• by Diane Mermigas , October 27, 2008

When the government yanks analog from broadcasters, forcing them to go digital amid a prolonged recession, it will give consumers the best reason to chuck their TV sets in favor of watching the same programs on the Web. Broadcasters who remain in denial face a certain death spiral.

Dramatic as that sounds, there is mounting evidence that consumers are happy to access their content of choice as streaming video on the Internet, an iTunes download or cable video on demand. There is the real prospect that many of the 9% of U.S. households whose TV sets go dark Feb. 17 because they are not equipped to receive digital signals will stay dark.

The long-planned Feb. 17 switch date is an extraordinary catalyst strengthened by an unrelenting economic downturn in which weary consumers don't have the money or the inclination to invest in converter boxes--much less big-screen HD TVs--to view the relatively minimal amount of TV content they are satisfied to get elsewhere. Sony and other major hardware manufacturers have publicly conceded as much.

Although they have had plenty of time and growing reason to embrace digital conversion, many broadcasters are now overwhelmed by an accelerated loss of advertising revenues. That confluence of factors could send many broadcasters that are stubbornly clinging to their old ways into a death spiral that can only hasten their collapse.

The way to avoid that calamity is to play to the universal screen--whether it is a home TV monitor, a computer, a smart phone or other portable device. It is the consumer access--not the screen--that is important. Create timely, innovative, artful content that entertains and informs anywhere, anytime. A broadcast network schedule is just one increasingly uncommon place where liberated consumers watch what they want. You have already lost younger generations from prime-time regimentation; older consumers are not far behind.

Bring advertisers along for the ride by encouraging their interactive connections with target consumers on the universal screens. By next spring, it's the only chance to hang on to the $9 billion in upfront advertising commitments that will be siphoned off by digital viewing alternatives. Even with DVR households added to their estimates, the broadcast networks this fall have 11% fewer viewers so far this season than last. The broadcast TV value proposition confined to television is in serious jeopardy, and it must take its content wherever fractionalized audiences are gravitating.

NBC Universal and Fox get that, and have begun to demonstrate encouraging signs of adaptability on their co-owned Hulu.com site, where digital consumers are getting their first glimpses of "30 Rock" with commercials before they make their way to prime time. The shift to digital facilitated by Hulu is averaging 142 million streams--ahead of CNN, ESPN and even MTV, according to Nielsen Online. The future is now. NBC could have done better with the Olympics, but has brilliantly circulated "Saturday Night Live" clips of late. They are learning--bit by byte.

Still, the chief executives whose conglomerates include the major broadcast networks are pressing for a full court review and public comment on the Federal Communications Commission's plans to hand the vacant TV "white space" airwaves to Google, Hewlett-Packard and other high-tech giants seeking to launch new wireless Internet networks. Or what Microsoft founder Bill Gates calls "affordable broadband opportunities and create new markets for innovative applications and services." Traditional media executives say they are concerned about TV set interference--an arcane complaint.

Those other broadcasters--local TV stations--must quickly get to the same place. The smart ones will leverage their local connections and authority to become the quintessential town crier classified ad bank for the universal screen. It's a role to which local newspapers and blogs aspire. The fallout from the credit crisis and recession will dramatically retard advertising revenues, forcing media companies to do more than skim jobs off the top. They will eliminate or radically change legacy operations that are a drag on the balance sheet. The shift to lower-cost digital platforms and processes will yield higher returns in time.

Barclays analyst Anthony DiClemente warned earlier this year that digital distribution courtesy of Google's YouTube and Apple would beat the TV program giants at their own game. There has been plenty more startling evidence since then.

The recession's grim financial reality will force broadcasters to more fully follow consumers into the digital age; the interactive Web and the universal screens offer the ultimate prize: salvation.