BLOG STARTUPS, VENTURE AND THE TECH BUSINESS

December 22 2009
by Thanasis Delistathis

The changing landscape of internet TV

I have argued in a past blog entry that getting your TV through the internet is inevitable.  The big question is “how will it unfold”?  Who is likely to lead this revolution?

In numerous blogs and articles, it appears likely that Apple is trying to play a role.  Here is an article from today’s Wall Street Journal that attempts to discuss some of the behind the scenes dynamics.  It makes perfect sense that Apple would be a logical player to try to alter the landscape of TV content distribution.  After all, Apple has already shown that they can do this in the music, cellphone and gaming industries.  They have the “gravitas” in the technology and media industries to pull off the necessary content agreements to launch a service.  And the have the pull with consumers that is necessary to make such a service a commercial success which is a necessary prerequisite for commercial partners.

CuttingCable

Personally I am cheering for Apple to play a leading role in bringing about change.  For the reasons mentioned above, I think Apple is likely to accelerate to path to TV content unbundling and ultimately better pricing for the consumers.  Not that it won’t happen anyway through another path that may be hard to predict.  I think it will.  Like I said it is inevitable.  Why?  It’s quite simple: because consumers crave it.  What they crave is not a new and different way to get the content piped into their house.  Consumers don’t care about how content comes in, as long as it is easy to access.  ( In fact, as I have mentioned in the past, it is currently much harder to get content over the internet around the house, but technology is quickly addressing this problem.)   What consumers want is to pay for the content they consume and not for access to hundreds of channels they don’t care about.

How we get to widescale internet TV distribution is hard to predict, because it involves a complex game of three dimensional chess among cable companies, content owners and third parties like Apple.  Cable companies have gradually increased prices over the years by bundling more channels on cable bills and making content owners dependent on them for monthly content payments.  Content companies would normally chase any audience in any medium, but for the fear of cannibalizing or sacrificing the revenue stream from the cable companies.   Like one media exec was quoted in the WSJ article, “you don’t want to shoot a hole in the bucket to create another revenue stream.”  By offering higher per sub prices Apple is hoping to lure media companies to take the plunge.  Media companies with a large portfolio of cable channels, such as Discovery Networks, will be naturally more skeptical of this approach.  Broadcast networks who derive much of their revenue from advertising would naturally be more amenable to a new approach (that might actually expand their audience), but for the fact that they also own many cable channels that are the cable company dole.  Meanwhile, companies like Comcast are trying to stave off internet alternatives by distributing content on the internet themselves (see Fancast from Comcast).  This I think misses the point I made earlier, that what consumers want is not access to their TV content on the computer (OK, maybe a small portion do), but lower monthly bills, because they don’t feel that they are consuming $150 worth of content when all they watch are 5 channels.

I believe that Comcast has made a smart move in bidding for NBC and hedging their bets.  Their distribution business will not go away, if for no other reason, due to the fact they they are a major provider of internet services and ultimately a consumer will need a way to get the digital bytes through the door.  The margins in that business, however, are likely to be lower than in the value added service or being an aggregator of content.  So, when their distribution business comes under threat from new alternatives, owning a media company will be another chip they can use to affect the outcome.  It’s fascinating to watch!

COMMENTS

December 22 2009
by NewAtlanticVentures

From the NAV Blog: The changing landscape of internet TV http://bit.ly/4oXj39

December 22 2009
by Thanasis Delistathis

The changing landscape of internet TV http://bit.ly/6woHXF

December 23 2009
by John Backus

Great blog post: The changing landscape of internet TV http://bit.ly/6woHXF (via @tdelistathis)

December 29 2009
by Brendan Picha

@stuntdubl @DerekEdmond @tdelistathis Good article here form New Atlantic Ventures on the Internet TV landscape http://bit.ly/61mzuU

December 30 2009
by Scott Johnson

The cable companies’ strategy is to somehow lock up must-have content to preserve the value in their bundles. The only really good way to lock up content is to own it outright. Comcast failed to purchase Disney, which owns ESPN, which is the only truly must-have channel in the world IMO. So they settled for NBC, which is still must-have for some portion of consumers I suppose. I maintain that if consumers can get their sports programming outside of a bundle, then the bundles will all fall apart. So, watch the NFL, MLB, NCAA, PGA and NBA closely. When they break from the bundles, the end will be near for the bundle rip-off.

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