Tag Archives: YouTube

The Future of TV – The Viewer

The Twilight Saga (film series)

The Twilight Saga (film series) (Photo credit: Wikipedia)

Probably the biggest change in the TV landscape is that viewers are changing, or at least their expectations for the viewing experience. For the first time in the history of the industry, the consumer is in the driver’s seat by their ability to collectively determine which content is popular. This must be driving the executives at cable companies and media production companies crazy.

For most of the history of the industry, the content providers were in charge. For most of the history of TV the studios or cable networks would choose the content and determine when it would be seen. And the process was a huge chess match trying to get the most eyes to product hits. New content that was scheduled opposite an existing hit show were dead on arrival.

Not all consumers fit well with the process of having to watch shows at pre-set times. I am an admitted space cadet and I have never been able to watch a TV show regularly at a pre-set time. And so, when TV shows started showing up on tape and then DVDs, I scrapped television and would just buy the series I was interested in to watch at my leisure. I saved money by not having cable TV, but buying DVDs for shows was expensive and so I would watch only a few old series per year. And I bought movies. Lots and lots of movies. But I was in the minority and I was an early cord cutter due to my personal spacey habits and my willingness to pay a premium price for alternate content.

But then along came new technologies that let people drop out of the treadmill of watching shows at pre-determined times. First came TIVO followed by video-on-demand that let people record and watch shows later. And more lately has come OTT programming on the web. So now, people have an immense amount of content that they can watch at any time. Both my wife and I are the kind of people who like to watch a whole TV series back-to-back and so OTT programming satisfies us for the most part.

And if that is all there was to the change in the industry the cable companies and content providers would not be worried. They would continue to monetize the ability for people to watch their content whenever they wanted to, and in the end their finances would not change too drastically.

But that is not the end game. If you want to see the end game, spend a few days watching how 14-year olds watch video. The way they watch content is the future:

  • They rarely watch just one thing at a time, at least for very long. They may watch something on a TV screen, but they will watch their tablet and smart phone at the same time.
  • They don’t have long attention spans, regardless of the content and getting them to watch a movie the whole way through is difficult.
  • They like to watch content made by themselves and their friends as much as they like professional content.
  • They don’t want to watch something end-to-end. They will not go back and watch a Twilight movie they have already seen. Instead they will watch compilations of their favorite scenes from the Twilight movies that they or somebody else has strung together on YouTube.
  • They love the 7-second clip content on Vine. No adult can handle Vine for more than a short time. Vine produces memes more than content, but kids find this entertaining.
  • They love watching together with other teenagers, be that live together or virtually together.
  • They don’t even need cable for the news. Take the example of the Boston marathon bombing. There were hundreds of people in the area going live on the web talking about what was going on there.
  • And they don’t want to pay for content. Not so much because they are 14, but because they believe that content ought to be free.

It is the 14-year old girls that are scaring the industry because they presage a new way of interacting with content. These kids are not going to grow up and buy traditional cable subscriptions. They are not even that likely to buy the alternates like Hulu or NetFlix. They are largely happy with free content or short clips of industry content. The cable companies are hoping to snag boys with ESPN and sports content, but they don’t know what in the hell to do with the girls.

The Future of TV

Kicking Television

Kicking Television (Photo credit: dhammza)

Laura Martin and Dan Medina of Needham & Company, a branch of an investment banking and asset management firm have issued an analysis on  the Future of TV. There has been a lot of other reporting about this report, most of which zeroed in on the fact that ESPN would need to charge $30 in an a la carte environment. I’ve written several other blogs about the a la carte issue and instead want to highlight some of the interesting facts from the report.

They say that TV is a bargain and that the average family spends 30 cents per hour to watch TV. This is based upon an average cost of $75 for a cable subscription and a family watching TV eight hours per day. I think they miss two points with this. The price of cable has grown much faster than inflation and there are now more and more homes who feel they can’t afford the cost of the subscription. If cable rates keep climbing 6% per year, in only five years this same subscription is going to cost over $100 per month. Also, there are many households who do not watch TV eight hours per day. It is these two groups that are leaving the cable system, the first reluctantly and the second because it no longer feels like a bargain.

TV content is expensive to produce. The four main broadcast networks (ABC, CBS, FOX and NBC) spend an average of $2.5 million to create a prime time hour of programming. To contrast, all of the other 130 or so cable networks spend an average of about $100,000 per hour. But there are new rivals now producing programming. There are a number of companies now producing content for the web and this is expected to grow rapidly. For example, YouTube is spending about $100 million, NetFlix $200 million, Hulu $500 million. And both AOL and Yahoo have created web ‘channels’.

They say that about 80% of content never pays for itself. The TV world is driven by hits since they draw the bulk of the advertising revenue. But hits are ephemeral and unpredictable. The broadcast networks have been geared for decades to product hits and it’s obvious that even with the money that they spend that it’s very hard to do. But the top shows garner the lion’s share of ad revenues. To show the power of hits, the top 1% of movie hits account for 18% of movie rentals / views.

They recognize that TV viewing is shifting in a digital age. They cite the following statistics:

  • 72% of viewers watch content only on a TV set.
  • 11% watch content only on some digital medium such as computer, pad or smartphone.
  • 17% of viewers watch some content in both ways.
  • 61% of TV watchers now use the Internet while watching TV and 10 – 25% of those viewers go to the website of the show being watched (depends upon the network being watched).
  • 29% of the viewers who use the web while watching TV are on Facebook.

The report estimates that over 1 million jobs are dependent upon the TV sector. These are mostly middle class jobs and include cable TV installers, customer service reps, people who work in various roles at the networks. Comcast alone has 126,000 employees. By contrast the new companies trying to make money from web content have very few employees. Hulu has 420 employees, YouTube has 650 and NetFlix has 2,348. The report thinks that most of the traditional cable TV jobs are at risk if we move to an a la carte system.

The public companies in the TV sector have about $400 billion in market cap (investable securities). The report estimates that at least half of that market cap would disappear under a la carte programming. They warn that even having the government looking at a la carte programming puts these investments at risk.

These are just a few of the many facts cited in the report, which is why I have included link to the full report for anybody who wants to read more. Oh, and at the end of the report they recommend buying CBS and AOL stock. If you buy them and it doesn’t work out, you didn’t hear it here.

Remember the White Pages?

NSW Telphone Directory_March 1944_042

NSW Telphone Directory_March 1944_042 (Photo credit: MargaretBee)

Earlier this year the Virginia State Corporation Commission granted an interim waiver for Verizon to be able to stop distributing residential white pages. This makes Virginia one of the last states to do this. This waiver came with the same kinds of requirements that we’ve seen in other states. Verizon must make sure that the information that was available in the white pages is available on its website and on the website of SuperMedia. Consumers who still want the white pages must be able to order them either in paper of CD format.

Most of the states have allowed the larger LECs like Verizon and AT&T to stop delivering white page directories with the same sorts of caveats. AT&T has reported that in all of the states where they have been able to get out of the white page business that only about 2% of customers still ask for a paper copy of the books. All of the phone companies are still publishing business white pages and there they report there is good demand for those listings.

The drive to ban the white pages was driven by both the phone companies and by consumer groups. Thinking of the big push to ban the white pages made me remember this funny YouTube video from 2008:

We certainly are only a few years away from a time when white pages will be a memory shared only by us old timers. Back in 2008 there was a Harris poll that showed that only 11% of households had any interest in the white pages in paper or even on-line format. One has to imagine that the growth of cell phones since then has to have nearly eliminated that requirement since our cell phones now act as our personal directories of people we want to remember.

Consumer groups have now turned their attention to the yellow pages. Since the yellow page industry makes a huge profit the telcos don’t agree with any push to ban yellow pages. The Local Search Association (formerly the Yellow page Association) is the national trade group representing the publishers of yellow pages. It has created a system in most places where customers can opt-out from receiving yellow pages. Consumers can go to https://www.yellowpagesoptout.com/ and can opt out of yellow pages for three years at a time.

Unless a telco seeks permission from the state commission to get out of the white page business or else shares white pages with a larger LEC it is still required to publish the white pages. I still have a lot of clients that publish their own directories that include residential white pages. But most of these directories are not the giant doorstops that are published in metropolitan areas. Instead they are small local books that include the white and yellow pages combined and are mostly still well-received by customers.

A lot of the yellow-page business has moved on-line and the industry is now embroiled in the same kinds of issues that affect other companies that live on advertising like Google. A big current push this year is for Do Not Track legislation that would allow consumers the ability to opt-out of being tracked by web advertisers. One thing about the yellow pages was that it didn’t track who you were and what you searched for.

Local Programming

digital on-demand

digital on-demand (Photo credit: Will Lion)

One way to differentiate your cable system from your competition is to develop local programming. Local programming is just what you imagine it to be. It includes such things as high school sports, little league games, local church services, local government meetings, high school plays, and if you have a local college a wide array of things. And it can include more with content like local news, courts, cooking shows, tourist information, etc.

Why should you get involved with local programming? If local programming is done well, meaning that it has content that people want to watch, then it differentiates your cable programming from the competition and entices people to buy your service rather than the other guy. And of course, if customers buy your cable they are more likely to buy your higher margin products like data and telephone.

The ability to produce local programming has gotten much easier in recent years due to the cost of cameras dropping significantly. I remember in the not-too-distant past helping local service providers get grants to buy video cameras for local organizations that cost more than $15,000 each. Today, studio quality cameras are handheld and cost a fraction of that old cost.

One of the first hurdles you must cross with local programming is figuring out how to get the content listed in the channel guide with everything else. Many, but not all channel guides allow you to insert your own custom programs.

A number of cable systems carry local programming of some sort, so let me talk about how various companies have gotten local programming onto their cable systems.

Create a Local Network. There is always the expensive way to do things, which is to create a traditional local channel on your cable system. This means you would have some sort of studio and you would produce a lot of content to run 24/7. Some companies have done this and think it is successful. Some of the larger cable companies such as Cox have local channels, but there are also smaller companies doing this like Hiawatha Broadband in Winona, Minnesota and several large telephone cooperatives in the West. But the cost of producing content is expensive and very few companies feel they can afford this option. To be successful, it must be done well.

Let Others Create the Content. There is a less expensive option which is to let other create the content for you. There are a number of systems that have given a channel to local government, to local churches or to universities. Sometimes these organizations to a great job and sometimes they don’t. Most viewers don’t hold local programming to the same standards as network TV, but shows must have good sound and decent video if they are to attract viewers. One of the most successful local programs I have ever seen was a company that carried a local court and it seems the DUIs get good ratings. Many communities have done well broadcasting local high school sports.

Video-on-demand. Another way to carry local programming is not to create a channel, but instead to create a library of local content. If your system is capable of video on demand then you can create a library of local content. This way you can not only cover little league or high school sports, but a subscriber can pull up the game where their son hit a home run from last summer to show grandma when she visits.

There are other uses of having this kind of VOD library. For instance, you can create a rotating set of content from the library to show in hotels to tell visitors about area attractions. You could do something like the City of Seattle has done and create an index of past government meetings so that somebody can pull up a specific meeting where a specific topic was discussed. You can also pull the best of the VOD content and create a channel where the content plays continuously. But to do this well you need to always refresh the content.

Web TV channels. Finally there is the newest way to create a channel. There are now some vendors who have made it easy to let you put any web content directly onto your cable system. They let you take any web programming and create a virtual channel. They let you create as many local channels as you like and to put the content into a channel lineup.

This really opens up the world of local content for a service provider. It takes a lot of electronics and eats up system bandwidth to create multiple traditional local channels. But using a web-to-TV interface you can carry almost unlimited channels in one channel slot on your network. Each customer can then just watch what they want out of the lineup because they are getting the content from the web and not broadcast as a ‘channel’ from the hub.

This means that you can give a ‘channel’ to every organization in town that wants one, be that high schools, colleges, churches, governments, non-profits, local businesses, etc. Some of them will do a good job at creating local content and others will not, but the best of them ought to create a great local line-up that your competition won’t have.

This technology also lets you bring in any other content from the web. You can add OTT content like NetFlix and Amazon Prime. You can make channels out of YouTube. Or you can add one of the web services that have already tied this kind of web programming together nicely.

So you can create channels that bring together local content plus the best of the web. One idea that I have mentioned before is to create a package of local programming, OTT web programming and network channels. Such a package could sell for $20 and be more profitable than your larger cable packages. You can also insert local advertising into local programming or sign up with somebody like aioTV who will insert national advertising and share the revenue with you.