Google (s GOOG) chairman Eric Schmidt was on a diplomacy mission last week, reaching out to broadcasters in the UK and urging them to embrace changes in the way that viewers watch TV, as enabled by the Internet. Giving the MacTaggart Lecture at the Edinburgh International Television Festival, Schmidt provided a view into how TV is changing and made a plea for broadcasters to work with the search giant to enable that future.
Reading the transcript or watching a video of the lecture (Schmidt’s speech starts about 36 minutes in), you get the feeling that this is no less than a manifesto, not just on the way things will be but also on the way they should be. There’s a feeling of inevitability to it. The message to broadcasters, in light of this, seems to be that they can either get on board with technological change or risk being left behind.
“You ignore the Internet at your peril,” Schmidt told the audience. “The Internet is fundamental to the future of television for one simple reason: because it’s what people want.” For Schmidt, people want the experience that the Internet brings, because it enables things that traditional TV cannot: “It makes TV more personal, more participative, more pertinent.”
The future of choice
While TV programming is limited by time and the number of TV networks, the Internet provides the possibility of a near-infinite amount of content to choose from. And, given the on-demand way that viewers are increasingly viewing content — through prerecorded shows on their DVRs, video-on-demand selections through their cable provider or streaming on the Internet — there needs to be a way to sort through those content choices.
For years broadcasters have largely tried to control viewer choices with lead-ins and other editorial hooks, but the vast number of content choices calls for a new way of discovering content. We’ve long argued that personalized recommendations will be vital to the way that viewers discover video in the future, and it seems that Schmidt agrees with us:
Online, through a combination of algorithms and editorial nudges, suggestions could be individually crafted to suit your interests and needs. The more you watch and share, the more chances the system has to learn, and the better its predictions get. Taken to the ultimate, it would be like the perfect TV channel: always exciting, always relevant — sometimes serendipitous — always worth your time.
Schmidt cites the success of Netflix, (s NFLX) which doesn’t have a lot of new content and yet has survived and even flourished through a robust recommendations engine. According to Schmidt, around 60 percent of Netflix views are a result of Netflix’s personalized recommendations, showing that the one-size-fits-all approach to linear TV programming might not be the best way to reach audiences in the future.
The future of interactivity
While viewing is destined to become more personal, it’s also becoming more social. That might seem like a bit of a paradox, but at the same time that viewers are watching content that is more relevant to them, they are also sharing what they’re viewing with others.
This interactivity is not being driven by the TV screen itself but through second screens that viewers are using while watching TV. That includes tapping into social networks on laptops and on mobile phones, commenting on blogs and forums, and even chatting with friends in real time. Schmidt pointed to Google+ Hangouts as one example of how viewers can socially interact while watching video together, and you can see how the same type of technology could be incorporated into future versions of Google TV devices for live video viewing.
While viewers clearly want social interactivity, it’s also good for broadcasters, Schmidt said. “Trending hashtags raise awareness of shows, helping boost ratings. It can be metric for viewer engagement, a vehicle for instant feedback, a channel for reaching people outside broadcast times. It can also provide a great incentive for watching live.”
The future of measurement and monetization
Broadcasters can benefit not only from the way the Internet allows viewers to discover and interact with content but also from vast new opportunities for monetization. That includes selling directly to viewers through digital downloads or the ability to more profitably sell ads against content.
Today there’s a huge premium spent on advertising against the first airing of a TV show, in part because that airing is most likely to aggregate the largest audience. But Schmidt argues that it shouldn’t matter when viewers first watch a show. “If it’s the first time you watch a show, it’s first run to you, no matter how many times it has been broadcast. As TV becomes more personalized, ad models should adjust accordingly.”
Note also that this shift means a change in the way that viewing and ad effectiveness is measured. Nielsen, which provides the ratings currency that is used for selling TV ads in the U.S., is investing heavily in multiscreen measurement, but Schmidt said that Google is trying to understand how to measure effectiveness across multiple platforms as well.
Will broadcasters get on board?
There’s no doubt that the TV industry is in the midst of some fundamental shifts in the way viewers find and interact with video content. And there’s a huge opportunity for broadcasters to use Internet technologies to enable new experiences and better reach a more engaged audience.
Schmidt gave many examples of how content industries fought change over the past century, from newspapers fighting with radio stations in the 1920s and ’30s to Hollywood and broadcasters arguing that technologies like the VCR and TiVo (s TIVO) would destroy their businesses.
Although TV viewing will inevitably change as the Internet enables new habits, Schmidt argues that broadcasters should see the opportunity and not the danger that such a change brings. “History shows that in the face of new technology, those who adapt their business models don’t just survive, they prosper,” Schmidt said.
But how soon those businesses will adapt, and how Google fits into their plans, is still very much an open question.