BroadbandTV will deliver the a la carte programming nirvana that consumer’s desire, and it will do so at the subscription pay TV model’s peril. That’s according to this recent BusinessWeek article, Winning the Broadband TV Game. The authors postulate several theories which suggest that consumers will adopt broadbandTV to gain access to the content model of “give-me-what-I-want-when-I-want-it,” and reject the current model of “take-what-we-offer-you.” They also suggest that 40% of U.S. consumers will have some way of connecting their TV displays directly or indirectly to the Internet within 3 years. By five years, that number will grow to 70% and represent a true mass market. The tipping point is well on its way because televisions are now shipping with Ethernet ports and broadbandTV enabled gaming consoles will be in one third of all U.S. TV households by 2010. The implications suggest that cable, DBS, and telcoTV providers are in trouble. “The barriers that have long inhibited Internet-based TV are beginning to crumble. The TV manufacturers will win; the gaming companies will win; the best new platforms blending personalized and branded content will win; Hollywood will win; and consumers will win. And, unless they find ways to adapt very quickly, telecoms and cable companies will lose.”
To be fair, the BusinessWeek article is authored by Herve Utheza and Gary Morgenthaler, both of whom are heavily invested in the broadbandTV space. But they bring up some interesting issues. The reality of broadbandTV today is it’s simply too complicated for average consumers to install, find, and watch content consistently. Should those barriers be lowered through things like broadbandTV enabled set-top-boxes, game consoles, and even the televisions themselves, the story could change. If broadbandTV does truly become plug and play, we may very well see some Utheza and Morganthaler broadbandTV predictions come true. Cable and telcoTV providers may be challenged to adapt their business and revenue models to ensure they don’t concede their subscription TV business to the burgeoning broadbandTV ecosystem. DBS may feel the broadbandTV pinch more, because they don’t have broadband connections to the home, making a broadbandTV strategy somewhat more complicated for them.
Many people are making this argument too simple. The current system will be around for a long time to come. Here’s why – content owners have a wonderful annuity with the subscription model. To wreck that by trying to bypass their cable/DBS partners would be like shooting themeselves in the foot and then reloading and doing it again. Why would they risk giving up a virtually guaranteed anuity for the risk of trying to replace it with building direct relationships with fickle consumers. It makes no sense – but I guess its good to talk about.
What Mr. Williams said, and more of it.
The Biz Week piece reads, frankly, like an IPTV ad. The technology has been there for *quite* some time (Microsoft Media Center, anyone?), but the author’s basic arguments — TVs with Ether, “hybrid” delivery (a settop box, maybe?), and the always-coming “hockey stick” growth curve of game consoles — conveniently avoid mentioning where the programs are coming from. HBO is going to strike a deal with Sharp? NBC Universal is going to license its programs to *hardware vendors*? I wouldn’t hold your breath.
As a consultant to MSOs and providers I’ve been hearing the “telcos, cable, and DBS are toast” argument for over ten years and frankly it’s getting a little stale. Understand, I’d actually *love* to see these guys — especially cable — lose some of their customary arrogance. But don’t assume you can just throw some new hardware into a home, wire it up, and viewers will instantly just start watching their favorite programs like they always have. There is *much* more at stake here than just “broadband is increasing and we can stream shows” — and the high-profile stumbles in this area (see Uverse, Apple iTV, not to mention a score of movie download companies) haven’t exactly burnished its image either.
While I’ll agree the issue of putting video distribution channels is slightly over blown, there is some real disruption taking place. They won’t go out of business, but they will be forced to alter their business model significantly. If they go fighting, they’ll lose. If they are rational and adapt, they’ll be fine.
You can’t underestimate the choices that consumers will now have for content choice. Smart operators will find ways to embrace that choice and build competitive advantage around it. Those that try to force the old way of doing things will die – it’ll be a slow death, but dead is still dead.