Tom MacIsaac is the CEO of ExtendMedia, which provides software that allows video distributors to deliver professional video over the web. This post is reprinted from ExtendMedia’s blog.)
The Virtual MSO
Here’s a term you’re going to be hearing more and more in 2010 — the Virtual MSO [cable company].
Web video and traditional TV have been on a collision course for a while. For most of that time, the discussion has been Web-centric, with the media and analysts asking whether Web-based video services, YouTube, Hulu and others like them, which have garnered huge, loyal audiences and have become part of our culture, lexicon and experience in a very short time, will pose a serious threat to traditional TV distributors. Will consumers, they ask, cut the cable cord and rely instead on free, ad-supported Web video rather than paying Comcast (or some other cable, telco or satellite TV provider) $150 per month for a cable package? Maybe, someday, but not anytime soon.
On the other hand, they might just cut the cord in favour of the Virtual MSO.
Apple’s planned subscription service, Netflix’ streaming service, maybe even Comcast’s new xfinity are early examples of the Virtual MSO. Its attributes – premium content, multi-business model (subscription, advertising, transactional), linear and on-demand consumption, user and multi-device entitlement – come from both Web video and pay TV. Also, with the Virtual MSO, the big screen is primary, maybe an Apple iMac with a 52″ screen built for the living room or a Web-connected TV from Vizio, LG, Sony or Samsung.
Expect the discussion to shift to a more TV-centric view of the broadband video landscape. The VMSO will offer consumers something between free (ad supported Web-video) and $150 per month (Comcast). What if someone offered you a service for, say, $69.99 per month that integrated Web video and pay TV — allowed you to get any Web video (like free broadcast network TV from Hulu), along with a handful of linear channels you select (we really only need linear for sports and breaking news) plus a rich VOD library of premium TV content and movies? And you could access it from anywhere at any time from any device – TV, PC, netbook, smart phone. Streaming or download. No special set top box (Web connected TV’s and open set top devices and will leapfrog service-specific boxes), no truck roll, not restricted by geographic footprint or multi-billion dollar infrastructure build outs – because it’s an IP based, broadband distributed, managed service. OK, so maybe this TV-nirvana service is a ways away, but we will see VMSO services in 2010 that begin to set the stage.
We’re hitting a ceiling on free-ad supported premium content on the Web. Content owners and TV distributors are trying to stop the bleeding. Efforts like the cable-industry’s “TV Everywhere” – under which cable programming is made available online only after a consumer “authenticates” that he/she is a cable TV subscriber – are proof that the incumbents plan to preserve the status-quo business model for television and keep premium content under their lock and key as long as possible. They have a massive business to protect and will, no doubt, fight to protect it. So the new VMSO’s will have to adopt the existing pay TV business model and pay big bucks to content owners. The costs of entry will be great, but also the potential rewards. But even these cable incumbents, namely Comcast, may be forced by the new VMSO operators – Apple, Google, Amazon? — to offer their own national footprint VMSO services. Several have speculated that “TV Everywhere” might be considered a “dry run” for a cable VMSO service. Operators could flip the business model switch and offer their TV Everywhere services as out-of-footprint national subscription-based VMSO services if new competitors force their hands.
Who will succeed in bringing us the Virtual MSO? Apple (best bet so far), Google, Amazon, Microsoft? Vizio, LG, Sony, Samsung? Comcast, Verizon, AT&T? Should be interesting…