream. And when you get this kind of fragmented markets advertising just doesn't work - at least not for the most. And we would reach a point where choice will be limited, to the extend it can get funded by ads.
So my opinion is that if you want choice you will have to pay for it in the form of a DRM solution or get it for free after it creates all the necessary revenue in some other closed distribution network.

www.startup.gr

[Rog]

There are some running P2P TV protocol and practice:
www.pplive.com