The traditional TV industry–cable companies, networks, and broadcasters–is where the newspaper industry was about five years ago:
There are murmurings on the edges about how longstanding business models will come under pressure as Internet distribution takes over. But, so far, the revenue and profits are hanging in there, so the big TV companies don’t really care.
Specifically, the TV industry’s attitude is the same as the newspaper industry’s attitude was circa 2002-2003: Stop calling us dinosaurs: We get digital; We’re growing our digital businesses; We’re investing in digital platforms; People still recall ads even when they fast-forward through them on DVRs; There’s no substitute for TV ads. And traditional TV isn’t going away: Just look at our revenue and profits!
After saying all this same stuff for years, the newspaper industry figured out the hard way that, eventually, reality intrudes, that you can’t stuff the genie back in the bottle. And over the next 5-10 years, the TV industry will figure this out, too.
Here’s the problem in a nutshell:
As with print-based media, Internet-based distribution generates only a tiny fraction of the revenue and profit that today’s incumbent cable, broadcast, and satellite distribution models do. As Internet-based distribution gains steam, therefore, most TV industry incumbents will no longer be able to support their existing cost structures.
Specifically, TV business models for the past half-century, from broadcast to cable to satellite, have been built on the following foundation:
- Not much else to do at home that’s as simple and fun as TV
- No way to get video content other than via TV
- No options other than TV for advertisers who want to tell video stories
- No options other than cable–and, more recently, satellite–to get TV
- Tight choke-points in each market through which all video content has to flow (cable company, airwaves), which creates enormous value for the owners of those gates.
And now, slowly but surely, look what’s happening:
- Other simple and fun options emerging at home: Internet, video games, Facebook, IM, DVDs
- New ways to get TV content other than traditional TV companies: Hulu, YouTube, iTunes, Netflix
- Video-story options for advertisers beginning to emerge: Hulu shows, for example (But NBC, et al, making a lot less per viewer now than they do on TV)
- More options for getting video content: telcos, cable cos, wireless cos (soon)
- Fewer choke points in each market: With an Internet connection anywhere in the world, you will soon be able to get to almost anything. And not just to your computer–to your television.
Thus far, the TV industry has reacted to these changes the way most people would: By trying to port its existing model to the new world and maintain its hold on power and money. This is why we’re getting so many ridiculous, consumer-unfriendly TV solutions, such as:
- Market-based control over what you can and can’t watch (thanks to contracts with local cable companies),
- No live-streaming of lots of popular video content despite the fact that this would grow the audience (same reason),
- Time-shifting of popular shows (don’t want to cannibalise more profitable TV audience)
- Hoarding of video libraries that could be easily available, watched, and monetized online
- Single episode downloads that expire after 24 hours
- $150/month “triple-play” solutions that come larded up with absurd taxes, fees, and service-charges, most of which go to pay for crap we don’t want.
All these Band-Aid solutions will eventually fail. Why? Because eventually the cable-satellite-airwave monopoly over TV content in local markets will be circumvented by simple, global Internet distribution.
You won’t have 5 channels, or 50 channels, or 500 channels. You’ll have millions of channels. You’ll be able to watch anything you want, live or taped. You’ll be able to watch it wherever you want–TV, computer, mobile device. You won’t have to sorry about “slinging” video content around or programming your DVR. You’ll just plug a pipe (Internet) into a box (device) and watch.
This is where the future is going. That’s obvious. The only question is how long it takes us to get there–and who gets killed along the way.
A lot of this content, by the way, won’t–and shouldn’t–be free. But you won’t have to pay your cable company for the dozens of channels you won’t ever watch just get the ones you do. You may have to maintain subscriptions with several different content-aggregation companies (a pain) but this will be a lot better than paying for things you don’t want. And whatever content you do pay for will–and should–cost a lot less than it does now.
And what will happen to the companies?
The best content creators will do just fine. Video storytelling won’t go away. Compared to the people who produced Battlestar Galactica, the Sopranos, and West Wing, etc., the folks who post to YouTube generally suck at it. So great content creators won’t have to worry about them.
The lousy content creators will disappear. No big loss. And no big change.
The cable companies will become dumb pipes, and they’ll get disintermediated. We won’t need Brian Roberts to negotiate a deal with the Tennis Channel for us (or, rather, to prevent us from getting the Tennis Channel because of some contract dispute). We’ll just go direct.
The phone companies will remain dumb pipes.
The wireless companies will become dumber pipes.
The competition between the multiple dumb pipes will eventually, we pray, result in lower prices for consumers for the only thing we will really need: Ubiquitous high-speed Internet access.
Box and device companies will remain box and device companies. Unless Apple somehow creates a new global chokepoint via the iPhone.
Networks that produce live news, sports, and entertainment will offer the content direct to consumers. But they’ll no longer get paid big carriage fees from cable companies.
A few clever online aggregators–YouTube? Hulu? Cable companies? Netflix?–will create nice video portals and build powerful new businesses. At these portals, you’ll be able to sign up to watch anything in the world on any device you want. You’ll be able choose among multiple subscription models (monthly, a la carte). You’ll also have a basic “what’s on” option in case you just want to watch TV.
When will this happen? Over the next 5-10 years. And it will leave today’s TV industry looking like today’s newspaper industry.
And from this TV consumer’s perspective, it can’t happen soon enough.