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Why Is the Television Business Determined to Destroy Itself?

  |  April 21, 2011   |  Comments

Apps could save the traditional television business, but only if the industry gets out of its own way.

A few months ago, it seemed like a golden age of TV viewing beckoned: live content was being freed from the living room and becoming available across PC and post-PC platforms.

Today? Not looking so good.

Let's start with some recent history. At CES 2011, during the Samsung keynote address, the two largest cable distributors, Comcast and Time Warner Cable (TWC), stood shoulder to shoulder demoing iPad apps. Now, these weren't just glorified channel guides or even fancy iPad remote controls - they were the genuine article: watch live and on-demand TV, in your own home, on your iPad.

Now, the cable industry doesn't tend to be in the vanguard of innovation, but this time the cable giants made their move pretty early in the game: less than a year after Apple made the tablet market a reality. TWC turned on the live streaming in March and took the arrows for it.

The Time Warner app is dead simple, exactly as it should be. Channels scroll up/down the left gutter of the screen; recent channels can be pulled down and viewed from the upper right corner. Best of all, every bit of interface happens on top of the live TV. The result feels much more like television than nearly anything over IP.

Sadly, though, navigating the channels is too easy, and getting easier every day. That's because more than half the channels that were present during launch have been removed from the app.

What happened? Well, while consumers rejoiced and pundits started to believe the cable business might not be headed for the scrap heap after all, the networks lawyered up. Ranging from threats to sue TWC (lots of channels) to actually suing them (Viacom), the networks demanded their channels be taken out of the iPad app. They say that their carriage agreements don't allow their programming to be shown to subscribers on anything other than a TV.

Jeff Simmermon, director of digital communications at Time Warner Cable, wrote in a blog post:

"Like I said, television is melting right now. The whole TV industry is sitting on a river that's flowing fast into the future. Some programmers are kicking the currents with feeble karate and some are getting in a boat and pulling oars along with us for the good of our customers - the people who already paid for all of this and want it really, really badly."

And while I'm a little perplexed by his crazy mixed metaphors, I have to agree wholeheartedly with the sentiment. Following in the proud footsteps of the music industry, the TV business is fighting among itself while the real threats go unchecked. Remember a couple of important things:

1. The live streaming works only in the subscriber's home.

The opportunity for misuse is nonexistent. It's exactly the same as me buying a small TV, a big extension cord, and a long roll of coax cable and carrying all that stuff around my house - but without the cords or backache.

2. In 2010, MSOs paid $24.8 billion,* an 11 percent increase over 2009.

On what planet do the networks feel like they are getting a raw deal? Channels clearly aren't feeling the same pressure as the multiple system operators (MSOs), but their behavior is incredibly short-sighted. Sure, their content is what everyone's fighting about, but they will be hard-pressed to get the kind of revenue from over-the-top (OTT) services that they currently get from distributors. *(Source: SNL Kagan)

3. Piracy is the real threat.

OTT is only the most obvious enemy, not the most frightening one. My friend and leading media analyst has made big news in the last few weeks by illustrating the real threat in a way a child can understand. The video he made walks through a site of free-streaming pirated TV shows and films that are available to watch on the iPad in totally acceptable quality for anyone who wants them. Whether I was on the network or MSO side, that's what I'd be worried about.

We're vehemently anti-piracy at Possible Worldwide (as is BTIG), but I can't stop feeling a deep sense of déjà vu. Remember Napster? It changed the way we experienced music at the turn of the century. But pirated music didn't spike because people wanted to break the law; it spiked because there weren't any good legal options for the way we wanted to consume our music. Napster was easy and the fact that it was free didn't hurt. And consumption of pirated music didn't plummet because of legislation - it plummeted because plenty of convenient ways to listen became available.

The path TV is now on looks like this: lack of viewing options from traditional providers, rise in piracy, desperate deals by networks to get on OTT platforms, lots of legal options for cheap à la carte programming. While this might sound like paradise for consumers, less money in the TV industry means that quality and choice will suffer.

Can apps save the traditional television business?

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Only if the industry can get out of its own way. The entire TV content and delivery business can band together to keep their high subscription rates and their happy consumers glued to their precious 150+ hours of TV each month (Nielsen).

And all they have to do is agree on what a TV is.

Update: While going to press (as of April 15), Discovery and Fox have rejoined the lineup. Maybe there is hope after all. Stay (ahem) tuned.

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ABOUT THE AUTHOR

Andrew Solmssen

Andrew Solmssen serves as managing director of Possible's Los Angeles office, leading the firm's West Coast client teams and determining best practices for engagement management.

He previously served as managing director at digital firm Schematic, where he played a key role in developing some of the earliest advertising models for delivering broadcast content via the Internet. Andrew was also responsible for providing strategic guidance to clients such as Comcast, ABC Television, and NBC Universal in the areas of digital strategy, content distribution, mobile entertainment, and Internet TV. Before Schematic, Andrew served as executive producer at Web design and consulting firm Kaufman Patricof Enterprises.

A frequent speaker at industry events such as Digital Hollywood and CES, Andrew is also regularly quoted by business and trade media on the topics of digital advertising and technology innovation. Prior to his involvement in digital media, Andrew lived in Namibia as part of the Harvard Institute for International Development.

Follow Andrew on Twitter @asolmssen.

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