Robert Tercek, the former MTV exec and ex-president, Digital Media of Discovery’s OWN: The Oprah Winfrey Network, closed paidContent Entertainment with a breathless, history-spanning overview of the state and near-future of television: the end of channels, the unbundling of the cable business and the rise of media marketplaces.
Tercek began his presentation — slides will be available shortly, along with video — by tapping his inner Marshall McLuhan by telling the audience, “Content is always shaped by the container.” And in the case of the record industry with CDs and cable television with the set-top box, the container is shattering.
He illustrated his point with a description of Charles Dickens revenue model for the novel. The British author, like others of the period, didn’t sell books — he sold serialized chapters. The container of the “serialized pamphlet” influenced Dickens to write chapters with a cliffhanger so readers would be hungry for the next one. Because he was successful, he wrote a great many chapters. Dickens was so good, in fact, interest in his works crossed the Atlantic, where they were packaged as complete books — which publishers in the U.S. produced without paying Dickens royalties for his content. “We complain about China, but once, we were the content pirates.”
Eventually, story structure was determined by TV, which structured scenes around commercial breaks. But as broadcasters create shorter, more frequent commercial pods, they’re ending up losing their audience.
While cord-cutting has been talked about as an emerging threat, if not currently an actual one, to the cable industry, Tercek says that MSOs would do well to prepare for users to turn away from the set-top box.
Even broadcasters (i.e. “content companies”) find themselves in jeopardy, as they face competition from quarters they never had to worry about, such as device makers and telcos and the cable distributors themselves. TV channels like ABC (NYSE: DIS) and NBC (NSDQ: CMCSA) face a future where they are simply apps on a tablet that consumers choose to view.
The move to TV Everywhere, where cable subscribers are given permission to view subscription programming on digital devices, is the way cable believes it can hold on to their value in the eyes of consumers, as device manufacturers, telcos and content providers compete to show programming on their own terms. This will force the unbundling of cable and the MSOs will have to create new services to compete, Tercek said.
Some argue that the telcos will be the winner by “rebundling,” by offering to sell users a basic tier of service and then premium on top of that. “I don’t think the consumer has been asking for that,” Tercek said. “People don’t want a choice between a collection of basic and premium channels. In fact, we’re seeing the end of the channel.”
In the two-way network, channels, are about getting viewers to tune it at a specific time. As time-shifting increases, the value of programming for a specific moment will fall by the wayside. Unbundling will lead to the creation of marketplaces of content. “Every successful business on the web is a marketplace of some sort: Google (NSDQ: GOOG) with search, Amazon (NSDQ: AMZN) with retail products and iTunes with music and apps. They are all marketplaces: efficient mechanisms for matching buyers and sellers. These companies don’t need to monetize content the way TV companies do. Facebook monetizes your social graph and market it to the highest bidder. Google does the same; it’s all about selling consumer behaviors, identities and relationships.”
The end of the channel has been happening for a while, Tercek said. “Broadcast news used to be the flagship of the brand. But we’ve hollowed out newsrooms because of the cost. Reality television was thought to be a fad, but it is here to stay. Every TV programmer has some form of reality show. We’ve also started to notice endless repeats of hits in cable, because it’s cheaper to rerun a show than invest in a new one. About 60 percent of cable viewing on a particular channel is three or four shows; the rest is filler.”
While Tercek expressed a great deal of pessimism for the current state of cable TV, he is particularly excited about the kinds of businesses that will emerge. “What might the service of the future look like? A company called Frequency — I wish I could talk about what they’re releasing next week. I was at a presentation of their’s earlier and it rocked my world.”