The TV Business Is Toast
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:
- 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 options emerging at home: Internet, video games, Facebook, IM, DVDs
- New ways to get TV other than satellite/cable: Hulu, YouTube, iTunes, Netflix
- Video-ad options beginning to emerge
- 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 cannibalize 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, 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
Follow Henry Blodget on Twitter: www.twitter.com/hblodget
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…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
Nice piece Henry, though detailing the demise is the easy part :-) Trying to figure our where this is headed, is like trying to predict the rise of the Internet in 1980, and its impact on our society.
I suspect this is the best reason why your future predictions are cautious and incremental, I can hardly blame you. Not having the rep and reach that you do, perhaps I can be more adventurous (read foolish, or clueless if you like) and take a stab at the mid to long term future:
- Phone, data, video all merged into one interface, perhaps a super WWW. (I always thought the 1987/88 TV series "Max Headroom" was way ahead of its time, and understood why the series was so quickly killed by the "networks". This was about the time that we were brainstorming the universal interface, and the really smart people were actually constructing one. See Sir Timothy John Berners-Lee's WWW proposal of March 1989, which I am sure was preceded by at least a couple years of thinking.)
- We will begin to kind of look like the Borg, though much more friendly. Putting on our light flexible mesh helmets, as we leave the house for the day. Allowing us to stay fully connected with our networks, and even improving eye sight and hearing It will strangely, remind folks of the wigs of yesteryear. [see part II]
Thanks to 3rd party ISPs, I have been without TV service since Comcast shut off analog cable last year. It has not been a problem.
The big problem here is that the cable and phone companies control access to the internet. AT&T, Comcast and the rest of them also provide traditional non–broadcast Television (the kind you pay for). Recently Comcast and Time-Warner have been experimenting with bandwidth caps or pricing in tiers. AT&T seems to have redefined the meaning of "unlimited" as in you have to pay if you go over x amount of y. Until these companies are forced to become a kind of dumb pipe and not content providers the internet will never take off as "the next generation of TV" that we're all looking forward to. However, the satellite companies are the ones that will really be screwed (as will their customers) if this ever comes to be as they don't really offer a ISP service. On the other hand maybe one of the cable companies might see the advantage of being just a dumb pipe service and push the industry in that direction. Personally I'm hoping the wireless providers will wake up and see the benefit of a dumb pipe model realize that voice is just data and just charge us a monthly fee for data transfer but thats another story all together.
Why Watch TV when you can Star in your own Cartoon Movie everynight?
I have for the past year been developing my own shows, broadcasting them live and generating about 15,000 views a month with PookyMedia. This is the Golden Age of The Internet, and I talk a lot about using Second Life as a media platform. I have been actively doing a show, broadcast live for over a year featuring the best and brightest of Second Life. The people who have been on the show are incredible- I have been able to produce my own shows and now films. I was moved to this because sit back and relax has become lean forward and engage.
And yes I represent the next step in branded media where the customer and the product share an experience together, it is time to deliver meaning to content.
But the really important thing remains - where will people get thier news & who will control it ?
Plus the internet has it's own control point which is the provider & they are currently fighting to do it thier way. If we lose sight of that ball that is excatly what they will do - have it thier way - not ours.
Easy - read the foreign newspapers - I write for some, and their attitudes are 180 degrees from those in the USA. The latter are no longer worth bothering with, now.
This article couldn't have come at a better time. I spent an hour on the phone with Comcast today, trying to figure out a way to downsize my package (and, my bill). The first thing the rep tried to do was get me to sign up for their Triple Play, which would cost almost TWICE as much as what I am currently spending. I couldn't help but laugh. It took her almost 30 minutes to finally admit there were cheaper options for me, and that was only after I told her I'd just have to cancel my internet and cable service altogether. However, their "cheapest" internet and cable packages would still cost me a total of $60 per month. She also informed me that Comcast now charges customers $1.99 every time they make a change to their package. WTF?
I told her that it eems like the only way to get a good deal is if you work for Comcast. The rep admitted she gets her cable/phon
Good ole compusuck. At it again. They never give up. TW and Compusuck have been hitting homes directly, signing people up, in fact, a disabled friend of mine in Austin had someone answer her door, and accepted TW's "bargain deal." To date, they will not cancel the "contract" although she owns her own home, and they had no signature on the "contract.
Bail them out, too. Not on our lives! NO MORE CORPORATE BAIL-OUTS (next come the weeping insurance companies!).
So we should have let AIG go under? And GM? And what do you think that would have done to the economy?
WTF? What do you think your charges would be if they didn't make you pay for the admin overhead of making a change? EVERYONE would be charged $2 to cover the costs. This way, only people who ask for the service of changing something pay for it.
I've been waiting for a post on this line for months. Thank God!! I have been searching myself for alternatives. My reason: One big one, advertising. It is a gross injustice that I now pay $100 per month--that in and of itself is reason enough for my ire--considering the product. But, my biggest gripe with TV is that I am literally spending 50% of the total cost for advertisements. And, to add insult to injury, these advertiser
Pissed...
I'm all for subscription service options for content and would be willing to pay more to not be bothered with ads.
This will be the way to free up content as well - more diversity without everybody hunting for ad dollars from companies by trying to appeal to the exact same demographic the ad companies want to brainwash.
Now as for the internet providers and content - we all have to remember it's not just the news that's propaganda, most of the "entertainment" we view is propaganda (movie romances anyone?).
Because of this the corporates will stick together to protect their interests if some content threatens it.
Do without them! Its tiring to have 1/2 available programming from lame religious programming that are in fact infomercials by far less than qualified talking, weeping, smiling heads. I will not pay for those stations, nor for lame anything in my own home. Life is grand with NPR, music, and PBS.
What frosts me is their attitude. They claim they cannot give you what you want. Bull! Why should I pay for crappy channels I never, ever would use?? Betcha I support those lowly viewed channels with just the 4 or 5 I regularly watch. Let us have what we want, and only what we want. Also, am sick to death of paying for dish, yet having my material edited. Stop beeping out movie lines and deleting entire scenes! I paid for the ENTIRE movie, not fractions. And they wonder why we will jump ship????
As has been pointed out by better minds than mine, the television and the newspapers are not in the business of informing the public - they make their money by selling ads. What comes in between is filler. Many years ago, when cable television first hit the market, I thought, "What a great idea. Pay 30 bucks a month (or whatever) and no more insipid ads." Of course, that still left the insipid shows. And, to add insult to injury, the cable fees didn't keep the ads away for long, but they did keep me away. The insipid shows on regular television have long since lost my interest. Going through a newspaper with a friend of mine the other day, we noticed that there wasn't a single article in there which could not fall into one of two categories: Either it's trivia, or something to be freightened about. I haven't watched television going on 10 years now. I no longer listen to commercial radio, and the bias on NPR caused me to abandon it years ago, also. Ditto with the BBC. In fact, the only radio I listen to any more is New Zealand radio (on the internet): Good content, good variety, no ads, and critical analysis.
The problem with having business/investor types making predictions about the entertainment market can be seen in their predictions about Disney/ Pixar's "Up." "Big failure" is all I heard before it was released. "Kids don't want to go see a cartoon starring an old guy." Right! And 8 year olds hate their grandparents too....
So he thinks consumers will put their big screen HDTVs on the curb and watch on hand held devices over the internet? I don't think so.
No that isn't what he means. I have a HD plasma hooked up to a PC for watching DVDs and streaming internet video now. It is also hooked up to a cable-conv
While I think he may be overstating matters, his point is not that the physical object "the TV" is destined to be replaced, simply that the business structure that dominates getting video content is "toast." Certainly people will hook computers into TV's (in effect creating big screen monitors;) this is already possible now, and will become more simple in the future. However, why on earth would I pay for cable and the 95% of the channels that I have no chance of ever watching.
I think the comparison between TV and newspaper is a little bit facile, since access to Television is far more simple and immediate than with Newspaper. This kind of evolution is pretty inevitable though, in my opinion.
I watch streaming video on my 60" LCD every day. I download videos from Netflix, watch the Daily Show and Colbert online. As more content becomes available i will watch it as well. I also have cable but am looking forward to the day that I can get it online.
You are correct, of course. However, identical to the great Americans who purposely engineered the bankrupting of our country from Wall Street, the executives of these companies don't care about anything but next quarter's profits. The Wall Street mentality has taken over all big business in the US, so a person's job is based purely on a 3-month performance model; the rest of your article means nothing to anyone currently running a media company. The youngest CEOs may be interested--the Google, Facebook, etc., but really, the major media players--Malone, Redstone, etc., could care less. They will be dead, their families will have inherited billions, so who cares about the future?
No one in American big business cares one whit about anything to do with the future except the medical crowd right now since Obama is focused on them. And their only gripe is that they may lose profits. If you think anyone in big business cares at all about anyone's health but their own you are surely dreaming.
Don't worry about the pipes--they will grow larger and more diverse with demand. Always remember what my professor told me in the '60s: CONTENT IS KING. If you have the content, you will get the pipes you need to deliver it and collect revenue. The exact name or size or process for that will be whatever will make the most cash for the people who pay off the FCC to let them have the bandwidth, period.
A corporation has no conscience.
May I say one thing?
I remember, maybe in the early 90's, that it became real clear that companies and the people that worked there, had to be concerned with only the next three months because "we", collectively, demanded higher and higher returns on our investment dollars. This forced the company to have to make the hard decisions of long term steady growth, which the exec's may not even be there to enjoy, or the short term investment return so they could keep their jobs. I am not justifying anything, just shedding some insight from where I sit.
Thank you
very interestin
Tuner card in PC ($100 or so), antenna (depending on your location to towers: $10 for rabbit ears - 50 for bigger non-amped) antennasdi
Henry, I agree with you, the execs are so slow thinking it is amazing to observe over and over in one industry after another. Like trimom, I grew up with the TV on all the time and I lived that way myself for a long time. But for several years now my family and I have been getting all our viewing content from the internet. I think it is shocking that no one is making use of the intersection of the web and the potential merchandising that could come from a show - I don't mean t-shirts & mugs - I mean specific items that give a show & characters their look and feel. I don't think a show should feel like an infomercial but imagine if a show's website had a virtual set where you could click on some of the items to reveal where to get them.
I used to have TV on when I was in the house..Tho
You must be logged in to comment. Log in or connect with
