I started writing this post over a week ago. I was going to write about the imminent demise of TV as we know it.
Then, I met a *very* senior person from Akamai over a long lunch. I’m not a name dropper so I will refrain. (If you don’t know Akamai, they run a massive, global content delivery network that optimizes the speed at which web pages, streaming content and files are served up to your computer. Apple’s iTunes service, for example, utilizes Akamai for file downloads. In sum, Akamai is sort of an Internet within the Internet).
We’ll come back to what the person from Akamai said in a bit.
My wife is a bit of a TV and Internet junkie. Back in Boston, we had a media feast at home: Verizon FIOS fiber-optic service to our home. Hundreds of TV channels. Uncompressed high definition programming. Tivo DVR. 20+ megabit per second Internet downloads and uploads. iTunes for music and video. 2 terabytes of storage connected to a PC. You get the picture.
I’ve been trying to figure out how to replicate that experience for her in Prague, while avoiding astronomical expense. I knew that BSkyB would be happy to relieve us of $300/month for satellite TV, plus $1500 for a crappy DVR. But I hate the extortionate pricing that cable companies seem to charge. This led me to investigate what was available over the Internet without cable TV or satellite service.
What I found was pretty amazing.
The Internet already has most of your TV shows.
I started surfing U.S. web sites looking for shows to watch. Cable networks (NBC, Fox, CBS et al) have lots of free shows online, as does Hulu. And there’s Amazon, iTunes and Netflix with paid content.
I added up all of the TV shows that we could access on-demand across these free and paid services. With one striking exception – live sport – virtually everything is available over the Internet as can be seen over Verizon FIOS or Comcast or BSkyB.
The promise of Internet TV.
The Internet finally gives the ability to match price with preference, one viewing at a time. You need to see the latest episode of 24 in high definition on the night it aired on broadcast networks? $2.99 please. Willing to watch in standard definition tomorrow? Proceed to FOX.com and stream it for free. In this setting, we as users are given unprecedented control over what we watch and at what price. Versus the alternative “all you can eat” $200/month fees of the cable companies. Heck, you ignore most of what’s broadcast.
What you’re *allowed* to see over the Internet is a different story.
While surfing the free sites, on many occasions I was presented with a message to the effect of “sorry, you appear to be from a different country, so we won’t show this to you”. If you live in the U.S., you can see free TV shows over the Internet that others can’t. And in some cases, vice versa.
Thanks to a little luck, I discovered a service called “personal VPN” for $60/year. Basically, this lets your computer appear to be located in a country of your choosing. Problem solved.
Why the confusing mess?
Content creators, broadcast networks, cable networks and the cable service providers look to me like a pack of wolves that can’t find any deer to kill. So they’ve set upon themselves. Let me explain.
Content creators such as cable networks (Discovery, USA Network et al) and broadcast networks (Fox, NBC et al) are experimenting with ways to get around cable service providers (Comcast et al) in the U.S. They have opened a Pandora’s box of sorts by showing free content on their own websites and by giving content to free websites like Hulu. And their partnerships with Internet services like Amazon, Netflix and iTunes are starting to pay handsomely.
Clearly, content creators have broken ranks with their traditional routes to the consumer.
So, why the disparity elsewhere in the world? Meaning, why should the fact that I’m in the Czech Republic somehow limit me from seeing that same stuff?
Partly it’s greed. If you are a content creator, you want to charge every cable or satellite provider the world over for your content. You get very concerned about free viewers who should have been paying their local cable company instead (and your royalties).
Partly it’s because the experiment has only just begun. If content creators can bypass networks elsewhere in the world in favor of the Internet, they will.
Where do the advertisers factor in?
Internet TV now has the ability to insert ads dynamically on the basis of who you are and where you’re from. No reason I can’t watch an episode of “Glee” and see an ad for a concert in Prague.
Advertisers love precise targeting, so they are rooting for Internet TV. They will really steer the game once critical mass of viewership arrives. This is not good for the next lot.
What about the cable service providers?
I suppose they are having a moment of panic, as their service gets reduced to a dumb pipe of high-speed Internet connections. That’s worth $40/month to a consumer, not $200.
They are holding onto live sport as the thing we’re willing to pay $200/month for. It’s a last stand, in my opinion.
Comcast is having an “oh sh*t” moment and will pony up $30 billion to buy NBC Universal if the regulators let them.
Ironically, Michael Armstrong tried to do this over 10 years ago at AT&T when they owned much of Comcast’s current cable TV franchises. And he got fired for the effort. The man had vision but a crappy sense of timing.
How soon is now?
Based on the experiment the content creators are running, they must believe that they can tap greater revenue by letting consumers pick and choose what they pay for in tiny increments. And they must believe that the user personas that have funded the industry to date – my household and our $200/month peers – are dwarfed by those who spend $50/month and would gladly spend $75 if they saw value for money.
It’s a complex equation because lots of other variables apply: household broadband penetration, HDTV display penetration, home computer penetration. For those doing the math, apparently the combined penetration rates are reaching critical mass.
Back to the Akamai meeting. I told my colleague that I assumed Internet TV was explosive as a growth driver for his company. His response surprised me as seeming nonchalant. He said something to the effect that it’s the future but it’s only just arriving. We then laughed about how all of this crap was predicted 10 years ago (see Michael Armstrong above) and is only now materializing.
After my meeting, I reflected on why the transition to Internet TV isn’t happening faster.
My conclusion? We as consumers control the transition. And that consumer behavior is governed by inertia. Consumers are not yet motivated en masse to switch to something better or different. But they will be. Just as influencers lead technology adoption in every other way, so too will they do it here. One living room demo at a time.
Eventually, we will all demand the same experience: on-demand, HD quality, huge selection, live streaming, download & store, TV content plus movies, etc. etc. Cheaply or at least cheaper. If we’re going to tolerate adverting (which we must), we’ll like it a lot better when it’s targeted appropriately to us. Google has proven the premise with Internet search. Internet TV will be no different.
So why is TV as we know it dead? In the end, the Internet is the only way to satisfy all of your needs at once.