Bob Pittman will be presenting at next week's NATPE conference. A long time media executive, he is a founding member of Pilot Group LLC, a consumer brand focused private investment firm based in New York. Among other prior roles, he's served as President and COO of America Online and was also a co-founder of MTV and later CEO of MTV Networks.

Yesterday I caught up with him for a pre-NATPE briefing. Read on to learn why he's bullish on broadcast TV stations, skeptical about broadband video's impact on the TV business and emphatic that convenience rules.

VideoNuze: Pilot has been a buyer of broadcast stations. That's somewhat contrarian. What do you see in the industry?

Bob Pittman: Broadcast stations are greatly unappreciated. TV is America's hobby. Look at any category, the biggest is always the most important. So we want to invest in place where most people are. It is a fantastic advertising medium. There's no substitute for TV advertising. It works like nothing else. It's still wildly cheap - for the most part it's a $7-8 CPM, compared with newspapers and magazines which are $25-30, and it outperforms by every measurement - reach, time spent, effectiveness. It's still wildly underpriced.

We have focused on small market television, where local advertising is the predominant revenue stream. We have done that because we believe national advertisers will slow down spending in economic downturns, whereas in local market when you're dealing with a local retailer he still has to sell everything that's on the shelf, come good times or bad. And we believe that in small markets, newspapers and yellow pages are getting wildly disproportionate share of the revenue, so we think there's a great growth opportunity as well. In smaller markets the station's coverage area nicely matches the advertiser's reach goals. It's also a fantastic free cash flow business.

VN: Is broadband video a net positive or a net negative for broadcast stations, or is it not clear yet?

BP: We have to be really careful about broadband video, it's still a very small percentage of use for most people. Most of what people talk about is still 3 minutes or shorter clips on YouTube, many sent to you by a friend in email. The idea of people sitting down and watching their computer is a small part of the overall audience. So we have to be careful not to talk about fringe uses as if they're going to be major uses.

However, we think it presents an opportunity for our stations and we've pursued that, by setting up what are in essence "newspapers online." And in our smaller markets, we're not competing with Google or MSN, so we can get large local audiences, which allow us to better serve our advertisers. But I don't think broadband is competitive with TV, putting TV shows on the Internet is nice, but you're talking about small audiences.

VN: What will the impact of services like Hulu and CBS's Audience Network on broadcast stations' audience size?

BP: Well, you may occasionally watch a program online if you can't get to your TV, or it wasn't available, or you're a little geeky, but as a replacement offering, I don't think so. TVs are big screen, public viewing devices, computers are not. They're 18 inches away and are private experiences, you don't want people looking over your shoulder at it. They're completely separate uses and devices, so to try to put the wrong kind of programming on either one limits your audience severely.

BP: If it's completely invisible to the consumer then yes things change, but if people have to do a whole lot of work then it's not going to be big. The one thing that motivates the consumer through every product category is convenience. The easiest thing to get is what people will use, even if the quality is lower.

I think it's going to be pretty hard to get something in the home that's easier to use than pushing a button on my TV set that I already know how to do and I'm set up to do. To start connecting a box and moving stuff around, then my rule of thumb is about 10% of the population will adopt new technology because it's cool and neat, but it will be hard to get past that threshold.

VN: So it sounds out like you're not that bullish on these new boxes succeeding?

BP: Right now these require a step or two more, and my experience from the Internet is that just one more click means a lot less response. You think, well it's just one more click. But for example, when I was at Time Warner, we had 2 options for ordering PPV - one to click a button and one to call an 800 number. The response rate for the former was three times the latter - that's the power of ease of use and convenience.

VN: How about broadband's larger impact on the video industry - who's helped and who's hurt?

BP: Short form appears to be working very well. If there's a nifty little video that's great, but get above 3 mintues and you start to lose people - certainly you lose me. So who's advantaged - people who have short clips that they can build a business out of. But I still think the best thing to do online is to read and write, because it's quiet, it's personal, you can do it with others in the room. Importantly, it's not sequential. Internet is like a newspaper - it's random access - if I don't like sports I can skip that section. But video by its nature is sequential, it's linear, you have to have a story arc, you have to sit through the whole thing. So I think you're asking people to make a different sort of commitment.

VN: Your take on user-generated video?

BP: I think it's great. Probably 99.9% of it is crap, but the rest of it is brilliant. If you have a way of editing it down to the brilliant stuff and also allowing people to discover it easily, then it can be very appealing. So when you look at YouTube for example, and you can look at the "most viewed" and can skip my neighbor's kid's birthday party, that's great.

VN: Does user-generated video compete at any point with professionally produced content?

BP: Well, what's happening with the level of technology that's now in the hands of consumers plus their ability and knowledge of how to edit makes you ask the question, "who's really the professional now?" So I think you're going to see some shows on TV by what were once considered "amateurs." Professionals are anyone that has a good idea and other people want to see their stuff.

So I think the world is opening up and that's very healthy. When the studios have a set list of actors, writers and directors, by definition you're limiting the innovation process. When you've got those capabilities in the hands of everyone, you're now opening up to the possibility of some real breakthrough innovations. And that's good for the TV business, because if they do it in a 30 or 60 minute form, the best way to watch it is on the TV. And that's the medium that can pay the most for it, and has the biggest audience.

VN: What's your message to NATPE attendees?

BP: I'll be trying to put broadcast television into perspective. You hear so many negative stories yet I think it's one of the most misunderstood mediums out there today. So the idea is to try to point out how it relates to Internet, newspapers, magazines, what the trendlines are and explain why believe it's actually a very good business with a brilliant future.

People keep talking about Internet as if it's competing with TV. But what the Internet has really done is replace print - things like yellow pages, newspapers and traditional research books. It's also replaced communications - phone calls, voice mail. So when you hear these stories about the Internet replacing TV, I think they've got it all wrong.

VN: Thank you and see you in Las Vegas.

(Bob Pittman's NATPE presentation is Tues, Jan 29th at 10am)