By Tom Wheeler, Managing Director, Core Capital Partners
It wasn’t just the weather that was hot this summer. While everyone else was at the beach the media crowd was jockeying for their role in Internet delivered television. A rundown of the summer’s highlight happenings raises the question, “What’s next?” This sure ain’t plain old TV anymore.
Television is for Old Folks – A new report established why the media scramble is underway. Only 52 percent of American’s viewing time is spent watching live TV (the kind that includes commercials, including basic cable). That percentage is actually skewed high by those over 55 years-old who spend 64 percent of their viewing time on traditional television. For the coveted 18-34 year-old demographic live TV makes up only 41 percent of their viewing. What are the 48 percent of non-traditional video people watching? DVDs are the big winner, accounting for 14 percent of viewing time, but look who they just barely eased out; online video (including streaming) accounts for 13 percent of overall TV viewing, outpacing DVRs at 12 percent, and on-demand cable at six percent. Watch the horse coming up on the inside!
New TVs are Networked Devices – A different forecast finds that by 2015 there will be 43 million US homes with at least one television that can connect straight to the Internet. Today there are more iPads capable of streaming video than connected TVs (over 3 million vs. 2 million). That differential won’t last long, however. Most new TVs (and even many Blu-ray players) now come with an Internet connection standard.
Cable Bypasses the Set Top Box – Cable television operators are not asleep at the switch on these trends. “At least seven of the ten largest subscription-TV providers in the U.S. are building new tablet-computer applications that offer select TV shows and movies to their subscribers,” the Wall Street Journal reported. After watching video seep into home WiFi via the Internet the MSOs are joining the migration to bypass both the set top box and the TV screen. This initiative dovetails nicely with cable’s TV Everywhere initiative that allows a consumer to access their cable subscription content via any device connected to the Internet – more on that in a moment.
Studios Go Over-The-Top – Netflix reportedly paid three Hollywood studios nearly $1 billion to add their content to its “Watch Instantly” streaming video subscription service. Then Apple anointed Netflix as the streaming video on their revamped AppleTV. Looks like Netflix had more in mind than saving on postage when they did the deal with the studios.
AppleTV 2.0 – Speaking of Steve Jobs, the reworked AppleTV device (accompanied by an Apple-delivered service, of course) breaks from the iPod model of sideloading and storage. Jobs, the guy who taught us all about managing content on our device, believes TV is different, “People don’t want to think about managing storage…They don’t want to sync to a computer.” Sounding like a cable operator, he explained, “They just want to watch their shows.”
Networks Over-the-Top – Hulu, the online service from TV networks NBC, Fox/NewsCorp and Disney/ABC, currently garners about one-third of the online video time in American homes. The fact that the company is on the verge of a $2 billion IPO says something about how the owners and the market view the non-traditional TV future.
Wal-Mart Goes Connected TV – Wal-Mart’s Sam’s Club stores are being fitted with WiFi so that the benefits of Internet-connected TVs can be demonstrated right in the electronics aisle. High on the list of those benefits, of course, is over-the-top content delivery. And it looks like it’s not just selling low margin TV’s that’s in Wal-Mart’s future. The giant retailer recently bought Vudu, the online video service that is built into an increasing number of televisions. As the Netflix example has shown, Hollywood will be happy to provide the content. Wal-Mart TV anyone?
GoogleTV – Speaking of giants, the Web behemoth also sees non-traditional TV in its future. Google’s YouTube is reportedly negotiating with Hollywood studios to launch a streaming video service by the end of the year. Reportedly it would cost $5.00 per video. Think of the impact of applying Google’s platform to television. On Friday night, for instance, a subscriber could search for “family-oriented comedy” and Google’s algorithms will recommend multiple choices to click on. Of course, because Google knows what you are searching for they can then target ads that fit that profile.
Cable as a Cable Bypasser? – So if you were a cable MSO how would you respond to all these forces coming together to storm your castle? The reward for growing out of the core TV retransmission business to become the nation’s dominant broadband provider seems to be others using that pathway to disrupt your traditional business.
As a part of the TV Everywhere initiative cable companies have developed sexy new branding – the exciting Xfinity in place of the boring Comcast, for instance. While Xfinity delivers content via the Internet, it really isn’t over-the-top, however, since only the specific cable system’s subscribers can use it.
As everyone else goes over-the-top how long until cable companies become over-the-top providers themselves? Imagine this: I buy Internet service from my cable operator or telco, but then I choose among multiple iTunes-like program stores run by the major cable providers. In other words, I can go to the Xfinity store and order the content I want delivered over the Internet service provided by a completely different company. I bet I could even get an a la carte menu rather than having to subscribe to channels that I never watch.
For years cable operators have battled so-called bypassers of their local programming monopoly. Now technology has shifted the balance. Perhaps it’s better to join the bypassers than to fight them.
Tom Wheeler, a Managing Director at Core Capital Partners, is the former president of the National Cable Television Association and Cellular Telecommunications & Internet Association. He writes the Mobile Musings column for TMCnet. To read more of Tom’s articles, please visit his columnist page at http://www.tmcnet.com/tmcnet/columnists/columnist.aspx?id=100106