The Media Technology Headline of 2004: Digital TV

Digital television was a big topic of discussion in the early ’90s. There were grim warnings that we were falling behind Japan in the high-definition race, and that if the US government didn’t give digital TV spectrum to broadcasters, free over-the-air television was doomed. Everyone involved knew that the plan that eventually emerged — a gradual transition to digital broadcasting through 2006, at which point the broadcasters would return their analog spectrum — was a fantasy. But the broadcasters are among the most powerful political lobbying forces in Washington, and they got their way.

Over the next several years, a spate of articles touted the remarkable clarity of HDTV programming. The computer industry battled the broadcasters over transmission standards. Manufacturers started building high-end sets capable of receiving HDTV broadcasts. Stations proudly announced the programming they were making available in high-definition format. And nothing really happened. The HDTV sets were so expensive, and the available programming so slim, that hardly anyone tuned in. Instead of HDTV, the revolutionary media technology of the ’90s was the Internet.

Giving broadcasters prime digital TV spectrum, which could have provided ubiquitous broadband wireless Internet service or generated tens of billions of dollars at auction, was a terrible mistake. But it’s too late to change the past. Let’s take a look at the present.

Just as everyone has forgotten the overheated predictions about HDTV, it’s finally starting to become real. Sales of digital TV sets increased 84 percent from the first quarter of 2001 to the first quarter of 2002, according to the Consumer Electronics Association (I first saw this figure in Mark Anderson’s Strategic News Service.) The industry projects 2 million sets sold in 2002, and 4 million in 2003. On the supply side, the major cable operators have agreed to accelerate carriage of high-definition channels, responding to a proposal from FCC Chairman Michael Powell.

Broadcast.com founder Mark Cuban is ahead of the curve on this one. While spending most of his time running the Dallas Mavericks, he quietly started a company called HDNet. It calls itself the “world’s only national television network broadcasting all high-definition content,” which includes a growing number of sporting events and other programming, currently via DirecTV satellite. It’s still too early for HDNet to be taken seriously, but plenty of people laughed at ESPN, MTV and CNN in the early days too. Cuban won’t make as much money on HDNet as he did when he sold Broadcast.com to Yahoo! for nearly $6 billion, but HDNet just may wind up being the most successful business he starts.

Meanwhile, the content industry is trying to kill the golden goose. Three-quarters of US broadcasters missed a recent deadline to start broadcasting in high definition format. And the broadcasters are pushing for draconian digital rights management solutions that would make those existing digital TV sets obsolete. EFF’s excellent Consensus at Lawyerpoint Weblog documents the activities of the Broadcast Protection Discussion Group, which is defining standards for digital TV copy protection.

Broadcasters and content owners are right to be scared about digital TV. Digital technologies, by their nature, explode scarcities… and these industries are built on the exploitation of scarcities. But it will only take a few cracks for the dam to burst. TV will be delivered digitally, just as both wired and wireless phone service are today. It’s a matter of when, not if.

If the copy protection issue doesn’t slow things down too much, 2003 should be the year digital TV becomes more than a curiosity… and 2004 the year it starts to become a mainstream phenomenon. Interestingly, that’s about the same trajectory as two other technologies that were also hyped too early: 3G wireless networks and interactive television (using next-generation set-top boxes that incorporate Tivo-like personal video recorder technology). Put a reminder in your calendars now.