The Enthusiastic Skeptic:The Enthusiastic Skeptic:Disruptive Innovation and Public RadioDisruptive Innovation and Public Radio

Dennis L. HaarsagerDennis L. HaarsagerDigital Distribution Implementation InitiativeDigital Distribution Implementation Initiative

& Northwest Public Radio& Northwest Public Radio

Digital Distribution Implementation InitiativeDigital Distribution Implementation Initiative

CORE WORKING GROUPCORE WORKING GROUP Ed Caleca, PBSEd Caleca, PBS

Jeff Clarke, KQEDJeff Clarke, KQED

Dennis Haarsager, DDII Dennis Haarsager, DDII consultant; KWSU/KTNW, consultant; KWSU/KTNW, NW Public RadioNW Public Radio

Byron Knight, WisconsinByron Knight, Wisconsin

David Liroff, WGBHDavid Liroff, WGBH

Pete Loewenstein, NPRPete Loewenstein, NPR

Jim Paluzzi, Boise State Jim Paluzzi, Boise State RadioRadio

A strategic investment initiative funded by the Corporation for Public Broadcasting.

Joint Radio

Television External

Multidiscipline Experts GroupMultidiscipline Experts Group Jon Abbott, WGBHJon Abbott, WGBH Brenda Barnes, KUSCBrenda Barnes, KUSC Rod Bates, NebraskaRod Bates, Nebraska Joe Campbell, KAETJoe Campbell, KAET Scott Chaffin, KUEDScott Chaffin, KUED Beth Courtney, LouisianaBeth Courtney, Louisiana Vinnie Curren, WXPN (now Vinnie Curren, WXPN (now

CPB)CPB) Tom DuVal, WMRATom DuVal, WMRA Tim Emmons, Northern Public Tim Emmons, Northern Public

RadioRadio Fred Esplin, Univ of UtahFred Esplin, Univ of Utah Glenn Fisher, KTCAGlenn Fisher, KTCA Jack Galmiche, OregonJack Galmiche, Oregon John King, VermontJohn King, Vermont Ted Krichels, WPSXTed Krichels, WPSX Jon McTaggart, Minn Public Jon McTaggart, Minn Public

RadioRadio Paige Meriwether, KUEDPaige Meriwether, KUED

Steve Meuche, WKARSteve Meuche, WKAR Peter Morrill, IdahoPeter Morrill, Idaho Meg O’Hara, WNETMeg O’Hara, WNET Maynard Orme, OregonMaynard Orme, Oregon Allan Pizzato, AlabamaAllan Pizzato, Alabama Lou Pugliese, onCourseLou Pugliese, onCourse Don Rinker, AlaskaDon Rinker, Alaska Meg Sakellarides, Conn Pub Meg Sakellarides, Conn Pub

R-TVR-TV Bert Schmidt, WVPTBert Schmidt, WVPT Jonathan Taplin, IntertainerJonathan Taplin, Intertainer Kate Tempelmeyer, NebraskaKate Tempelmeyer, Nebraska Tom Thomas, SRGTom Thomas, SRG Mike Tondreau, OregonMike Tondreau, Oregon David Wolff, Fathom (now David Wolff, Fathom (now

Sunburst)Sunburst) Art Zygielbaum, NebraskaArt Zygielbaum, Nebraska

Disruptive TechnologiesDisruptive TechnologiesRoadkill Menu: AM Stereo, FMX, RBDS, Roadkill Menu: AM Stereo, FMX, RBDS, Betamax, 8-tracks, 5¼” Diskettes, MS-DOS, Betamax, 8-tracks, 5¼” Diskettes, MS-DOS, Local phone operators, mom & pop ownershipLocal phone operators, mom & pop ownership

Disruptive TechnologiesDisruptive Technologies

[Technology here means the processes by which an [Technology here means the processes by which an organization transforms labor, capital, materials and organization transforms labor, capital, materials and information into products and services of greater value.]information into products and services of greater value.]

Innovations that result in worse product Innovations that result in worse product performance, at least in the near term.performance, at least in the near term.

Bring to market a very different value proposition Bring to market a very different value proposition (typically cheaper, simpler, smaller and frequently (typically cheaper, simpler, smaller and frequently more convenient)more convenient)

Usually are the cause when leading firms fail – Usually are the cause when leading firms fail – notnot sustaining innovationssustaining innovations

From Clayton M. Christensen, The Innovator’s Dilemma

Established Vs Disruptive TechnologiesEstablished Vs Disruptive Technologies

ESTABLISHEDESTABLISHED

Photographic filmPhotographic film

Wireline telephonyWireline telephony

Full-service brokerageFull-service brokerage

Campus-based instr’nCampus-based instr’n

Medical doctorsMedical doctors

MRI/CT scanningMRI/CT scanning

Offset printingOffset printing

Cardiac bypass surgeryCardiac bypass surgery

DISRUPTIVEDISRUPTIVE

Digital photographyDigital photography

Mobile telephonyMobile telephony

Online brokerageOnline brokerage

Distance educationDistance education

Nurse practitionersNurse practitioners

UltrasoundUltrasound

Digital printingDigital printing

AngioplastyAngioplasty

From Clayton M. Christensen, The Innovator’s Dilemma

Disruptive Technologies in Radio

Disruptive InnovationDisruptive Innovation

““The pace of technological progress generated by The pace of technological progress generated by established players inevitably outstrips customer’s established players inevitably outstrips customer’s ability to absorb it, creating opportunity for start-ups ability to absorb it, creating opportunity for start-ups to displace incumbents.”to displace incumbents.”

““There are times at which it is right There are times at which it is right notnot to listen to to listen to customers, right to invest in developing lower-customers, right to invest in developing lower-performance product that promise performance product that promise lowerlower margins, margins, and right to aggressively pursue small, rather than and right to aggressively pursue small, rather than substantial, markets.”substantial, markets.”

From Clayton M. Christensen, The Innovator’s Dilemma

Environmental ScanEnvironmental Scan

Electronic Media TodayElectronic Media Today

Conglomerates dominate ownership and control Conglomerates dominate ownership and control diverse distribution outlets, with both “horizontal” diverse distribution outlets, with both “horizontal” and “vertical” operations and pricing advantagesand “vertical” operations and pricing advantages

Users are beginning to take control of when they Users are beginning to take control of when they access programmingaccess programming

Subscriber-based economic models (Subscriber-based economic models (e.g.e.g., HBO) , HBO) are competing with ad-supported onesare competing with ad-supported ones

Radio TodayRadio Today

Terrestrial radio remains strong, but landscape is Terrestrial radio remains strong, but landscape is littered with failed radio technology enhancementslittered with failed radio technology enhancements

Ownership consolidation widespread since ‘96; Ownership consolidation widespread since ‘96; pubradio competing with stations with better cost pubradio competing with stations with better cost profiles and centralized best practices operationsprofiles and centralized best practices operations

Satellite radio and real-time web streaming are Satellite radio and real-time web streaming are emerging as playersemerging as players

Asynchronous distribution (on demand, peer-to-peer Asynchronous distribution (on demand, peer-to-peer sharing) of audio also gaining foothold; first radio sharing) of audio also gaining foothold; first radio “TiVo’s” appear“TiVo’s” appear

Because of group ownership and general availability of Because of group ownership and general availability of 7x24 program services, national voices are 7x24 program services, national voices are increasingly replacing local onesincreasingly replacing local ones

Pubcasting’s Diverging FortunesPubcasting’s Diverging Fortunes Terrestrial digital transition is market-driven for Terrestrial digital transition is market-driven for

radio; mandatory radio; mandatory andand market-driven for TV market-driven for TV National content producers in public radio is National content producers in public radio is

strong mix of licensees, independents and NPR; strong mix of licensees, independents and NPR; licensees or licensee gatekeepers dominate in licensees or licensee gatekeepers dominate in public televisionpublic television

Public radio listening and members have Public radio listening and members have increased, while PTV viewing and members are increased, while PTV viewing and members are steadily declining; revenues generally following steadily declining; revenues generally following the same vectorsthe same vectors

Public radio players have explored alternative Public radio players have explored alternative distribution platforms to a greater degree than distribution platforms to a greater degree than have PTV’s have PTV’s

Public Broadcasting TodayPublic Broadcasting Today

““Everyone is baking their own cookies”Everyone is baking their own cookies”

““Hail Mary” method of funding depreciationHail Mary” method of funding depreciation

Usage strong compared to other public service Usage strong compared to other public service providers (11.8B providers (11.8B personperson contact hours annually contact hours annually for public radio, 5.8B for public radio, 5.8B hhhh contact hours for PTV) contact hours for PTV)

Policy support of public broadcasting less Policy support of public broadcasting less assuredassured

Our esteem is an asset that can be leveraged or Our esteem is an asset that can be leveraged or squanderedsquandered

Other public service entrants entering electronic Other public service entrants entering electronic media, usually using disruptive technologiesmedia, usually using disruptive technologies

Radio In Five YearsRadio In Five Years

Local ownership of commercial stations will have all Local ownership of commercial stations will have all but disappearedbut disappeared

AM/FM digital broadcasting established, but AM/FM digital broadcasting established, but acceptance uncertainacceptance uncertain

Lack of spectrum for public radio even more acuteLack of spectrum for public radio even more acute

Use of other platforms and new forms of distribution Use of other platforms and new forms of distribution will grow, but are unlikely in this time frame to will grow, but are unlikely in this time frame to displace much listening to terrestrial stationsdisplace much listening to terrestrial stations

Our UrgenciesOur Urgencies

““To be or not to be” for public televisionTo be or not to be” for public television

““To be all we can be” for public radioTo be all we can be” for public radio

Strategic Investment ScenariosStrategic Investment ScenariosInvestments may be individual or collectiveInvestments may be individual or collective

Collective Investment ModalitiesCollective Investment Modalities

Toolkits – activities or tools stations can use to Toolkits – activities or tools stations can use to achieve best practices without need for collaborationachieve best practices without need for collaboration

Service Clouds – stations outsource significant Service Clouds – stations outsource significant activities created for specialized purposesactivities created for specialized purposes

Colonizers – efforts to operate public broadcasting Colonizers – efforts to operate public broadcasting mission elements independently with or without mission elements independently with or without station involvementstation involvement

Scenario 1 – SustainingScenario 1 – Sustaining

Make strategic investments in initiatives that sustain Make strategic investments in initiatives that sustain the legacy (broadcasting) businessthe legacy (broadcasting) business

Tends to maintain operational independenceTends to maintain operational independence

Preserves as much “gross tonnage” of public Preserves as much “gross tonnage” of public service as possible, at least in the near termservice as possible, at least in the near term

High investments in “Toolkits,” somewhat lower High investments in “Toolkits,” somewhat lower investments in “Service Clouds,” little in “Colonizers”investments in “Service Clouds,” little in “Colonizers”

Scenario 2 – RepositioningScenario 2 – Repositioning

Make strategic investments in initiatives that Make strategic investments in initiatives that reposition a station in new directions consistent with reposition a station in new directions consistent with historic missionhistoric mission

Capacity and scale created at collective levelCapacity and scale created at collective level

Emphasis on editorial (programming) rather than Emphasis on editorial (programming) rather than operational independenceoperational independence

Increased investments in “Service Clouds” and Increased investments in “Service Clouds” and “Colonizers”“Colonizers”

Diverging Investment PossibilitiesDiverging Investment Possibilities

Public radio should be able to make strategic Public radio should be able to make strategic investments in both the sustaining and repositioning investments in both the sustaining and repositioning directions.directions.

Public television, because of greater investment Public television, because of greater investment costs and a declining economic vector, will likely costs and a declining economic vector, will likely have to choose between these directions.have to choose between these directions.

Consultant’s Provocations 1Consultant’s Provocations 1

Form “virtual broadcast groups,” digital distribution Form “virtual broadcast groups,” digital distribution companies that operate key functions of current companies that operate key functions of current stations within and across markets (include NPR or stations within and across markets (include NPR or PRSS as eligible service provider)PRSS as eligible service provider)

Create public service “digital condominium Create public service “digital condominium association” with other state, national and association” with other state, national and international advanced networks (e.g., Internet2)international advanced networks (e.g., Internet2)

Task a system economics panel with devising Task a system economics panel with devising strategies to redeploy [strategies to redeploy [insert ambitious amount insert ambitious amount herehere] of existing system revenue from “cookies” to ] of existing system revenue from “cookies” to capitalization and audience-sensitive prioritiescapitalization and audience-sensitive priorities

Consultant’s Provocations 2 (IMA)Consultant’s Provocations 2 (IMA)

Most broadcasters treat the Internet as a sustaining, Most broadcasters treat the Internet as a sustaining, rather than disruptive, technology innovation. Most rather than disruptive, technology innovation. Most indicators, however, point to it being the latter. How indicators, however, point to it being the latter. How do we design services differently in each world?do we design services differently in each world?

If we consider the Internet as a disruptive If we consider the Internet as a disruptive technology for broadcasters, what investment and technology for broadcasters, what investment and service strategies should we follow in delivering IP service strategies should we follow in delivering IP services?services?

How do we exploit the emerging Wi-Fi and other How do we exploit the emerging Wi-Fi and other wireless data capacities?wireless data capacities?

Contact InformationContact Information

Dennis L. Haarsager, DDII Consultant

1019 Border Lane, Moscow, ID 83843-8737

208-892-9445 • e-fax 206-770-6100

haarsager@moscow.com

www.technology360.com

Associate Vice President, Educational Telecommunications & Technology, Washington State University

Box 642530, Pullman WA, 99164-2530

509-335-6530 • e-fax 888-455-1070 • haarsager@wsu.edu