Will TiVo Win TV's Future?
For those trying to understand what television looks like in a digital, IP-driven, networked future, today's announcement that TiVo and Netflix have finally teamed up is a big step. Could TiVo's carriage of Netflix movies give the company a significant "leg up" in its long-fought battle to be a key entertainment "platform" in the homes of television viewers? Maybe.
I am very bullish on the future of television. I believe that people will consume sight, sound and motion from large screens and entertainment systems in their homes for many, many more years into the future. I also believe that advertising and related "commercial communication" will be a big part of that future.
It's not hard to be bullish. Virtually everyone believes that new digital communication and computing technologies will revolutionize television and entertainment, just as they have brought us the Internet and the extraordinary power of networked personal computers. However, when I write about a robust and rosy future for television, I am referring to the screen, the audience and the experience, not necessarily to all of the market incumbents that currently dominate the market.
While I believe that the future will bring more people interacting more often with more television screens for more of their daily entertainment consumption, it doesn't necessarily follow that the television networks and cable companies and market participants that we know today are all going to benefit from (or even be part of) that future.
No, just like in the online world, the future of television is going to be defined by a long, drawn-out, 10-year-long battle among a number of companies with quite different approaches. In the development of the online world, we had many years of battling between telecommunications companies with very closed and proprietary systems -- like the old AT&T and regional Bell operating companies. We had players that offered online services based upon much more open networks, but who controlled them with proprietary "walled gardens" -- like Compuserve and AOL. And finally, we had players with very open models, using open networks and very open software approaches -- the Web that we know today. That battle was raging in earnest in the late 1980s, and it was not until probably 1997 that the Web won out. Once again, we are now at the forefront of a similar battle.
In my view, there are at least three different "platform plays" going on today in television. They are:
· Gatekeeper Infrastructure Providers. This group seeks to rebuild the current linear television platforms as a digital, on-demand platform. These players include the cable companies, satellite companies and telephone companies, from Comcast to Direct TV to Verizon. They are providing communications infrastructure at their core and hope to make money on content and ad-related services as their communications platforms commoditize. These companies take heavily proprietary, gatekeeper approaches and hope to enjoy "toll-taker" business models, taking money on every transaction possible, whether it be from consumers or advertisers or service providers.
· Web to TV Pure-Plays. This group seeks to build television services on open Web platforms. They are focused first on delivering video to PCs, but their long-term plans are clearly focused on the big flat panel television screens in the homes as soon as it is practical. Players in this space range from YouTube to Google to Tidal TV to Boxee to iTunes. Most of these players are focused on ad-supported business models, but we're certainly seeing some subscription services here as well.
· IP-Driven TV Peripherals. An emerging group of players are offering what is essentially set-top box replacements that are connected to the Internet and can access both open Web services, but also use some degrees of proprietary hardware and software to maintain proprietary services. These include services like TiVo xBox, Sling, Roku and Apple's and Microsoft's media centers. These business models rely primarily on hardware purchase and subscriptions, but they too are starting to build ad-supported models.How is this going to play out? I certainly don't know, but I do think that it is going to take a lot of time. The Gatekeepers certainly have a short-term advantage and the Pure-Play folks are well-positioned for the long-term, if they can ride the Web long enough to get there. The ones that could surprise are the TV Peripherals. The winners here will be chosen by the consumers and if some of these new services, like TiVo/Netflix really catch on, they could end up beating both for control of the set-top boxes of the future. What do you think?