The New TV Model

For a while now, I’ve told people I have a vision for the model of future TV, but Twitter wasn’t the right place to describe it.

I think it’s worthwhile to explore the primary ways TV is consumed today. 

• ·        Over The Air (OTA) – Using a digital antenna, your television can receive multiple inputs from regular (free) airwaves. This includes all of the major networks (ABC, CBS, NBC, PBS) as well as other channels (what used to be referred to as UHF channels which would generally be FOX and the CW). These shows are free, but contain commercials. They can be time shifted using a standalone DVR.  OTA offers a decent selection at a minimal cost, but generally no flexibility on when to view (without a standalone DVR) or access to previously aired shows short of “repeats” or DVRs.
  
  
  
• ·        Cable (to include satellite service) – People subscribe to a tier of service. Generally, all providers offer local OTA channels and a combination of the most popular basic cable channels. Higher tiers (more expensive) offer more channels. Cable providers offer access to premium channels (such as HBO, Starz, etc.). Premium channels may be acquired (generally) without regard to tier, but maybe bundled with higher tiers. It’s worthwhile to communicate to your local cable provider about channels you want that they don’t carry. It’s a data point when they negotiate with the cable channels.  The other advantage is that most cable providers offer “On Demand”, which can be very useful if you don’t have a DVR (or are selective about what you record).  A drawback to On Demand is that many times the amount of “free” or even “available” episodes is limited. 76% percent of the American public subscribe to cable/satellite. However, it’s interesting to note that more older Americans subscribe (over 80%) and fewer younger Americans subscribe (65%). I think this is likely attributable to financial resources (plus, younger Americans may be more willing to find alternative methods to obtaining shows (streaming or piracy)). (See this article at www.marketingcharts.com).
• ·        Streaming – Generally, the major players in streaming are Amazon Prime, Hulu and Netflix. You may be able to get international shows from streaming (using a device like Roku with a service like Acorn).  These providers are generally subscription services and can be much less expensive than cable.  Additionally, all three of the major services have branched into providing “original content.”  Original content can be EITHER brand new shows only available through the service (like Orange is the New Black, available only on Netflix, OR it can be “resuscitated” or acquired shows canceled by networks or cable services. Longmire is an example, where the first three seasons were shown on A&E. It was canceled by A&E and then season 4 was produced by Netflix.  Most streaming options offer time flexibility, as well as freedom from ads. However, access to shows is limited based on the streaming service to which you subscribe. Note that there is a “new player” in town, and that is Network Streaming services. For example, CBS’s “All Access” subscription service affords access to current shows as well as an archived library, perhaps of ALL OF ITS shows.

About 15-19% of the American public identify as “cord cutters” meaning they had cable or satellite, but now no longer have that type of paid subscription. They are primarily using some form of streaming to view television.  This is being facilitated by things like HBO Now, which allows access to HBO without cable or satellite.  A major obstacle to this can be access to broadband internet access. A rather shockingly large amount of the American public doesn’t have access to broadband (high-speed) internet access in their home.  Some people are relying solely on their mobile phones. (See the Pew Research Center report).

Right now, there is a patchwork of services if you want to access ALL original programming. There is no SINGLE way to access all original content.  The average cable bill is between $65 and $99/mo and by some measures has gone up by 40% in 4 years, way outstripping the rate of inflation. Netflix streaming is $10/mo. Hulu Plus is $12/mo. HBO Now is $15/mo. CBS’s All Access is $6/mo. (I suspect that the other major networks will follow CBS’s lead, at about the same price point.) Thus, patchwork viewers are paying a fortune to access all original content, and this is unsustainable.

Where does that leave us? With a very complicated and expensive TV consumption landscape. I believe that the current patchwork will get worse, and then it will get better.

Technologically-savvy penny pinchers can easily piece together a patchwork of sources to watch what they want to watch, when they want to. But, this can involve different platforms, even different devices. I believe the viewing public to be uninterested in this complexity. I think cable is currently popular because of its essential simplicity and breadth of offerings. The reason people are becoming disenchanted with cable is primarily an issue of affordability. With the burgeoning variety of quality shows, not all of which are on network or cable, consumers will have to make choices about the services to which they wish to commit.

The answer to all of this will be “cable 2.0” but it won’t necessarily be cable. I think that some savvy service will offer to “bundle” options that consumers wish – essentially what cable is doing right now for a subset of programming.  But consumers already feel they are paying too much money for channels they don’t wish to watch. The average cable customer gets around 190 channels, but only watches 10% of those channels. (See this article at www.finance.yahoo.com). Generally, when the cost is viewed as prohibitive, and when customers only use a small fraction of what they are paying for, customers are unhappy and may drop the service. In gaming, clever companies have come up with various models of “dynamic packages," which basically allow you to choose what you want, and in some cases, discounts the price of the bundle if you already have one of the items. 

Right now, TiVo is pretty close to the “bundle accessibility solution” because you can access NetFlix, YouTube and Hulu, but it still relies on cable input for OTA and basic cable channels, as well as On Demand.   At some point, I think that, using streaming, TiVo could be THE one source supplier of streaming entertainment and provide bundled options (and if they don’t, someone else will!). In the meantime, the landscape is varied, expensive, it is difficult to measure, shows are difficult to finance and it’s just overall frustrating for the average consumer.  I think what a consumer wants to do is the equivalent of cable (which is to pay an inclusive price) but select what they want from one provider, which would include access to cable channels and streaming services, using one device.

At some point, some provider will allow consumers to choose a digital mix-and-match at a much more affordable price point and that is what I believe the TV landscape will look like, sooner rather than later.