Commentary
Who Will Own 'TV Everywhere'?
- by Dave Morgan , Featured Contributor, October 15, 2009
Television is going cross-platform. Video content is becoming unshackled from the broadcast transmission towers, terrestrial coaxial cable plant and the living room television sets of old. While the business models for Web-distributed video are far from developed and proven, video content creators and producers can now use the Internet to deliver their programming directly to the vast majority of U.S. households.
This trend is already impacting the television industry in a significant and disruptive way, and its effect is intensifying. Many companies are now taking steps to try to control their destiny in a future where TV can be consumed "everywhere," on a multitude of different and widely distributed devices and platforms. So today, I am going to discuss my thoughts on how this future might play out -- who might find the elusive business model for profitable cross-platform video scale, and who might not.
The players. A lot of companies want to control the cross-platform video future, and why not? TV advertising is a $68 billion annual business in the U.S., with video subscriptions representing almost another $120 billion per year. A lot of money is at stake.
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A number of incumbent TV companies are already moving aggressively into this space. Jeff Bewkes of Time Warner and Brian Roberts of Comcast have their "TV Everywhere" and "On Demand Online" initiatives. NBCUniversal, News Corp. and Disney have their Hulu joint venture, and Disney also has ESPN 360. There are lots of upstarts moving this way as well. They start with AT&T and Verizon and their U-verse and FIOS offerings, and include Netflix, TiVo, Microsoft with Xbox and Navic, Google with YouTube and GoogleTV -- and lots of young start-ups like Boxee, with pure over-the-top Web to TV plays.
Where will their aspirations collide? In my view, there are four primary battlefields emerging that will help determine who wins the future of cross-platform television. They are as follows:
Distributed subscriber authentication. This is a critical starting point for both content owners and operators. Firewalling premium video content and permitting authenticated users to access it wherever and whenever they want across multiple platforms -- PC, mobile, IPTV -- is one of the most important battlegrounds. If television programmers don't enable and enforce this, particularly owners of cable networks, they lose significant leverage with multichannel system operators and risk losing a substantial amount of the sub from existing subscribers. Operators that don't force authentication risk subsidizing their future competition. Those that accomplish this early will be well-positioned to move onto the next step. Time Warner and Comcast are out front here.
Consumer interface. Authentication is a process, not a product. If you want viewers to use and enjoy video content on PC and mobile devices -- and tolerate your authentication -- the interface will be critical. As we have seen on the Web, the interface will probably be more important than the content. Great interfaces with average content will garner lots of usage. Bad interfaces with great content will be ignored and will lie fallow until eventually killed. This battle will be won by the companies that best solve the users' problem in discovering video content that they might enjoy. It will be all about relevance, recommendations and navigation. TiVo has the lead here, with Netflix,Hulu and Google's Youtube all in the hunt.
Creative content packaging. The first step in delivering protected access to premium content online will likely be to extend the value of existing subscriptions. Smart companies, however, will go further. They will leverage their authentication gateways and interfaces to offer new packages of content. They will make it easy for users. They will build and market creative new content packages. We will see "premium" channels emerging independent of cable operator packages. Sports companies and sports networks have been great at this, so keep an eye on ESPN. Also, Time Warner's HBO is the leader in premium channel packaging, so watch it closely as well.
Consumer data management. The management, protection and leverage of consumer data will be critical in the development of successful multiplatform video businesses. Historical data can be used to deliver more relevant content, marketing and more customized services. Everyone in the ecosystem -- from the programmers to the operators to the technology providers -- wants to exclusively own and control this data.
But they can't and won't. Winning here will not be about how much data you have, but what you do with it. A good sign of a "failure in the making" will when one or some companies announce the construction of a massive, gold-plated, expensive data warehouse. Winning will be more about what you do with data, not how much you can store. No one has the lead here. Most, unfortunately, are probably predisposed to try the "bigger is better" approach, and will fail before they get on the right track.
Who will win the cross-platform video future? Viewers will win, for sure. As for the other companies, this is going to be a long fight, with many battles. Who do you think will win?
Since the dawn of cable, there has been a steady, relentless trend towards subscription revenue models. Advertising revenue that once dominated the industry is now one third of the total revenue pie. Super-serving the subscriber at the expense of advertiser value will drive the vision that Dave has articulated so well in this article. Those clinging to ad revenue models would seem to be in denial. Carriers would appear to own the future since they own the subscriber but any mega-TV company needs to recognize that they are drowning in overhead costs that don't get paid for in the digital economy.
So Dave,
great piece on battlegrounds for TV.
I would say that our perspective comes from the "consumer data management" arena.
To put it bluntly, resistance is futile.
Trying to "control" this market is also a very good indication that the people in charge of these initiatives aren't "getting" the new rules of engagement with consumers in a digital era.
Like everyone in the business, however, we all must kneel to the "consumer interface" altar, because if consumers aren't thrilled, it's pretty much a moot point about all the rest.
In that context, we believe that empowering consumers with "Content, Control and Community" is where this all comes together.
Content
Content needs to be accessible, but we think that "controlled access" should be earned, not inherited. Today's arguments seem to infer that the "right" to conrol access is inherited from the old media model. We disagree, and think that it should be an open market, with content owners being compensated fairly. That includes having some comfort about consistent future ad revenues so that they can transition from today's world to the new world. The old world of upfronts, packaged deals, carriage packages, and the like, are anachronistic vestiges of an old, analog world. We see enormous opportunity in a digital world if we can keep the consumer at the center.
Control
Control means a lot to today's consumer. It means the control over what they view, when they view it and how they view it. On their terms. It means control over their ad stream (where we play). It means control over how they package their paid-for content (subscription, transaction and ad-supported) and ways to make the content owners whole in the process. Hard to do that with intermediaries screaming for "inherited control" solely to preserve their old business model. But that's another article. And we do think we can help them too, as consumers ask for more "a-la-carte" style control. Again, lots of opportunity there.
Community
Community means different things to different demographics. To millennials it means connection, meaning and collaborative experience, even asynchronous collaborative experiences, which is a hard thing for old folks to get their heads around. To boomers it means the TV (or monitor) as camp-fire or hearth. Millennials demand an experience that respects their need for connection across a series of connected but only partially overlapping community anchors. This means that there is huge opportunity for the user experience guys to work with the data guys (that's us again) to enable drop-dead simple ways to eliminate friction as consumers move around from device to device, from place to place and from community to commmunity (online, that is). It also means that there will be opportunity for flexible, personalized content and access packaging that can be controlled by consumers, and discovered and experienced (and mashed up) across and among communities of users. Boomers are running the media companies and delivery ecosystem, and think believe that we boomers will pretty much do their bidding or "respect" the old way. And to date, we have, although we are getting cranky, and embarrassed by our kids and grandchildren showing us a "better" way of control and better experiences, fractured as they may be for now. The old broadcast DNA of "we know what's good for you, better than you do" is dead. So is the old "we only offer these packages, take them or leave them" is also soon to be dead. The smart money is betting on how to make this a self-serve process and keep the money interests (read: content owners) intact, or even better off. I am not ignoring carriage, aggregators and other delivery ecosystem elements and members, who do add incredible user experience value (ok, some do) and convenience. But like the arbitrage ad network business, they must sunset their old-world franchised monopoly/duopoly model and innovate to meet the new digital consumer and ecosystem (again, where we play). Innovate, not re-package.
We agree that huge datamarts of "everything" are folly. Except if you're Google, who believe (perhaps with good reason) that they have the franchise to "all" data in the world... with a nod to their great efforts and achievements in some areas, and unsuccessful experiments in others. We need their innovation and "try fast, fail fast" experimentation and participation desperately.
As for our little data company- as we move EyeTMedia into our markets with our real-time consumer contextual, community, behavioral and sentiment preferences (all around ad performance, engagement and intention) we are excited to see so many ideas around what could be done with the data, and who may be able to benefit.
Our position (not surprisingly) is that the consumers must own their own data and preferences, and that vendors who recognize and respect this can provide a unique value-add to the consumer experience (where this all started). This means better ad satisfaction and performance, by the way. Likewise it opens the door to service providers who can help improve business performance in the advertiser/brand area as well as in the delivery ecosystem. We believe that this delivery ecosystem is in need of innovators, new ideas and smart thinking to help them adjust to these sea changes forced on them by the millennials' demands, the "what's possible" in digital media, and disruptive forces coming from intermediaries that are up-ending established "control" of access and advertising / revenue streams. They are huge money interests, and rather than throw stones at them, we should understand that they got us to this fabulous jumping-off point in the first place. They can be powerful allies if we can get them through this transition, and on the side of the consumer (without being against the content owner).
Tricky, but it should be possible with some hard truth talk, and some honest conversations. We're already having some of those and getting great resonance. Sounds like you guys are too.
Keep up the great work. Looking forward to your next post.
Matt Weeks CEO, EyeTMedia 650 520 8808 mweeks @ eyetmedia.com
Insightful post that puts good structure around the issues. However, one area I feel you should include is the net neutrality vs. network capacity issue. This will impact directly impact the quality, which is crucial to success online, and it may drive the economic model for distributors.
Michael,
Great point .. I should have mentioned public policy as a fifth battleground. It will certainly be important.
Matt,
I agree, "control" or "own" may not be the best words to us - and I do think that the viewers will be the winners and will be in control - but suppliers can win as well.
Mark,
In my view, your point is the most important one for incumbent TV companies to listen to - if they don't reduce cost structures, and gives themselves some flexibility, they will never have a chance to win.
Dave
Dave, great article. I couldn't agree with Mark more. Plainly and simply, carrier's do indeed own the future of this rapidly changing space. Old ad models are dead. As one who has worked for two of the four major networks, ad sales are tanking at a rapid pace. The big media companies have overpaid for acquisitions (see Sunday's NY Times article on this) and they are bleeding money. Big media has not found a way to monetize and aggregate their brand(s). They are in slowmo. Let's face it, I can DVR Mad Men or House and watch it later sans the commercials. I can view an entire season of Lost via Hulu and be subjected to only a few commercials per episode (and they are relevant to my interests). I do believe the real battle here is just beginning. Comcast is spending gobs of money. They are looking like the front runners to win this war.
Maybe this upheaval will open the door to more elegance and imagination in brand positioning and messaging.
For years, all of the creative energy in the advertising business has gone into making 15- or 30-second interruptions in which the brand tries to tell its story. So you wind up with 18 or more brand stories in a 30-minute program, all competing with the mother organism that sustains them. The result is a cacophony of noise. No wonder the audience couldn't wait to embrace pure content alternatives, whether via subscription or DVR.
It begs the question -- isn't there a better way?
HBO's 'Sex and the City' demonstrated how to make a brand a household name if only the Carrie Bradshaw character would put them on her feet. Virgin America is letting its brand become the background for its reality show, "Fly Girls."
There are plenty of examples out there. The industry needs to re-channel its creativity into different experiences—something that meets brand strategies, sustains the art forms and news the public craves, and is more audience friendly.