Synopsis: Consumers demand access to video content across their disparate media devices, and crave portability. Coalitions are forming between content providers, technology providers and telecommunications companies in order to control, monitor and monetize the consumption of media. The coalitions are not naturally stable due to the competing interests of each party involved in providing legal content for viewing, but since this is not a constant-sum game there is room for more than one coalition to thrive.
The King is Dead, Long Live the King!
So television's time has passed, all hail the new king of content delivery, the bitstream. Well, not so fast. The majority of Americans still have a cable, dbs (satellite) or fibre-optic system delivering subscription content to their homes. Despite the success of content-delivery sites such as YouTube and Hulu, which are overwhelmingly consumed from a personal computing device, for most consumers in the US television is still king. Although a small, but rapidly growing, segment of Americans have cut their cable ties and download or stream content on demand to their media centers, Apple TV's, Xbox's or Roku's, television is still very much in command of what content gets viewed by consumers (albeit much less in command of when since the advent of the DVR.)
Consumers increasingly seem to want to take their content where they go, or watch content stored on a single device to be available to them in another room or on another device. Content portability is creating simultaneously the greatest opportunities as well as the biggest headaches for content providers. On one hand, content providers have the chance to grab more eyeballs or mindshare, while potentially adding new revenue streams, by providing the means by which consumers can view content whenever and wherever they may be. On the other hand, providers struggle to control piracy or monetize digital content across all various platforms and devices, many of which may not be connected to the potentate of the American living room, the flatscreen television.
With the recognition that savvy consumers, especially the much-coveted 18-35 demographic, are knowledgeable enough to discover and consume the content they crave, whether of dubious origin or not, content providers are moving to enlist partners who can give them a degree of control over - and, of course, what they deem to be a 'fair' share of the revenue created from - these shifting consumption patterns.
Although one could speak of the cat-and-mouse between 'soft' (convenience-driven) or 'hard' (will never pay or just enjoy the challenge of , say, cracking encryption) content pirates and content providers as a game, this analysis is concerned with the strategic game between major content providers, technology providers, and telecommunications companies. Each one of the players in each category needs help from at least one in another category in order to share in a piece of the video content pie. For example, a content provider needs a secure delivery mechanism, which may involve partnering with a technology provider to create a secure authentication scheme, or a phone company who has a pipeline to consumers homes as well as devices in them to make content available.
Here are some of the major players by category. Note that players involved in more than one category, are placed in the category which is most associated with their primary line(s) of business:
Big Content: TimeWarner, Disney, Viacom, NBC-Universal, Sony Pictures
Technology/Service: Google, Apple, Microsoft, Netflix
Telecommunications/Delivery: Comcast, DirecTV, AT&T, Verizon
Coalition One:
TV Everywhere. Pay for a content subscription once, get access to that content from anywhere via an (opaquely defined) authentication scheme.
Current Players: TimeWarner, Comcast
Benefits: Does not attempt to alter radically the existing economic system (in fact it attempts to defend it), which is that content providers get paid by content deliverers (e.g. cable companies) as well as advertisers for their product. In turn, the delivery companies sell advertising locally as well as get subscription revenue from consumers. As Mark Cuban points out, someone has to pay for all this great content, and indeed most consumers already are doing so.
Cons: It's unclear at this time how this will actually solve the platform issues, because there is no clear technology provider at this time, or any promises as to specific platforms or devices which will end up being supported. Only one Big Content provider is 100% behind it, and rollout to the delivery stage is in an early phase.
Stability of Coalition: Very stable unless the economics of the industry are undermined or radically shifted by consumer behavior and technological interruptions, which seems to be occurring but perhaps not on a grand scale (yet?)
Coalition Two: Netflix Anytime
Current Players: Netflix, Microsoft, Viacom & other content providers
Benefits: Allows consumers to use PC's, Mac's or view content on their televisions by streaming from Netflix's servers, connecting the TV via a computer, Xbox, Sony PS3 or Roku device (not to mention the traditional Netflix DVD or Blu-ray delivery via post.)
Cons: Does not solve portability completely, as mobile devices are left out at the moment. The iPhone is a big problem here if Apple blocks access.
Stability of Coalition: Stable, but vulnerable to interruption. Content providers could leave Netflix in order to destabilize this service or promote their own pet solution. Delivery providers are cut out, so they will work hard to see their own interests preserved. Microsoft could force Netflix off the Xbox in favor of their own streaming video service or another party's.
Coalition Three: iTunes on AppleTV, iPhone, iPod Touch & Mac/PC
Major Players: Apple, Disney and other content providers
Benefits: Can view content on televisions, Macs & PC's, as well as the iPhone/iPod Touch juggernaut. Consumers can rent or purchase content easily from an integrated store. Rumored subscription model would allow for bulk content rental, but it's not clear this will actually occur.
Cons: Is dependent on content providers to license content; said providers are wary of Apple after they took the upper hand from the music companies, also via iTunes. The Disney relationship is relatively strong due to Steve Jobs being one of their largest shareholders (via the Pixar purchase by Disney), but other content providers could choose to defect.
Stability of Coalition: Same as with Netflix - good but vulnerable, largely cuts out telecom providers.
Coalition Four: Hulu
Players: NBC-Universal, Disney, News Corp and other content providers
Benefits: Allows consumers in the US to discover and stream content to a PC or Mac.
Cons: No dedicated devices nor even available on most living room gadgets, no subscription service (for consumers to access more/specific content in a more timely manner), selective content available, not useful on mobile devices. Attempts to change the prevailing economics since Big Content 'owns' everything and thus denigrates content providers to 'dumb pipe' companies instead of partners. This last point also risks the currently quite substantial subscription revenues cable channel owners get from their Delivery partners.
Stability of Coalition: Very stable for the content providers as they control everything, having acquired the technology which powers the website via an acquisition. Telecom companies will work against this solution unless they can get some kind of revenue from it.
Clearly, there are more solutions available than even these four (the Amazon video service comes to mind, as well as Google/YouTube), but this isn't meant to be an exhaustive review of every possible solution to the delivery problem. Rather, we can see that certain players are involved in several coalitions while others are shut out of many of them, in particular the telecoms. Since telecoms are a hugely important delivery stream as well as revenue source, the content providers have to tread carefully when promoting their own self-interested content delivery services (e.g. Hulu.) It's no accident that NBC was the primary driver behind Hulu, because as an over-the-air station they are not as dependent on cable or satellite compliance for either revenue or delivery (cable companies are required by law to carry local stations, for example.)
Over time one would expect the number of solutions, and therefore coalitions, to decrease as consumers choose the solutions which best suit their preference for convenience, portability and cost. However this may take many years, so I would predict many new entrants before any shakeout occurs. In any case more than one of these coalitions can survive, as each creates value differently to different parts of the media ecosystem (with the exception of Amazon, iTunes and Netflix, who are all dependent on content partners and create value from rental models.)
I will post further on these topics, including looking at strategic moves individual players might make in order to further their specific interests.
Full disclosure: Blogger is an employee of TimeWarner, completely uninvolved with the TV Everywhere initiative. Comments do not necessarily represent the views of TimeWarner.
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