The future of TV is here. It’s just not evenly distributed.
If it doesn’t seem like the American television industry is in the middle of a dramatic transformation, that’s simply because the pieces are scattered all over the place. But they are starting to come together.
One transformative piece arrived earlier this week, when Dish Network secured the rights to include ABC, ESPN, and other popular channels owned by Disney in a TV service delivered entirely over the internet. Negotiating deals like that one has generally been the biggest impediment to internet TV in the United States.
Others aren’t far behind. DirecTV is likely to strike a similar deal with Disney. Sony has internet rights to Viacom’s channels, which include MTV and Nickelodeon. Verizon recently bought crucial technology from Intel. And technology companies like Apple and Amazon are in the mix, too.
Dish will reportedly charge between $20 and $30 a month for its planned offering, which it’s calling a “personal subscription service.” That doesn’t sound like traditional pay TV. Rich Greenfield, an analyst who is usually right about these things, figures Dish’s move will represent “a watershed moment for the media industry,” with Comcast and other large rivals doing something similar.
What exactly that is remains unclear, but there’s enough evidence floating around to make a strong prediction. And along with other recent developments, we can start to see what the near future of TV will look like.
At $20 to $30—less than half of what most American households pay for TV—Dish’s internet TV service will target young adults who balk at the cost of most TV subscriptions. They are more likely to cancel their cable service or never sign up for it at all. ”We think there is a group of individuals, 18-to-34-year-olds, who would love to have a lower-cost product with some of the top content out there,” Dave Shull, Dish’s chief commercial officer, told Bloomberg.
The spread of internet TV should also increase competition. Whereas cable companies tend to have near-monopolies in their respective regions of the US, the internet isn’t bound by local markets. Anyone should be able to choose among any of these internet TV services, and that should push prices down.
But notice Shull said “some of the top content,” not all of it. Dish figures it doesn’t have to offer every channel out there. The service may only need some of the most desirable programming to attract its target audience. ESPN (popular among young men) and the Disney Channel (young parents) are a strong start.
In part, Dish is bending to the practical realities of the TV business. Negotiations with the big content companies can be torturous, and Dish may well have to go without, say, popular channels owned by 21st Century Fox, if they can’t reach a deal. But many TV customers don’t care about having hundreds of channels—in fact, they take umbrage at having to pay for a bundle of channels they don’t watch.
Apple last year appeared to be pursuing a similar strategy in its quest to launch a television set and internet TV service, seeking deals with some but not all content companies. DirecTV has also talked about offering smaller TV bundles over the internet, aimed at specific audiences like Hispanics or children.
Channels are obviously an outdated way to organize television. They aren’t going away, but the experience of browsing TV is still rapidly improving.
Comcast has a new cable box that people don’t actually want to throw out the window. Its web-based interface lets you easily search for “movies” when you want to watch a movie—a long-overdue and welcome change. Why memorize the channel number of NBC Sports Network when you can just click “sports”?
Even better are Time Warner Cable’s apps for mobile devices and set-top boxes, which plainly demonstrate how watching TV gets easier when it moves to the internet. Here’s a demonstration by Greenfield:
Television is currently sold to households, but the phrasing of Dish’s “personal subscription service” suggests that it will be sold to individuals. It could resemble cellphone service plans, with discounts for families. In any event, selling individual TV subscriptions allows for more flexible pricing and greater personalization—of the choice of content, the interface, and maybe even the advertising.
Personal subscriptions also make it easier to let people use more than one device. “Television” no longer refers to the big screen in your living room; that’s just one screen of many. You might prefer to use your phone or tablet or PC. They are all just “glass-covered internet machines.”
Some pay-TV services already let you watch on mobile devices within your home. True internet TV service would extend anywhere, relying on fast cellular connections when you aren’t connected to Wi-Fi. More to the point, taking the emphasis off your TV set and cable box allows for lots of creative possibilities. The most obvious is putting your “DVR” in the cloud, so you can schedule and view recordings from anywhere.
Phones and tablets aren’t just for watching video; they can control video, as well. Plenty of existing examples suggest that your phone makes for a better TV remote than what’s on coffee tables in most living rooms today. The mobile remote can adapt to specific contexts, cutting down the number of buttons or offering you a keyboard when it makes sense. And switching between screens becomes simpler, too.
Most of the innovation in internet TV has previously been found in electronics that plug into television sets, like Apple TV, Roku devices, and Google’s Chromecast. (“Set-top box” is an outdated term for them.) But using them along with a traditional cable box is harder than it should be. Most people find it cumbersome to switch between one device for watching Netflix and another for live TV.
The next generation of TV services ought to solve that by fully integrating streaming video services like Netflix, Hulu, and Amazon Instant Video. Users won’t have to switch inputs on their television sets, which may sound like a small improvement but could help make internet TV more mainstream.
Netflix recently agreed to pay Comcast for better delivery of its content. Some analysts believe that, as part of the deal, Comcast will put Netflix on future versions of its cable box. That would be a big step for the cable TV industry, which has generally been wary of internet-delivered competitors.
In that scenario, you can start to think of Netflix as just another TV channel like AMC or HBO. Netflix already welcomes those comparisons and has started referring to itself as a “movie and TV series network.”
But, of course, Netflix isn’t like other networks. It doesn’t have any notion of airtime. Everything is played on demand. So you might think of that as a model for what other networks could end up looking like, as well.
You don’t have to imagine what on-demand HBO might look like because it already exists in the form of HBO Go, the network’s website and app for subscribers to the cable service. Many have argued that Time Warner should sell HBO Go on its own, without requiring a pay TV subscription, but that isn’t yet economic for the company.
However, a personal TV subscription priced as low as $20 a month would start to make add-ons like HBO, for another $10 to $15, seem more attractive. HBO might then reach customers outside of the roughly 100 million US households that currently pay for cable TV service. Someone might pay monthly fees of $20 for a basic personal subscription, $10 for HBO, $8 for Netflix, and $2 for some newfangled YouTube channel—a scenario that’s closer to an à la carte media menu.
People want easier and more personal access to video, which is one way to explain the success of Hulu. Much of Hulu’s content is also available to pay TV subscribers through on-demand menus, but those interfaces are so poorly designed that people avoid them or don’t even know what’s available. Hulu is easy to use. HBO Go is easy to use. Netflix is easy to use. And people are willing to pay for that convenience.
An internet TV “channel” could resemble an on-demand menu with better design. Or the entire internet TV service could take that approach, emphasizing viewer control over what happens to be airing right now.
Once you’re thinking this way, it’s easier to see what other internet TV “channels” might look like—and, as importantly, where they would come from. Consider a few recent developments:
- WWE, the leading American wrestling promoter, offers its own streaming video network with access to live events that could previously be purchased only as add-ons to cable TV.
- Apple TV added a Beatles channel to celebrate the 50th anniversary of the band’s American debut.
- GoPro, ostensibly a camera maker, is launching an Xbox channel.
- The PBS app for Apple TV is getting rave reviews for mixing a deep archive of content with new episodes of shows like Downton Abbey, Sherlock, and NewsHour.
All sorts of companies, from sports leagues to film studios, are in a position to form their own channels and sell content more directly—if only their licensing agreements allowed it. That will take longer than some other developments and may not make business sense for some content owners, but the opportunity is there.
However, for all the promise of internet TV, there’s still the issue of delivering it without hiccups. US internet infrastructure, from one end to the other, just isn’t good enough to seamlessly stream video to everyone. The technology will improve, though, and reliability will likely become a selling point for services like Netflix.
And while internet TV service looks at first blush much cheaper than traditional pay TV, it still requires a connection to the internet and lots of bandwidth. That will undoubtedly cost people more. Some internet service providers are among those likely to offer internet TV, so it will be interesting to see how they set their pricing to edge out competitors. People may end up feeling as boxed in by cable companies as they do today.
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