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Must Read: Google Chairman Eric Schmidt on the Future of Television. He Says, 'Linear viewing is remarkably robust -- in 2010, over 90% of broadcast TV viewing remained 'live.' But I sense the default mode of viewing will inexorably shift.' Here's How Deadline.com

Clearly Google is one of the innovative companies that is pretty good at taking the pulse of what consumers want and discern how they behave.

So when Google Chairman Eric Schmidt gives a major speech about the future of television, it behooves all of us in the TV industry to pay attention.

Schmidt gave just such a speech last Friday, Aug. 26, 2011, at the Edinborough International TV Festival in the U.K.

Thanks to our good friends at Deadline.com, we can all read a transcript of Schmidt's speech, and we here at TVWeek highly recommend it to all in the TV and advertising industries.

Here are some key excerpts from Schmidt's fairly lengthy speech:

[Y]ou ignore the Internet at your peril. The Internet is fundamental to the future of Television for one simple reason: because it’s what people want.


Technologically, the Internet is a platform for things that traditional TV cannot support. It makes TV more personal, more participative, more pertinent.

[A] system for recommending content is so vital. It’s what channel schedulers have done since the beginning of TV. But traditional scheduling is one size fits all. Sometimes their recommendations suit me, but just as often not.

Online – for those who wish it and grant permission – things could be vastly different. Online, through a combination of algorithms and editorial nudges, suggestions could be individually crafted to suit your interests and needs. The more you watch and share, the more chances the system has to learn, and the better its predictions get. Taken to the ultimate, it would be like the perfect TV channel: always exciting, always relevant – sometimes serendipitous – always worth your time.

We’ve already had a glimpse of the power of recommendations to sway viewing with Netflix. Around 60% of Netflix rentals are a result of algorithmically generated recommendations. Another example is Amazon. Their recommendations – like “others who bought this also bought” – are incredibly compelling, and in recent years have accounted for between 20% and 30% of their sales.

A social layer is something viewers – or at least a substantial number – clearly want. It’s also great for broadcasters. Trending hashtags raise awareness of shows, helping boost ratings. It can be a metric for viewer engagement, a vehicle for instant feedback, a channel for reaching people outside broadcast times. It can also provide a great incentive for watching live.

In fact, I don’t expect TV viewing will ever switch to be entirely on-demand. There will always be a cultural pull, for some shows, on some occasions, to watch in real-time. Linear viewing remains remarkably robust – in 2010, over 90% of broadcast TV viewing remained ‘live’. But I sense the default mode of viewing will inexorably shift...

Social signals are another powerful driver of behaviour. If three of my friends highly rate a TV series, odds are I’d check it out even if reviewers say it’s rubbish. We’re just at the earliest stage of learning how best to use social signals and other taste indicators to provide more personalised content and services.

So, what are the trends to watch? I can sum that up in 3 words: mobile, local and social.

More generally, think about what on-demand means for traditional business models. Most TV channels seem to practice a drip-feed approach to releasing content. But in an on-demand world that’s outdated. Netflix get this. In March they outbid the networks to win exclusive rights to screen the US version of ‘House of Cards’, and plan to make episodes available in clusters rather than one a week.

Consider too the way first-run airings attract an ad premium. That’s a less relevant distinction as viewers shift to watch on their own schedule. If it’s the first time you watch a show, it’s first run to you, no matter how many times it has been broadcast. As TV becomes more personalized, ad models should adjust accordingly.

Of course, doing this also requires new processes – not least changes in the way TV viewing and ad effectiveness is measured. To that end, Google – and others – are investing in research to better understand how viewers are consuming TV and the web across multiple platforms. In the UK we have recently teamed up with Kantar to create a single source research panel to measure web and TV habits.