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How Will The Internet Open Up the TV Industry?

May 3, 2011

The viewing of TV programmes over the internet is accelerating, and is set to explode in the coming years as TV sets with internet access built in and the availability of superfast broadband become widespread.  Content is now routinely created, stored and distributed digitally, driving rapid changes in cost structures.  We have seen how dramatically telecoms, music and print have had their whole industry structures upturned by the internet – how will the TV industry fare?

The major effect to date has been the increase in “catch-up TV” services like iPlayer and 4OD.  Specialised services like Netflix, and Hulu are beginning to challenge traditional cable TV structures.  YouTube now offers TV programmes and films as well as user-generated content (much of which is itself increasing in quality and appeal).  Google, Microsoft, Apple and Amazon are all developing their plans – powerful forces are at work.

The traditional TV industry’s response has been to create closed, vertically integrated platforms to retain control.  BBC, ITV and others are working on YouView (though much delayed); the SkyPlayer integrates with other Sky services; Virgin Media is launching similar products.  But experience from the first wave of text content on the internet shows that walled gardens like Prestel and AOL or MSN collapse quickly when confronted with a wider range of openly available content.  Will we simply access the Poirot site rather than wait for a particular episode on ITV3?

So what scenarios for “Connected TV” or “Over the Top” TV might we explore?  What will be the effects on the wide range of players in the industry value chain: from software developers, through consumer electronics manufacturers to broadcasters and programme production houses, not to mention advertisers.  Key issues include:

  • How will the EPG develop when it is in effect just a browser which can access any content on the net (including your own videos and photos)?   Does a Google TV Search take over?
  • Will multi-screen viewing become the norm, allowing parallel viewing, complementary advertising, user-generated commentary?
  • How will increasing mobile viewing impact the business models?   Will integrated mobile/fixed solutions become the norm?
  • What happens to the “zapper” – why not use Wii-type or MS Kinect controls?
  • How does rights management work?  This could be the key aspect to control of the value chain.
  • How does the funding work?  Micro-payments for PPV, subscription for live channels, interactive (hence more valuable) advertising, product placement and impulse purchasing (integrated online shopping baskets). Does the TV licence become a BBC subscription?

With all these forces and opportunities it seems that the current industry structure is the least likely outcome in 15 years time.  But what will be the main parameters we should examine and who will be the winners and losers?

Written by Huw Williams, Associate, SAMI Consulting

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