What Hath Digital Wrought?

Michael Hedges October 23, 2008

Telegraph inventor Samuel F.B. Morse tapped out “What hath God wrought?” one hundred sixty five years ago. The first message of the modern media age invoked awe of a power to that day had been ascribed to the heavens. How many newspapers – printing still – use the iconic name ‘telegraph?’

Today’s iconic name is, of course, ‘digital’. Fifty years ago the pioneering Digital Equipment Corporation began making and selling micro-processors. The fabled venture capitalist Georges Doriot invested $70, 000. He sold his shares for $450 million. Digital Equipment Corporation disappeared into Compaq and HP. The ‘digital’ age was sired by venture capital.

The world is no longer ‘going digital.’ It has gone. The BBC World Service program ‘Go Digital’ was renamed ‘Digital Planet’ in 2005. Maturity has come to all that ‘digital’ has come to mean.

Media is digital. Printers of newspapers are digital. Television cameras are digital. Radio studios are digital. Digital efficiencies were too good for broadcasters and publishers to pass up. Producing media became digital quickly.

Delivering media has also gone digital. The internet delivers more media content than any other means. A 2007 survey of media executives by Accenture found four out of five believing Web 2.0 had no bubble so no bubble to burst.

That was before – but only slightly – the financial market bubble started leaking.

Television will be the first medium converted (mostly) to digital transmission systems in the EU by 2012 (mostly) and the US in 2009. ABI Research reported (October 21) that in the US 20% of the analogue holdouts – those not ‘converting’ to new DTT receivers - will simply give up on broadcast television channels, choosing their visual entertainment from DVDs and IPTV.

“Our survey data suggest that the net result of consumers’ choices after analog switch-off will be a drop in overall terrestrial viewing,” said analyst Steve Wilson “Terrestrial viewers tend to be more likely to use alternative video entertainment forms such as DVD rentals and broadband video and the transition may push them further in that direction.”

A significant percentage of television viewers seem more than willing to give up on the way TV is distributed. Choosing a channel may – sooner than not – lose relevance to consumers. Note that TV Guide, once America’s largest circulation publication with TV listings galore, was sold this week for exactly $1.

Radio is the veritable cockroach of traditional media. It gets no respect and has survived all efforts – internal and external – to kill it. Digitally transmitted radio channels have appeared but, like the meme of the tree falling in the forest, who’s heard them? Broadcasters fighting off previous financial recessions turned to music-only jukebox programming to maintain profit margins. One result – like the television example above – has been music listeners choosing the iPod rather than a digital radio receiver. There’s a pattern. More choice leads to less usage per platform.

Broadcasters that produce a sizeable portion of their own content have known – viscerally, at least – that ‘going digital’ is potentially the ultimate ‘killer app.’ More channels available on more platforms deflate the mass media market that has, largely, paid for constantly improving – or the appearance thereof – content and programs. ITV’s Michael Grade is right: something has to give.

Digital radio – channels broadcast from multiplexes, listeners required to buy a different kind of receiver - was believed to offer the magic of greater choice, better quality and even the edge of interactivity.  A significant minority of UK radio listeners have, indeed, added digital radio to their menu of media platform choices. Danish listeners have, too. In the UK it’s clear that digital radio is attractive but it’s no mass market. Hence, commercial broadcasters – instinctively wary of too much choice – are fleeing.

Like the telegraph signal – dots and dashes – the digital message – 0’s and 1’s – is simple. Content is relative, bending with the curves of supply and demand. But as the current financial storms prove, supply and demand are imperfect resource allocators. Straining to lead media consumers down one digital path broadcasters and publishers are finding themselves pulled toward bankruptcy. Post-modern digital media is led – even created – by its users.

“And we have miles to go before we sleep.”  

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