The traditional TV industry -- cable companies, networks, and broadcasters -- is where the newspaper industry was about five years ago:
In denial.
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. 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 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:
And now, slowly but surely, look what's happening:
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:
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, I 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 frustrated TV consumer's perspective, it can't happen soon enough.
See Also: How To Make "Buy American" Cool
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Jarvis Coffin: Can Hulu rescue TV (For Nothing)?
It's not especially difficult to take $3 billion worth of product and give it away successfully online to the delight of millions of users. The question is how to make money from that give-away.
Loading comments… 
BluRay is ok. So, if you're willing to sneaker-ne
Viewing remote content is the catch. Cable and satellite providers struggle to support increasing numbers of HD channels. Most operators (terrestri
The solution for terrestria
While the Internet can support breadth of content, it has great difficulty supporting image quality. The last-mile infrastruc
http://www
The biggest telephony choke point is "copper wire". If fiber optic became more universal, cable companies would go the way of Fat Sam or offer reasonable cable delivery since cable installati
1. This pending TV demise is precisely the reason the phone and cable companies are desperatel
2. And without that control, all the TV business models for the broadcast TV/media companies (both network and cable) will fall apart, as the article suggests. Don't think for a second the media companies don't have a stake in that - recall Barry Diller recently was quoted as saying the only thing from keeping the Internet from being tiered was a 'billing system'. His idea is to turn the Internet into one big store for media companies’ content.
As long as the Internet evolution stays out of the hands of industry, government and the military - it won't go the way of broadcast TV.
http://mvp
Even if the production
You could compare it to the making of music. Folk music is often better than the standardiz
- Web users have become conditione
- you say the best content creators will be fine. How, then, will their potential viewers find their newest product? Do you expect subscriber
- finally, what differenti
thanks for the article. Very timely.
Okay, it's contingent on another thing, too: Simplicity
The solution, I think, is the developmen
Of course, this doesn't begin to deal with the business model for content distributi
So TV is bread, warm bread maybe. But not toast yet.
I can see this stuff when I want to...not at someone else's predetermi
I think it's all to the good....
We watch movies from Netflix, and we still catch The Washington Journal on C-Span's website. I don't miss the cable one little bit.