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Summary:

Cable companies and TV programmers are faced with a startling new reality: They are no longer the gatekeepers that decide what consumers see on their new Internet-connected TVs. In this new app-based world, their content is increasingly being placed against options from online services like Netflix.

tv apps

Last week’s Consumer Electronics Show (CES) highlighted a wide range of new Internet-connected TVs, Blu-ray players and other devices, but more important than the devices themselves is the effect that Internet connectivity brings to the consumer experience of watching video. If there’s one thing we learned from CES this year, it’s that there’s a paradigm shift happening in the way consumers discover and access content.

Cable companies, so used to having their program guides being the first thing people see when they turn on their TVs, need to get used to a new reality: It’s not the distributor that owns the relationship with the consumer anymore; it’s the TV manufacturer. In other words, it’s an app world and the cable companies just live in it.

On a new generation of connected TVs, cable programming is not the first or the only piece of content available to the consumer; instead, the cable company is just one of many on-screen choices available, including games, widgets and even over-the-top viewing options from companies like Netflix and Hulu Plus. As more people purchase these connected sets, that will increasingly put pressure on the old guard to differentiate what they have to offer from alternative content providers.

Perhaps seeing the coming shift, big cable players like Comcast and Time Warner Cable have announced new applications on connected TVs, Blu-ray players and mobile devices. But by doing so, they’re merely ceding some of the control they’ve long enjoyed in “owning” the customer relationship. That control now increasingly belongs to the consumer electronics manufacturer, which is now the deciding factor for what content options consumers see when they turn on their TV sets. In this strange new world, consumer electronics manufacturers are the new gatekeepers.

That’s a frightening thought for cable distributors, and for content owners alike. Which might be why so many cable and programming execs have come out to complain about the app experience on connected TVs, saying it’s confusing or “not ready for primetime.” (Of course, this is coming from the same industry that just put us through 15 years of navigating 500 channels on an up-and-down grid.) It’s not just that the consumer experience isn’t up to par; it’s that the new paradigm undercuts their hold on the TV audience.

We’ve discussed the potential results of this shift before: T he cable program guide will become less important as a content discovery mechanism, and personalized recommendations will become a larger part of the way that consumers find videos they want to watch. In the world in which content is democratized and served up based on viewer interest rather than as part of a programming lineup, the difference between content created for the web and content created for TV gets stripped away, which also has the potential to strip away the power of big cable and satellite distributors and big media conglomerates.

Unfortunately for cable and media companies, this is a shift that will happen with or without them. Some cable companies, like Comcast and Time Warner Cable, are trying to jump on board as early as possible in hopes of capturing some of the TV manufacturers’ audience before it’s too late. And there are signs that some media companies, like Disney, may find their own way to TV sets with apps that are separate from what cable companies offer. But those standing on the sidelines might have a hard time holding onto their audience when the cable program guide is no longer the first thing they see when they turn on the TV.

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  1. it can’t happen without the content companies — the content peeps control what they will and will not put on connected TV. it’s just empty screens without the programmers.

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    1. @col, The point is that it’s not just empty screens. The Internet content from Netflix and Hulu Plus is already there on the main TV menu before you even get to the cable content. Broadcast and cable TV can decide not to be on that menu as well, but they’re doing so at their own peril.

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  2. Great post. The power to control the consumer and content is definitely shifting from cable/satellite companies to hardware manufacturers and their closed systems.

    “In this strange new world, consumer electronics manufacturers are the new gatekeepers.”
    Do consumers and content creators want new, different gatekeepers or no gatekeepers at all? I am strongly in favor of no gatekeepers at all and for me this is the whole appeal of online video.

    “That’s a frightening thought for cable distributors, and for content owners alike”.
    Will content owners and consumers settle for these new closed systems. I think they will continue fight to be freed from gatekeepers and self serving distributors.

    These closed app systems appear to me as just a new way of doing an old thing – controlling/limiting/censoring content creators and their audience.

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  3. While much of the debate continues to focus on access to content, I’m still wondering how this shift will impact broadcast TV advertising ($60B+ industry). If I’m a marketing VP at a consumer packaged goods company, do I now negotiate ad rates with the TV manufacturers, the app or widget developers, and then I approach the TV networks?

    Who are the ad revenue winners and losers in this evolving ecosystem? The pay-TV incumbents successfully blocked Google and Apple in favor of this scenario. But how is this a better outcome for the legacy big media power-brokers?

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  4. Lobbyists commence!

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  5. Will this produce a TV simple enough to “just use”, without reading the instruction manual? I hate the situation today when you visit a friend, want to watch a music video on their tv, and have to cope with three or four remotes, each with 20 buttons. Then you get it wrong and they have to spend several minutes restoring the default options.

    If yes, I’m in favor. If no, I’d prefer a dumb TV and a computer.

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  6. Ever since I fell into the media/entertainment industry in the mid-1990s its always been about two elements of access, convenience and availability. The underlying driver in all of this is that people want the content they desire in an appropriate form and fashion. Everything from the top-notch production value of blockbuster films to the basic homemade quality of how-to content has a potential home.

    In any delivery system, either physical or virtual, there are constraints and those who have a valued solution reap compensation. So yes Virginia, gatekeepers have always existed and will continue to be part of the system. The good news is that over time disruptive changes shift value equations and open doors. In my humble opinion this is what’s taking place in the video content ecosystem. There is no longer a gatekeeper standing in the pass between two unassailable mountains. We now have a series of passes between foothills. All have gatekeepers but their status is confined to certain access paths with none able to completely block access. What this ultimately means is that they will have to learn how to play together, power will be shared, and hopefully the consumer will benefit.

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  7. I realize this is supposed to be a speculative, forward-looking post, but you may be oversimplifying this a bit.

    The programmer/cable company relationship is complex, to say the least. I’m not sure, but I don’t think that programmers have a direct relationship with the end-consumer. Losing the cable company for a Smart TV deal may well lead to an a la carte environment, and trust me, NOBODY wins in that scenario.

    However, if electronics manufacturers want to come to the table during retransmission consent fights, we’ll welcome the help.

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  8. Post seems to be following the GigaOm anti Cable/Cord-cutting branding a bit too closely,

    As mentioned in other comment(s), content is where its at, whether the main menu is a TimeWarner Cable menu on my Samsung TV, or its one of the options, that is irrelevant. Wherever the content is, that is where I, and all consumers will go.

    As far as ‘ceding control’ to the CE guys, that is hardly the case. Cable co’s have had a program ongoing for past several years to embed the smarts of the STB into CE devices such as Bluray players and connected TV devices.

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  9. Making these hardware devices (Alphaline, Amazon, Apple, Boxee, GoogleTV, Hulu, Netflix, OnLive, Playstation, Roku, Sezmi, Slingbox, Tivo, Vixio, Vutopia, Xbox, YouTube, etc.) “plug and play,” offering an intuitive and easy on-screen access to the programming, assuring a reliable and robust on-screen experience, offering a variety of content (and within reasonable access windows to their theatrical and/or broadcast and cable/satellite cast premiere), and at an attractive price, will be key factors in the transformation of the traditional content offering and delivery models. There will likely be several winners, but the historic players will not be able to maintain their stranglehold dominance.

    The quality argument notwithstanding, there is an avalanche of content available, in all genres (games, user-generated, traditional channel programming, websites, etc.) and consumption is up because of the ubiquitous opportunities for the user to consume the media at their convenience. And, if content is unavailable, the frustrated consumer simply moves on to that which is available; either tossing aside their original thirst or patiently waiting until it is available (e.g., “next day” on Hulu; or “in 30 days” via Netflix). The thirst for convenient content consumption will only increase as traditional and nascent technologies enhance their products and as new products are introduced. The easy to use, accessible, affordable product will be the most attractive.

    Channel programmers, whose bread and butter are affiliate revenue (advertising revenue, withstanding) will irk the ire of their consumer/fan base if programming content can’t be accessed however the consumer demands. Hence, the broadcast/cable channels slowly making more programming available off the traditional distribution pipes. This process will continue and not ease. Starving these outlets for content will eventually prove futile.

    David Polakoff
    http://davidpolakoff.wordpress.com

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