Channeling the Future of Television
Consumption of content has increased, yet less people are glued in front of the traditional TV set. A 2013 Nielsen Cross-Platform Report shows that though traditional TV is still prominent, American households are adding new mobile technologies to view programming and increasingly unplugging from wire cable service. Basically, the future of TV is in your pocket.
Knowing What it Takes
The true successor to traditional television will need to integrate a great user experience with painless access to content. This evolution happened when Apple changed music with the iPod, then the mobile industry with the iPhone, and Google with web content, and Facebook with personal content.
The question is, who will be able to do that for TV? The ideal company will have the capacity to successfully integrate all three key elements that are transforming the TV entertainment industry – traditional distribution, content creation, and web-based technology. Although having one entity successfully deliver all those elements is a tad unrealistic at this point in time, some companies are doing better than others.
Satellite companies and cable providers seem to be floundering. These multi-service operators (MSOs) and the content owners they partner with may need to abandon their expensive models, as viewers are less willing to tolerate a monthly triple-digit bill for watching TV. If the content is not convenient to access, then consumers will find alternative ways to access it – which includes illegal downloading. Plus, these satellite and cable behemoths are becoming harder to rely on. Later last year, Time Warner Cable (TWC) and CBS came to a standoff in negotiations for how much TWC would pay to carry the network. CBS went dark for roughly 3 million cable customers in New York, Dallas and Los Angeles. TWC ended up losing that fight to CBS, resulting in the loss of 3 percent of TWC’s subscribers in that quarter.
Besides the aforementioned quibbles, the fact of the matter is that the 1960s paradigm of family viewing of the only 7 o’clock show is no longer a sustainable framework. Consumers are demanding control of their schedule, the volume of the content they watch, and where they watch it. Consumers care less about the biggest, baddest television that Best Buy can sell, and more about the convenience and quality of their content.
Such a transformation has led to success for the companies that can satisfy this on-demand desire. Enter: Netflix – a paradigm for premium content creation and distribution.
From Red Envelopes to Digital Mastermind
Netflix navigated this transformation more gracefully than its competitors. In the span of months, Netflix seamlessly transitioned customers who were accustomed to postal delivery of DVDs, to the largest source of traffic on the Web. After a pricing hiccup in 2011, Netflix recovered by using its software expertise and its access to Big Data (i.e. the collection of multi-structured data of online consumer behavior using technology and algorithms). With these tools in tow, Netflix accrued 36 million viewers worldwide and went from offering mostly movies and some TV, to offering high quality serialized content and just decent movies.
In 2013, Netflix streamed four original series — “House of Cards,” “Hemlock Grove,” “Arrested Development” and “Orange Is the New Black.” The shows earned high marks from critics and viewers alike, and were nominated for 14 Emmys last fall. It was the first time an Internet-only service earned a seat at the big-boy table in television.
One theory as to the foundation of Netflix’s success is that, as a distributor, it already had the information necessary to analyze what genres, actors and directors were highly rated among consumers, and how those factors could intermix to develop successful original content. This method proved to be extremely successful with “House of Cards,” whose show runner, David Fincher, won an Emmy for Outstanding Director. Maybe most importantly, “House of Cards” satisfied the needs of an on-demand generation that can consume the entire season in one 13-hour binge session. This instant availability enables consumers to trade in cliffhangers, commercials, and comprehensive recaps for stronger and uninterrupted storytelling. Compare this recipe for success to TWC’s fiasco. You can bet that the subscribers TWC lost picked up a subscription with Netflix or even cut the cord altogether.
Cutting the Cord
Accordingly, if a media company intends to keep its customers and hopefully add some more, the model to follow is not the traditional pay-TV bundle of MSO’s. Rather, Internet TV seems to be the paradigm: Google Fiber, Chromecast, Apple TV, Roku, Boxee, and the like, can provide anytime-watching. Video game consoles can also provide similar experiences, as with Microsoft’s Xbox One and Sony’s Playstation Four. The next issue is producing the content, and enough of it, to stream on those devices.
Delivering the Content
Netflix will continue to deliver with second seasons of “Orange is the New Black,” “House of Cards”, and “Hemlock Grove,” plus the debut of “Lillyhammer.” But besides Netflix, who will step up to match this quality of programming? Amazon Prime and Hulu have already demonstrated the ability to do so.
Amazon Prime released 14 original pilots in April of 2013, and asked viewers to rate their favorites to determine which were worthy for full-series. In November, they debuted their first series “Alpha House”, a political comedy about four U.S. Senators who share a home in Washington, D.C., and “Beta,” a tech-comedy about a start-up and tech culture. Unfortunately, such shows have yet to be as well received as any of Netflix’s series.
Hulu has over 5 million subscribers and 30 million Hulu.com users. In 2014,“Behind the Mask,” a docuseries that looks at the world of sports mascots will be returning, as will “East Los High,” a California-set teen drama, and “Quick Draw,” a comedy western following a Harvard-educated sheriff in 1875 Kansas. Hulu will also be premiering its adult-oriented animated superhero series “The Awesomes,” whose creator is SNL’s Seth Meyers. In other genres, Hulu will debut “Deadbeat,” a supernatural comedy co-produced with Lionsgate Television, as well as “The Hotwives of Orlando,” a scripted parody of reality TV.
Sony Pictures Television-owned streaming service, Crackle, is also pushing original content offerings, adding season renewals to scripted drama series “Cleaners” and reality series “Comedians in Cars Getting Coffee.” Yahoo! unloaded 8 new series on September 9th of last year. The new programs are built around sketches from “Saturday Night Live,” and include “Ghost Girls” from Jack Black and “Tiny Commando” from Ed Helms and Jacob Fleisher, as well as “Losing It with John Stamos.” In addition to the top dogs, smaller web series will continue to surface.
Although some companies are making this content thing look easy, it is not. Being creative is time-consuming, expensive and competitive. New original content needs to be a hit, or it will sink fast, and take a business down with it. Even though the above-mentioned companies are doing well with what’s been produced so far, volume remains a stumbling block. There are six companies that still run the media world: Disney, Viacom, Time Warner, News Corp., CBS, and Comcast control 90 percent of American media. With that degree of market dominance, these content owners can still refuse to sell content a-la-carte and force the despicable pay-TV bundles. Change will arrive when these media behemoths are forced to break their existing profitable model. This revolution will occur eventually. Entertainment companies will just need to rise to the high expectations of their consumers by creating award-worthy, quality content, and delivering it with the anytime, anywhere convenience.
Rising to the Occasion
So, whom can we anticipate stepping up to the plate? Microsoft launched their Xbox One last year, which is designed to serve as your living room’s primary media device. Yet, the product has had trouble in living up to its all-in-one promise: Its live TV support is barebones and access to DVR recordings is not possible with the Xbox’s controls.
Sony will begin testing a web-based TV service to bring on-demand programming to TVs and its Playstation consoles. The product is intended to make it easy for consumers to switch between live and web-based TV programs. Such an innovative TV service may put Sony into competition with incumbent cable and satellite providers like Comcast and DirecTV.
Intel tried to launch a similar web-based TV service, but may turn that over to Verizon. One reason cited for Intel’s reversion from the media business is that while the company had the technology to support the effort, it was lacking in the quality content area. Intel’s CEO Brian Krzanich reportedly commented that, “When you go and play with the content guys, it’s all about volume. And we come at it with no background, no experience, no volume. We were ramping from virtually zero.”
Such commentary and examples elucidate the difficulty in trying to master the trifecta of content creation, distribution, and web-based technology all at once. Part of the challenge is actually defining television. What does one actually mean when referring to TV? Serialized content viewed in any environment, perhaps? When television, computers, tablets, phones, gaming consoles and the like all morph into one unit, then the demarcation is hazy, and the fuzzy lines will keep the media giants guessing.,
 Amit Karp and Payl Lyandres, Bessemer Venture Partners: http://gigaom.com/2014/01/18/to-understand-the-future-of-tv-look-in-your-pocket/
 Stock, Kyle. “The CBS Blackout Was a Horror Show for Time Warner Cable.” Bloomberg Businessweek. Oct. 31, 2013. http://www.businessweek.com/articles/2013-10-31/the-cbs-blackout-was-a-horror-show-for-time-warner-cable
 Carr, David. “TV Forsees Its Future. Netflix Is There.” The New York Times. July 21, 2013. http://www.nytimes.com/2013/07/22/business/media/tv-foresees-its-future-netflix-is-there.html
 Arthur, Lisa. “What is Big Data?” Forbes. August 15, 2013. http://www.forbes.com/sites/lisaarthur/2013/08/15/what-is-big-data/
 In 2012 and 2013 together, Netflix produced nine original series.
 “TV Forsees Its Future.Netflix Is There.”
 Chmielewski, Dawn C. “Binge-Viewing is transforming the television.” Los Angeles Times. Feb. 1, 2013. http://articles.latimes.com/print/2013/feb/01/entertainment/la-et-ct-binge-viewing-20130201
 Solsman, Joan E. “With its original shows so far, Amazon is no alpha.” CNET. Dec. 1, 2013. http://news.cnet.com/8301-1023_3-57613938-93/with-its-original-shows-so-far-amazon-is-no-alpha/
 Keh, Charlotte. “A New Year with New Hulu Originals.” Hulu Blog. Jan. 8, 2014. blog.hulu.com/2014/01/08/a-new-year-with-new-hulu-originals.
 Sperry, April. “Netflix, Hulu, Amazon Prime Originals: Time to Cancel Your Cable Subscription.” The Huffington Post. Jan. 18, 2014. http://www.huffingtonpost.com/2014/01/18/netflix-hulu-amazon-prime-originals_n_4591418.html
 Spangler, Todd. “Yahoo sets comedy binge with SNL, Jack Black, John Stamos and others.” Variety. Aug. 21. 2013. http://variety.com/2013/digital/news/yahoo-sets-comedy-binge-with-snl-jack-black-john-stamos-and-others-1200585946/
 For a list of comedy web series to check out, see: Mentel, Thomas. “7 comedy web series you need to check out.” Wall St. Cheat Sheet. Jan. 15, 2014. http://wallstcheatsheet.com/stocks/7-comedy-web-series-you-need-to-check-out.html/?a=viewall
 Karp, Amit and Paul Lyandres. “To understand the future of TV, look in your pocket.” Gigaom. Jan. 18, 2013. http://gigaom.com/2014/01/18/to-understand-the-future-of-tv-look-in-your-pocket/
 Ong, Josh. “PlayStation 4 vs. Xbox One.” Nov. 27, 2013. TheNextWeb.com. http://thenextweb.com/gadgets/2013/11/27/playstation-4-vs-xbox-one-one/#!sDm4P
 Edwards, Cliff. “Sony plans tests for Internet-based television programming.” The Washington Post: Business. Jan. 11, 2014. http://www.washingtonpost.com/business/sony-plans-tests-for-internet-based-television-programming/2014/01/09/8cc56044-78a1-11e3-af7f-13bf0e9965f6_story.html
 Bushey, Ryan. “Intel CEO explains why they gave up on web TV.” Business Insider. Jan. 2, 2014. http://www.businessinsider.com/intel-ceo-web-tv-project-2014-1
 Comment made in an interview with new tech news website Re/Code.
Drake, Sarah. “Intel’s Krzanich on why he killed Intel’s webt TV project.” Silicon Valley Business Journal. Jan. 3, 2014. http://www.bizjournals.com/sanjose/news/2014/01/03/krzanich-on-why-intel-killed-its.html
 That said, even if you are seriously considering placing some bets and making investments, Forbes speculates that big players worthy buying stock in are Comcast, Walt Disney, Lions Gate, Netflix, and CBS, as they are the companies well-positioned for considerable upside in the future.
 Gerber, Ross. “Investing in the Future of Television.” Forbes. Sept. 18, 2013. http://www.forbes.com/sites/greatspeculations/2013/09/18/investing-in-the-future-of-television/