Riding the Waves of Digital Disruption, this Week’s DistilledLive Video

Will is joined by the Chairman of the Board (no, not you Iggy) John Varney for this week’s DistilledLive video which takes a look at the digital disruption set to hit our screens. Tune into the full video below.

You can read along with the video transcript just here.

For more insight into the changing face of TV advertising as we know it, check out our recently released visual report on The Golden Age of Digital.

Stay tuned for more topical FOTV content later this week. 

DistilledLive | Digital Disruption and Regulatory Models

Will: Hi everyone. Welcome to Distilled Live. My name is Will Critchlow, and I'm joined this time by John Varney, Chairman of the Board here at Distilled and the reason I'm in a suit. He always dresses like this.

John was previously CTO at the BBC and has a big background in TV. Perhaps an odd choice for the board of the small web design company we were back in 2009 when we met.

But, John, tell us a little bit about why we ended up working together.

John: Well, yes, first of all it came through what was a [placement scheme]. You were kind of handed me from an expert that you had asked for assistance with an experienced mentor. Although Distilled was not the one I would have chosen from the list, actually when I met you, it was very clear that you had a long-term view of the future of digital content. It wasn't just about web design. It was about the entire environment, and that really appealed to me. Plus I liked the two of you.

Will: Good. Well, great stuff, and obviously we got along well.

John: We did.

Will: We have been working together ever since. So, as we have been talking about this month, Distilled has been thinking a lot about the future of TV actually. So now John's expertise starts to make a lot more sense.

We released a report, "The Future of TV: The Golden Age of Digital." We've been thinking about this in a much broader context actually. This is part of our vision for Distilled in the future, and we think that the disruption that's coming to TV, the way that viewers are getting their content from Internet sources and all of these different forms of over the top video, that's going to be very disruptive to the TV advertising market as a whole, and as a result tens of billions of dollars could be flowing to brand building marketing online. But this is maybe a little bit like the year of the mobile has been promised for a long time. Are we finally there? Is this finally happening?

John: Oh, absolutely, we are finally. I have been as guilty over the years as anyone of promising that we had reached that point. But that was very much from a technological perspective. We could do it, therefore we assumed it would happen. But it didn't. It never really happened in the way that it has now.

For me, the defining point was last year when Netflix invested in original content. When you have a content delivery platform that says this is the future, we're going to invest hundreds of millions of dollars, as they have done, in content, then something had become mature, that a pain point had been reached.

Sure, they were precursors. All the things that we thought were going to change the world, having things like the iPlayer, the development of which I was involved in, and the build-out of content delivery networks, of supervised broadband starting to arrive in the home, we just thought: Yeah, that's it. It's going to happen. Now it's that easy. You take TV content, you shot it over the Web, and everything works.

Will: Sure.

John: But actually that's not been the driver. The driver is, as it always has been in the TV world, original content.

Will: Right. That makes sense, and yet we're starting to see that from more and more places now.

John: Yeah.

Will: There are, of course, content producers springing up, dedicated to some of these new platforms. We've got people that make those videos for YouTube and all that sort of thing.

The other area that I thought we'd picked your brains on while we have you here is there's arguably some disruption happening elsewhere in this space as well, because it's not just the technology and the user habits that are changing.

John: Yeah.

Will: But also there's a lot of challenge in the legal and regulatory areas on that.

John: Yeah.

Will So, in the U.S., we've got cases like the Aereo thing reaching the Supreme Court. In the U.K., Ofcom in particular are trying to work out what this looks like. I know you've been doing a lot of thinking about this.

John: Yeah.

Will: What's the deal.

John: So, as you said, I actually sat on Ofcom's Advisory Board Committee for England. So it's something that I'm exposed to on a monthly basis as well. But there's something else behind that, and that's the commercial model and the emerging commercial model. It used to be that simple. You had public service TV, which was funded by a taxation in the U.K., the state in other countries, or you had commercial TV. Commercial TV is an indirect revenue model where you get the money for actually blank space.

Will: Right.

John: Yeah. So the TV programs are great, but it's the space that's the important part because that's where your money comes from. What it meant was that regulatory models ensure that that space was used appropriately.

Now we know that's all broken. The commercial models are mixed. There's now a way of looking at how you would fund through subscription, ad advertising, and any other form of revenue collection to that, and you get a world where the old regulatory models don't work anymore.

Now that's a real challenge for regulators. If we take the example of broadcast TV put online through a player, in most markets that isn't regulated entirely like broadcast TV. Now take original content and put it on the same distribution mechanism, it's not. So a piece of content on YouTube, if it's an original broadcast program, is regulated as if it was being broadcast.

Will; Right.

John: Something you made in your back garden is not.

Will: Yeah, and that's not at all transparent to the viewer. So we have the regulators, once again I guess much like the rest of the Web, lagging the technology.

John: Lagging the technology and also lagging the commercial model. How does the regulator do what they have to do? Do they be interventionists and say, "These are the rules, these are what you do"? Do they understand that with overregulation the commercial model will fail and the emerging platforms will fail . . .

Will: Yeah.

John: . . . and thus flow of money back into content markets and into creative industry will drop? Or do they simply say, "Hey, we're hands off. We don't understand this at all"?

Will: Wild West.

John: Yeah. It's the Wild West. We only apply our regulations to the things we understand, and we won't touch that other scary world of the Web. I think that's the real big challenge.

I think the encouraging thing is that there is a real degree of responsibility in the broadcasters and what I would call senior content makers, those who understand the value of the content. While we want to push the boundaries and they have to push the boundaries from a regulatory perspective, from a content perspective and similarly from a revenue gathering, they don't want to break it. They really don't want to push it so hard that everything collapses. 

Will: Yeah. Well, I'm sure we're going to be talking about this a lot more. But thanks for joining us. I hope you've enjoyed our future of TV month, and we'll be back with more on the regulatory environment another day. Thanks.

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