This just in from a consumer reacting to questions on my web survey.

"The worst enemy HDTV has is the broadcasters themselves. Cable and regular broadcast TV need to equate HDTV to profit margin. Of course, the financial equation says "invest no money, give up no bandwidth, charge more, deliver less". It will take renegade start-ups, new media and delivery methods, that eat into the profit margin of the big players before they will do anything.

The best thing that could happen would be for one of the big broadcasters to decide to increase their market share by using HDTV to their financial advantage. Something like: prime time broadcasts of a major movie with only 3-4 commercials. Now that would really hurt satellite, cable and the other stations. I'd watch and I would buy the equipment to watch.

By the way, I am ready, willing and able to purchase an HDTV set right now. I expect the cost of the sets to be 2 to 3 times as high as current sets. To me, it's a quality of life issue. You can't improve the quality without spending some money. The research that has studied the spending willingness of the public and has concluded that consumers will only pay $600.00 - $900.00 for a TV is being used to justify a marketing position that makes some CEO somewhere sleep better at night.

The market will belong to those who "seize the day". Forget the bean-counters, they don't have a clue as to what motivates consumers. They can study the surveys for several lifetimes and never know a thing. These are the type of people who, after a major market shift can explain everything, but they themselves are unable to use the information to affect any change. This market will belong to the organization that takes the definitive leadership role and leads this nations entertainment into the future. 65 million consumers are just waiting to pull their wallets out and spend, spend, spend on HDTV. "


What is below was written a few days ago, conceived in 1988, restated in a magazine interview in 1995, and retold here for your evaluation. I ask you to keep it confidential. As I said, this is a basic vision of a new business enabled and encouraged by new technology. Every word has been researched, and while there are some provision in this proposal which will take substantial achievements to realize, we have the conditions falling into place that make such achievements possible. Again, this is an idea which may be too "lofty" for those suffering from their own self-limitations. As I said on the phone, we can always trim it to what can be achieved with the people available to undertake the mission, but we cannot build higher than from our establishing vision. I carry a vision that is embodied here with the unalterable belief that the right people assembled and motivated can do everything proposed in this document. It is only salesmanship. statesmanship, and cooperation that stand between where we are today and the completion of this plan. There is nothing to stop it except our own failure to overcome self-denials and outside negations from certain sectors of the industry. The only reason we should be denied anything is if we doubt the viability of the basic tenants. If we believe in them, not because we just want to, but because we see the clear path ahead guided by the circumstances of our times, we shall succeed exactly as envisaged. I suggest here that as we move forward even more stimulating ideas will be generated from our new creative vortex to propel us beyond anything we can conceive today. Welcome to the beginning.



Proposal

This is a draft proposal for a new international entertainment and cultural television network that is charged with the mission of firmly establishing the next generation of television around the world.

This is a proposal for a new internationally distributed television network of fine entertainment, cultural, and educational programing presented in an update tradition of the great networks of the 20th Century, though transformed by technical developments amassed since the birth of the medium in the 1930s.

Behind the creation of this business proposal is a need to answer the difficult question of how we, as a people, can introduce the next technical generation of television to the home without inflicting irreparable harm upon the existing infrastructure for television at the expense of those who can least afford it.

Since first appearing in technical conferences in the 1980s high-definition television (HDTV) has inspired many to new heights in a contemplation of the potential programing for it. While certainly a paint box does not an artist make, the engaging of this "paint box" encourages the artist to produce expansively until the exploration, experimentation, and expansion phase for the new medium is exhausted.

It is unthinkable that the next generation of television should be less than a complete transformation of what preceeded it. Without that promise HDTV is little more than a better way to see uninspired and formula programs.

HOW IS HDTV TO BE TO BE LAUNCHED?

The problem:

HDTV is expensive. It is big. It is incompatible.
The conventional wisdom is that terrestrial broadcasting will introduce HDTV in the United States. Satellite transmission has that duty in Japan, and there is a mix of both destined for Europe.

HDTV has limited the velocity of its forward march by price. The introductory price in the US is $7500 (on average) and is simply unreachable by all but the well positioned. In Japan HDTV receivers began selling in 1991 for $38,000 (now between $3,200 and $12,000).

Introducing HDTV into a general market which has no ability to pay the high price is not only regrettable, but cruel. It is like waving tenderloin steak before the hungry and homeless. Yet, that is what is being done in the United States when asking terrestrial broadcasters to appeal to their viewers to acquire new HDTV receivers.

Why, then, is it being pushed on terrestrial?
For most of the history of television new standards--color the most obvious--could be introduced only through terrestrial broadcasting systems. That is no longer true. Terrestrial proves to be the least attractive method of inaugurating HDTV due to excessive complexity, a useless redundacy of equipment, and a cultural bias. Add the difficulty of outfitting 1550 separate broadcast stations at differening times, enforcing rules for must carriage upon 20,000 cable systems, inconsistant signal reception, and one begins to see the complex challenge of introducing a new and unproven technology in this way.

With cable, DBS, and even wireless cable more efficient methods of creating a viable signal service for it can be found.

Who wants terrestrial?
The most influential in HDTV are the manufacturers of receivers. They elected their old friend and partner--broadcasting--to introduce the all-important HDTV signals. It was thought that the American public would not trust the standard offered by a minority service such as DBS. Without signals little motive exists to buy an expensive HDTV receiver. That decision by manufacturers has decreed enormous costs upon broadcasters and still offers no assurances that a critical mass for the new television system will be reached.

Digital Television--Following Or Leading A Trend?
There is a loud cry around the world (fueled by the computer) that all electronics must be digital to be competitive in the future. This notion has seduced broadcasters and governments alike into accepting that they too must be digital, or die. Yet, in the midst of the digital era the analog services of broadcasting continues to serve our nation with an enormous financial reward and social impact. Digital, in the case of satellite and cable, has acted more as an assistant to analog than it has as its replacement.

Value of Digital
There are three fundamental values digital offers. One is quality improvement. Another is limitless software-assisted features. Finally, there is the alluring fact of digital compression--spectrum efficiency.

The last is the the first in importance.

Digital Flexibility. What Does It Mean?
David Sarnoff, the founder of broadcasting, was remarkably clear on how broadcasting would begin and grow to change the world for the better. He was praised for his far seeing visionary abilities. With the arrival of the computer Sarnoff failed for the first time at diving the future and fell into confusion himself .The computer--a digital device--enabled so many possibilities that one clear vision forward could not be easily seen. Divining the future for the computer was usually a lucky guess than the identifying of the inevitable road ahead. Even those in early computing had not forecast its direction more accurately than did Sarnoff.

It's A Blur
The same blur is occurring today with the introduction of digital terrestrial broadcasting. Digital allows so much--quality, quantity, variety of professional and end-user options--that a clear vision for building sound business objectives is not guided by any inflexiblity. No one knows which digital "solution" is going to work best for the same marketplace that broadcasters serve today.

This omnidirectionalism is less entangling for professional equipment makers . Their complex chips and software adapts to anything. The public is,becoming more and more befuddled with each word about it spoken in the press.

A straight stick
The restrictions of analog forced a rigidity upon the standard for sending and receiving broadcast signals. This regidity assured both broadcasters and viewer that certain things would happen when the set was on. That security played heavily in the development of a business model of traditional. That assuradness is gone forever with digital. As a result, the clarity needed for constructing a business model in digital broadcasting from a direction within the digital technology has been blurred. Among broadcasters there is a debate over just what parts of the digital capability should be pushed on the public as a new business. Should it be quality? Should it be quantity? Should it be something in-between? Should it be ancillary, yet unproven data services saddled to drive the transition? Which of the 18 formats should be used as the dominant format, if any? Broadcasters are asking themselves what business they are in today, which one tomorrow, and are they are prepared for any of them internally? There is clearly a loss of business focus which can only be met with corresponding market confusion.

THE LAST GENERATION OF TELEVISION
Television is the most sought after communications form in the world today. While the Internet rides a wave of the future, the premise here is that so does a straight forward television service that is updated to reflect all of our collective achievements, technically and artistically. Even as the Internet ascend to prominence, traditional broadcasting proves itself a durable and profitable business.

There are those who say that the next generation of television is no longer a steady stream downward towards its viewers but is a mixture of interactive medias. The motion picture has no such instant or interactive provisions, but thrives as one of the most important business segments in the world today. It is impossible to dismiss the 2 billion gross for the Titanic which has not one interactive capability. It is this plus the inertia of society that leads us to believe that there is a business to be made from a traditional model of broadcasting with an entirely diffent approach to revenue.

THE NEXT GENERATION OF TELEVEVISION
Ten years ago HDTV garnered the reputation for being the next generation of television. To achieve its mighty goal many thought a new level of programming had to be grafted on to it. Now, HDTV is looked upon by many as just one part of the digital generation. While this may prove true there is no discounting the fact that HDTV is and always will be thought of as the next generation of television if for not other reason that it has made a dramtic departure from the current standards of the world.


The Answer Is Shadows of Successes of The Past
Consider that digital technology is to the entrepreneur what clay is to the sculptor. Only an artists can mold the clay into something useful. Analog has limitations which helped shape what broadcasters became. David Sarnoff recognized that a two way analog communications system--Marconi's wireless telegraph--was suited for radiating a "program" from one point to multi points. That fact encouraged long form programs, the staple of television today.

Moving to digital the broadcasters can depend only upon viewers from the cutting edge of society--early adopters--to act quickly in the transition. Broadcasters foresee years of losses and the potential of a catastrophe should they become straddled between technically divided (analog and digital) audiences. Early adopters account for 1 to 3 per cent of the general population.

The introduction of digital television in 1998 predates consumer demand for it. No one knows what the consumer will use and pay for. Digital (flexibility) has no unique identity to promote to the public other than its growing reputation for quality (the compact disk establishing that). The computer established other public definitions of digital, mostly pointing to interactivity coming from the Internet and CD-ROM.

In 1997 the Wall Street Journal ran a survey on public priorities. The public hungers most, the survey said, for simple solutions to complex problems. Television is the simplest solution for connecting with the world. The computer brought more complex alternatives--like the Internet--using its least complicated method--the browser--as the "television channel" selector of the internet.

Walter Lippman observed, "Most men, after a little freedom, have preferred authority with the consoling assurances and the economy of effort which it brings."

We find ourselves in a vast sea of digital flexilbility, which some refer to as a new freedom of choice.. A hunger for authority to nullify the confusing effects of this digital freedom has yet to show itself in the H/DTV revolution, but it will predictably come. As Lippman indicates, the broadcast industry will begin to look for a new authority soon following the new found digital freedom to restore focus and a reliable business vision for their once-powerful enterprises. Someone must be granted a certain authority from all parties of the revolution and take the lead in expressing a business model for digital broadcasting by way of a "proof-of-concept" enterprise.

Forming A New Vision & Business
The benefit of quality is singled out and embraced as the most important element of our DTV business plan. It is faithfully believed that quality is the one value which an influential audience can identify with, respect, and embrace. With the addition of quality our business vision sets out to create a new enterprise that looks much like the old business of broadcasting, but is doubtlessly of the next generation.

In this draft I will refer often to the TEN MILLION INTERNATIONAL CLUB as an alternative pioneering service to that of terrestial broadcasting. It is called aptly the TEN MILLION INTERNATIONAL CLUB in order to impress upon the reader that our plan is limited to ten million global subscribers for our first tier of television services.

WHAT IS THE TEN MILLION INTERNATIONAL CLUB?
The TEN MILLION INTERNATIONAL CLUB is a temporary name. It stands for a new television service or network that will use the High-definition television signal programmed exquisitly from the best program sources in the world and limited uniquely to an audience not exceeding ten million households.

The world population is nearing 6 billion. Two per cent of all people own or manage 50% of the world's wealth. It is from this grouping of people that the TEN MILLION INTERNATIONAL CLUB is gathered.

The primary purpose of the TEN MILLION INTERNATIONAL CLUB is to form a mass or business union sufficient to pay for the home delivery of early release motion pictures and extraordinary interntional cultural events in the HDTV format by way of an international hook-up of direct broadcast satellites. A significant feature of the TEN MILLION INTERNATIONAL CLUB is that with one's membership comes a ten year guaranteed supply of early release motion pictures from the seven major Hollywood studios, and their affiliations. That guarantee is a crucial feature to the success of this proposal due to the strong inducement therein to join the TEN MILLION INTERNATIONAL CLUB as a subscriber. The quality of our programming must look to this subscriber much as does season tickets to their culturral centers they frequent.

Through limitation of membership to the TEN MILLION INTERNATIONAL CLUB an exclusive network of subscribers becomes a new idea among those in broadcasting, who have always sought the largest possible audience they could muster. What is felt important at this stage of development is our voluntarily setting of limits (we presume ten million subscribers at this proposal date, but it could be greater or lesser) in order to give us strength for successfully negotiating the motion picture agreement from the key program suppliers. We clearly recognize the difficulty in achieving this unprecidented goal, but believe whole heartedly that the seven major studios will come to recognize stupendious econoimc and promotional benefits well beyond what is presented in this limited presentation, and they will concur with full paricipation.

THE VALUE OF EXCLUSIVITY
Exclusivity is also a marketing tool of renouned power. Exclusivity has the means to produce demand earlier in those potential subscribers who might otherwise postpone a decision.

HOW DO WE GAIN TEN MILLION SUBSCRIBERS?
DSS, EchoStar, and Primestar in four years of operations have less than ten million subscribers combined. Their services are far less expensive than ours, and none of them have reached critical mass, i.e., profitablity. DSS has the largest subscriber base of just over 4 million installations. In total there are about 9 million satellite receive systems paying for programing in the USA. Our mission is to reach 10,000,000 subscribers using major cross-industry supported campaigns targeted to our known market segment. Why would we suppose to outperform the current satellite services? A promotion budget of $500,000,000 is not to be discounted nor is the power of first run motion pictures, and exclusivity.

Jack Valinti, President of the Motion Picture Association of America begged indulgance for his re-stating the obvious in a Congressional Hearing in Washington DC when he said that the willingness to pay at the box office for a motion picture is in direct relationship to when that motion picture is most heavily promoted. With box office prices ranging from $8 to 10 for first run features, dropping quickly to $3, even under $2 in second run venues, one can quickly agree with Valiniti from the mound of evidence. Carrying that over to television, one can assume safely that the willingness to pay for an early release motion picture will be greater than it is for older releases. Pay-per-view today is in the third window of release following behind the VCR. The pay-per-view price is $3.00 and two to three such purchases a month are made by those with PPV access. For a first window release, one can expect that interest will rise among a certain contemporary audience--the one that is our target group.

By advising our potential audience that the first ten million households to subscribe to our services will be granted a ten year guaranteed license (encrypted delivery) of a steady supply of early release motion pictures (within 10 days of their premier date) it is anticipated that the sale of those licenses (in the form of a ten year transferable contract for programming) will be made within hours of their being offered on a first come, first serve basis. As a signing bonus, and further inducement for our subscribers, we will grant them shares (unspecified amount here) in the new company and make an additional provision for stock options in the future.


THE INITIATION FEE
So strong is the inducement from the early release motion picture feature that we anticipate additional revenue possible in the form of an initiation fee. With the support of the motion picture industry we gauge that this will be acceptable to our clients. Price is not a primary issue for those in the ranks of our TEN MILLION INTERNATIONAL CLUB as much as is the integrity of superior services. We have peniciled in the initiation fee for this proposal draft at one thousand dollars ($1,000). It is hoped that upon further development of our network that even more powerful inducements can be created to impact upward the initiation fee.

Since a full collection of initiation fees would represent $10 billion, 50 to 75% of that money can be granted to the Hollywood studios in the form of low cost loans for the production of future motion pictures. The Bank of LA, or other institutions familiar with this branch of business, will oversee funding. Our company will take an appropriate position in each feature financed with these funds.

We will also grant the amount of $100 million from the initiation fee to each of the 7 major studios as a signing fee inducement. This $700 million grant is only the beginning of good financial news for the motion pictures studios from their support of our plan.

THE PROMOTION...
The promotion will be targeted and will carry the weight of our industry-granted endorsements and authority. We will not take this plan forward without the joint endorsements of the manufacturers of HDTV receiving equipment and the motion picture studios. A well respected person, loved the world-over, will be appointed as the chief spokesperson for our network. While a stretch, the first to mind for this critical work is Prince William, heir to the British throne. Few today can supply such a distinguished and attractive atmosphere to our new service. It is always the duty of a Monarch to help raise the standard of living for all his people. Substantial benefits can accrue to Britain as appreciation for his duty. However, his name is included here only to indicate how far we must search our thinking to find the right personality to stimulate our intended audience to action.


OPERATIONS
A programing fee of $100/month covers the premium programming service fee. That provides $1 billion per month in operating revenues with one half to three quarters going to our seven major studio program suppliers for rental of their early release features. Between 6$ and $9 billion per year will then be paid to program suppliers (domestic box office was $5.91 billion in 1996 with $16.3 in video sales and rental in USA) as essentially brand new revenue, costing only their agreement on release dates, and one video tape in a high-definition format.

With between $4 and $6 billion from operations available we will pay all our over head, including all distribution costs and expansions costs to other tiers. It affords us, as well, the opportunity to establish our own program production studios. Any and all motion picture programs made for the TEN MILLION CLUB by a studio, including our own, will be suitable also for theatrical release.

ARE THEATERS ENDANGERED BY THIS PLAN?
The TEN MILLION CLUB is sufficiently limited and targeted that no harm to the theatrical industry can be anticipated. By our raising the level of revenue to Hollywood both the greater quality and numbers of features made will very likely aid the existing distribution outlets. Ten million people scattered about the globe having access to a motion picture in their homes ten days after premier release will do nothing to harm theaters. To the contrary, the new money can only help them with better products with higher production values, which translates into box office appeal. There are ten million people added to the earth's population ever 90 days.

ELECTRONIC CINEMA
The TEN MILLION CLUB members are the leaders. They will be introduced to the capability of the HDTV technology. With the cultivation of our audience, business ideas will be expressed over our network. Hollywood has decided the time for electronic cinema has come. But no one knows how to do it. Our vision to that of a new franchised electronic cinema system presented as a new business opportunity for our audience. Training for the business of electronic cinema globally in a new business is called WORLD WIDE CINEMA DELIVERY.

The members of the TEN MILLION CLUB will also be the likely franchisees in their own respective communities, and over our network we will provide the appropriate "doing business" and training seminars on how to maximize the attractions and benefits of electronic cinema for all parts of the world. If we have but ten per cent of our club members (one benefit of the initiation fee is to screen and pre qualify our audience for such things) investing in such an electronic cinema enterprise we have added one million facilities able to draw revenue to Hollywood. In a Hollywood Tech Council report of a few years back they concluded that there is 5 billion waiting to be taken in from Electronic Cinema in just the fallen communist nations. How much more so if done on a very well thought out launch of a million or so of these theaters around the globe. Of course, availability of equipment is far more limiting a factor than the investment money willing and available from our TEN MILLION CLUB members. That is again something to discuss and begins a whole new dialog on ancillary business opportunities and how to greet them. Electronic cinema is eagerly sought by Hollywood but they never knew how to get it started, and this is the way.

With the relationship I will have with the studios and their banks we should become the preeminent distributor to our own franchised theaters (WORLD WIDE CINEMA delivery acts as the franchiser here much as McDonalds Corp.) in this new business. I can only tell you that the return comes in the billions upon billions of dollars to all parties and answers the problem of motion picture distribution and overcoming the stultified methods designed in the early part of the industrial age.

(We will distribute our own motion pictures from our own studios through WORLD WIDE CINEMA DELIVERY as well. )

So, you see John why the TEN MILLION CLUB and the licenses to early release motion pictures is so valuable for other enterprises relating to the technology of HDTV. I fully expect the consumer electronics business to come behind this vision and work with me. ANTI-TRUST: FAIR TRADE, ETC.
It may be that a cartel-like association making up a co-operation and ownership of this new service could come under anti-trust examination. Given the consciously limited scope of our business, however, any attack is unlikely to win popular support.

So far no one has been able to show me any such law, or under who's jurisdiction anything like this would come for an international company with headquarters anywhere that is best suited to the business. What I do know is that making this exclusive deal is the most difficult part I have to overcome rather than there being legal barriers to such a structure. If there were such barriers, the airline industry would not be ahead of VCR in release dates, and the VCR could not be ahead of pay-per-view, etc. I think there is ample evidence and history that Hollywood makes exclusive deals on a st ratification basis, and we take the position of being first electronic window for limited electronic release. We claim truthfully and specifically that we are the pioneering service for the next generation of television, which is to the long-lasting benefit of the general welfare. AT&T enjoyed its exclusive status for years based on that point, and the nation blossomed. When it came time to break up AT&T, it was broken into smaller parts. I think we should plan ahead for such an inevitability. I also believe we have years of life before is for no other reason than court delays in adjudication on whether such exclusive contracts are legally challengeable I only want ten years of that exclusivity, not a lifetime. We will be well positioned by then to do anything we want as far as programming is concerned, including producing it all ourselves.

If we are challenged successfully, then the exclusive runs in motion picture theaters is also challengeable. I would force the point to my dying day that pictures had to be released the same day for all media regardless of market consequences The studios breaking our exclusivity contracts and having others come immediately behind us is another point and why the contract signing fee (see below) is so important for reinforcing their memory and encouraging their loyalty. We will tie them in court for ten years just on that alone.





SO, WHERE DO WE GET THE SETS?
I have already said to Gary Shapiro that he should act as the mediator in setting a just allocating to his members for contracts totaling ten million HDTV receiving units to be sold under our own label to our new club members. Of course, he did not take that seriously since no one around him is thinking in such terms. We did have lunch in Washington and he did hear everything I had to say, so is more ready to act internally when the time comes.

PIRATING
There is always this dread from the studios that pirating from electronic or film sources will undermine the motion picture copyright values by some significant amount.

Two things to consider.

First, we can continue to build technical barriers. But we know that for the dedicated pirate they all can fail. There is nothing you can do about that as long as there has to be a showing of the film. Someone can tap past the encryption and we are left with either legal remedies or more temporary technical barriers.

What is more important is to look at the bottom line from what is being proposed here. If Hollywood thinks there will be more vulnerability from electronic distribution (someone steals from us early release and puts it on the Internet for anyone, for example) we have to point out that the loss of this value is far offset by the gain from serving OUR TEN MILLION CLUB.

First, we are holding back for ten days (two weekends). That is when a majority of the value of most copyrights is realized in their theatrical release. Even Titanic has not done more than $40 million in VHS sales, but did $2 billion in box office, albeit it ran for more than 10 days theatrically. Had the box office potential been compromised from fear that the 3000 plus prints floating about for weeks would provide undue exposure to professional pirates they would have reduced their income accordingly. Film is easier to copy than some deeply encrypted electronic distribution and with electronic distribution you market your prime value far more widely than ever you can with mechanical film. So, what I am saying is that we are going to raise the revenue side to cover any potential loss from the pirating side breaking down the codes.

Of course, we will be dealing with the leaders and shakers of the world and if some nation has too much pirating going on we can eliminate that nation from our distribution (conditional access, beam spotting, etc.) and put pressure on their legal system through our disgruntled audience to rectify things legally. Shop lifting is a crime with corresponding actions taken in local jurisdictions. Where shoplift is greater then applications of the law become greater. That is what the MPAA wants anyway.

HOME COPYING:
In digital this presents a potential for easy propagation. With digital watermarks heavy propagation can be identified to its source with the loss of our service being the result. "Be careful," I have to say, "to which friends and relatives you give a copy. You could lose all of your privileges." Undoubtedly, there will be some leakage and we have to ask if that is enough to stop our voyage? Considering that A&E and PBS have a booming business in selling tapes at $19.95 of programs already aired freely on their network, we may be talking about a problem here that does not, in fact, exist.

At a very minimum, we must look at a new paradigm which recognizes that we will exhaust the majority value of a copyright quickly through our ever-increasing improvements in quick and financially rewarding electronic distribution. Once the audience for a feature is exhausted, there is little value left in it until the next generation of potential viewers is in the marketplace. Films are pulled quickly from theaters when it is more profitable to rack up the next new feature. By so substantially increasing the take to the producers through our highly efficient and lucrative distribution methods, the idea of delaying, or obstructing our plan, from the fear of copyright value loss is like closing the door on your storefront for fear a shoplifter might one day enter.

That is all for now. I am clear that as long as the clutter and clatter over terrestrial pioneering HDTV goes on we will not be given our chance to do what I have outlined above. I wait in the patience and expectation that the way thing are going is not sufficient to create the critical mass needed to further the HDTV cause. If that case occurs, HDTV will collapse of its own financial weight and seek a new life elsewhere. At that time, if the industry remains interested in trying to still move forward, I will incorporate a company and seek the first shareholders from the ranks of the manufacturers--the first beneficiaries.


.