It appears as if 2009 may be shaping up as a defining year for broadbandTV – which we define as Internet streaming of video directly to the TV (with or without a STB). There’s been a flurry of activity in the past couple months with, NetFlix, Vudu, and Hulu all getting their fare share of news. Recent interesting news involves Netflix and LG announcing that LG televisions will embed NetFlix players on forthcoming TV’s, allowing LG customers to download NetFlix content directly to the TV, without the need for an external set-top-box or computer. With CES kicking off later this week, we expect to hear similar announcements from other broadbandTV players.
BroadbandTV or ‘over-the-top’ video has been building significant momentum for the past year or so. So much so, we can now extend ‘cutting the cord’ vulnerability to subscription pay TV, where consumers decide they don’t need a cable/IPTV/DBS monthly subscription, and instead opt for broadbandTV exclusively. The economic downturn fuels this vulnerability, as consumers look for ways to cut monthly expenditures. We would agree that 2009 is looking like an important milestone in the adoption of broadbandTV – but don’t foresee any material threat to the subscription pay TV model anytime soon.
Two significant hurdles remain before broadbandTV puts a serious dent in the subscription model – revenue and confusion. First, we must recognize that despite the press that broadbandTV endears, the subscription model still reigns supreme to the people that count the most in this debate – content owners. They rake in billions in revenue annually from the subscription model. They will not trade those subscription pay TV ‘dollars’ for broadbandTV ‘dimes’ anytime soon, despite the appeal of going direct to consumers. Can you blame them? There’s a reason why Hollywood moves slowly with new technology – they’re too busy counting money. Secondly, while broadbandTV is ‘cool’ to industry analysts and consumer geeks, to the vast majority of mainstream consumers, it’s still too confusing. Disagree – try explaining this phenomenon and its ‘value proposition’ to your wife who may be a school teacher, or your brother who is a fireman, and then convince them to give up Lifetime and/or the Sunday NFL Ticket for it. Good luck. That being said, LG and NetFlix are on the right course. BroadbandTV won’t be accepted by a sufficient number of consumers to have an impact on the pay TV model until such time that it’s idiot proof and doesn’t need an explanations of how to make it work and why it’s valuable. We’ll see significant momentum in 2009, with more ‘blue chip’ partnerships put in place that help achieve this goal. If anything, 2009 may awaken pay TV operators to figure out how/if they can dominate a broadbandTV world. Can they?
