The Future of Web TV

sony_w600b_tv_2014IDG Connect recently asked a number of industry experts where they saw web-based TV a decade from now. Since a decade is not that far away, the answers are things that many of you should already be thinking about when planning about the future of your video products. Here are some of the responses that are probably of the most interest to small carriers:

Content Will Largely Move Online. The experts almost universally agreed that content would largely move online. They expect this will be driven by several trends. First is that worldwide most video will not be watched on landline connections Second, there will be a huge influx of new content and content providers that are not associated with cable companies and traditional video.

Video Demand Will Drive Changes in the Network. Today, even in the US, only something like 5% of watched video is delivered online, so a migration to online content is going to require big changes in the Internet infrastructure. Video is already stressing the network and we have barely begun this migration. As more live content moves online network latency will become more important, as already witnessed by the numerous failures when putting big live events on the web.

The Players Will Change. The experts think that there will be a lot of changes in content providers. Today in the US the large content providers are in a position of power since they have the content that most people want to watch. But as more and more new content enters the market from alternate providers the balance of power will shift and the influence of today’s content providers will diminish. The experts expect major market consolidation as companies gobble up successful content developers.

Content Becomes Personalized. For years TIVO has had a great platform for helping people find what they want to watch. Searching for content on Netflix and other OTT platforms is far more clumsy. The experts believe that with the introduction of AI into the process that finding content will become easy. Rather than search through one content provider like Neflix to find something to watch, personal assistants will look through all content that is available to a given person and which will be platform agnostic. Of course, platform providers like Netflix will hate this because they try very hard to keep a viewer on their platform.

Wireless Connectivity Will be a Major Driver. Worldwide there will be far more people connecting to content with smartphones than through landline connections, and so there will be a huge increase in content aimed primarily at the smartphone platform.

Live Events Become the Exception. There is always going to be a demand for live content like sports or reality shows. But most content is going to become streamed rather than live. This bodes poorly for the big US content providers since they make all of their money through selling subscriptions to millions of US landline customers. While major networks like Disney or the Food Network might always be popular, many of the smaller networks are going to fare worse. We may not see the total shift to a la carte programming by 2026, but we ought to be well on the way towards it by then.

Social Media and Amateur Content will be Larger. Already today YouTube is becoming a major player in the content world. They have a ton of programming that older folks never heard of, but that all of our kids are watching. As Facebook and others social media sites get into video content delivery expect an explosion in the popularity of amateur content.

What all of this means to a small cable provider is that the traditional cable TV product is likely to change and morph over the next decade into something very different than what you deliver today. The chances of still delivering a 150 or 200 channel traditional lineup ten years from now is pretty small. What we don’t know is if there will be something to replace the big package for small cable providers or if you will eventually just be nudged out of the cable business.

One other thing is for sure – which is that as video moves online that people who live where there is no good broadband are going to have no access to programming and will become isolated from the major culture of the country. This is going to really push rural people to scream loudly to politicians to find them a broadband solution.

Web TV Not Hitting the Mark

Old TVI am sure that the day will come when there will be OTT web programming packages that will be legitimate competitors to cable. But that day is not here yet. We are starting to see the beginning of web TV, but nothing out there is yet a game changer.

And that is not surprising. We still live in a world where content is under the very tight grasp of the programmers and they are not about to release products that cannibalize the cash cow they have from the cable providers. The early web products are being touted as attempts to lure in the cord cutters and cord nevers who no longer buy traditional cable.

Here is what we’ve seen so far:

  • Sling TV is certainly priced right, starting at only $20 per month. That price includes ESPN as well as a few other popular channels like the Food Network and the Travel Channel. They have a growing list of add-on bundles priced at $5 each. And they are just now launching HBO. But there are problems with the service. As I covered in a blog a few weeks ago, watching some NCAA first round basketball games on Sling TV was the most painful sports watching experience I’ve ever had. And it’s been widespread that they botched the NCAA finals. But there are drawbacks other than the quality. For example, you can only watch it on one device at a time, making it family unfriendly.
  • Sony Vue has two major limitations. First, right now it is only available through a Sony Playstation which costs between $200 and $400. And it’s not cheap. They have three packages set at $49.99, $59.99, and $69.99. Without even considering cable bundle discounts, these can cost as much or more than normal cable.
  • Apple’s TV product is not even on the market yet. Their biggest limiting factor is that it’s going to require the use of a $99 Apple TV box. That unit has been far less popular than the Roku. Apple says they will have ‘skinny’ pricing similar to Sling TV.

There are several major factors that will work against web TV for the foreseeable future:

  • Incumbent Bundle Discounts. All of the major incumbent providers sell bundles of products and they charge a premium price to drop the bundle and go to standalone broadband. That is, if they will sell naked broadband at all. For instance, Comcast has no option for standalone broadband faster than 25 Mbps. When people do the math for canceling traditional cable many of them are going to see very little net savings from the change.
  • Issues with Live Streaming. People have become used to a certain quality level of web viewing due to Netflix and Amazon Prime. But those services cache their product to viewers, meaning that when you first start watching they send a burst of data and they then stay about five minutes ahead of where you view. This eliminates problems due to variance in the Internet connections, making the viewing experience smooth and predictable. But there is a far different challenge when streaming live content, meaning shows that are broadcast at set times. Such shows are largely not cached, and thus are vulnerable to every little hiccup in a viewer’s local network (of which there are many which becomes apparent when watching live sports on the web).
  • Programmer Bundles. Programmers make a ton of money by bundling their content to the ISPs. Comcast, Verizon, and everybody else are not able to pick and choose the content they want. There are seven major program owners that control a big majority of cable channels, and when you want any of their content they generally insist that you take almost all of it. This lets the programmers force ISPs to take programs that they would likely never otherwise buy. Web TV is trying to differentiate itself by offering smaller bundles. But I am sure that programmers are making the web providers pay a premium price for choosing to take only a subset of their channels.

The FCC is currently looking at the issue of web TV and they might make it easier for web companies to obtain content. If they do so, one would hope that they also make it easier for wireline cable providers to do the same. Nielsen released statistics late last year that show that the average household largely watches around eleven channels out of the hundreds that are sent to them. Consumers and cable providers would all benefit greatly if the programming that is being forced upon us better matched what we actually want to buy.

The web TV companies are trying to do just that and put together packages of just the most popular content. But I laugh every time I see them talking about going after the cord cutters, who at this point are largely younger households, because the content they are choosing for the web so far is popular with people fifty and older (sometimes much older). I can’t see too many younger households being attracted to these first web TV packages. If the rules can be changed so that different providers can try different packages, then we might someday soon see a few killer web packages that can give traditional cable a run for the money. And perhaps what we are already seeing will be the wave of the future. Perhaps there will be numerous web TV offerings, each attracting its own group of followers, meaning no one killer package but dozens of small packages each with their loyal fans.