• by Diane Mermigas , January 8, 2008

2008 will be a year of digital adjustment for media-related companies. They are being forced by economic adversity to devise more compelling content, interactive activities, user interfaces and storage options in a lucrative, connection-driven environment.

That digital problem-solving 101 is the thread binding the $120 billion consumer electronics industry being showcased in Las Vegas this week. Many of the interactive digital devices offer better ways to connect consumers and advertisers. Throughout the year, this column will identify and explore some of the more notable new concepts and solutions that media players develop in response to collapsing outmoded business conventions, economic pressures and consumer demand for connected portability and functionality. Many of the catalysts for this continuing transformation, especially in the television world, are hard at work.

For instance, the writers' strike and planned negotiation with directors may not render the level of guaranteed digital residuals they seek, but the labor stalemate has already set into motion changes in an inefficient fall prime-time TV season and advertising upfront. The irreversible change in broadcast dynamics is keenly evident in the continuing shift of ratings and revenue power from broadcast to cable networks--which are growing program budgets eight times faster than the Big Four, which has sustained four successive quarters of double-digit ratings declines. The narrowing gap between the lowest-rated broadcast network and the highest-rated cable network has the Big Four running scared. They have created an unprecedented number of interactive platforms and outlets to leverage their branded content.

The only way out of this downward TV spiral is to eventually reconfigure content production and advertising sales for TV, online, mobile and other digital video platforms. That means making consumers more comfortable with Internet connections through their living-room TVs. The instruments of that transition are everywhere at CES: ArchosTV's auxiliary box that manages every kind of video and information through a television, video USB flash drives and video-friendly large-screen cell phones; Xbox 360 and other game consoles' general entertainment interface; LG Electronics' handheld personal DTV set; and a new generation of other wireless technology extenders stretching from the PC to media smart TVs.

LG Electronics' low-cost solution for TV stations to transmit their digital signals to cell phones and other portable digital gadgets will be invaluable next year. That's when a government-mandated analog-to-digital conversion sends broadcasters scurrying for new ways to leverage their fare.

NBC Universal's first-ever digital media upfront pitch to media buyers slated for Jan. 16 acknowledges the comfortable migration of younger viewers to streaming online video during the strike. It offers an estimated 3 billion impressions for video content on some 10 digital out-of-home venues, which could generate more than $2.5 billion in new revenues by 2010. Choice Stream recently reported that 65% of consumers who watch video on their computers, mobile devices and digital media players are most likely watching professionally produced TV programs, complete with commercials. This will contribute handily to the more than 28% growth expected from all forms of online and digital advertising this year, taking advertisers deeper into the realm of transactional e-marketing. Consequently, Nielsen and other measurement players are rushing to track and quantify content access across multiple devices and platforms.

It's a clear sign that television-related companies have learned important survival tactics from the music industry, whose costly resistance to change and tussle with consumers has led to its undoing. Music has resorted to its digital reinvention as an adjunct to dance Web sites and user-generated video on YouTube, the backbone to popular interactive games such as "Guitar Hero," as the signature backdrop to television series and film, cell phone ringtones and the driver of Apple's iTunes and Amazon's digital music service, which are deflating CD demand.

Technology-based companies--from device manufacturers to software providers--appear to be more intent than ever to shepherd the digital transition from old to new media options, including simple voice-recognition and touch-screen navigation. There even seems to be a conciliatory tone to some of the more stunning CES-related content announcements, such as Warner Bros.' Blu-Ray alignment with hardware king Sony and even Netflix's capitulation to a no-brainer digital download of movies and other video as an alternative to relying on the U.S. Postal Service. It all suggests a resignation to getting on with the business of meeting digital consumers' needs.

Microsoft founding chairman Bill Gates focused on connected entertainment during his swan song CES address Sunday night on the heels of announcing new content deals with NBC Universal, MGM, ABC Disney and Turner for its established X Box and Windows Mobile platforms. He acknowledged the shift afoot--from a time when digital technology would become central to the way we work, learn and play to the next Digital Decade--in which "technology will make our lives richer, more connected, more productive and more fulfilling in profound and exciting ways."

Even with the winds of a recessionary economy, that appears to be unfolding on television's universal screen.