How Silicon Valley Will Kill Your TV

Wednesday Jul 17th 2013 by Mike Elgan
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The major tech players have major plans to control content delivery.

Suddenly, several powerful Silicon Valley tech giants are aggressively pursuing deals with media companies to replace how TV is discovered, shared, recorded and, most of all, delivered -- over the Internet, rather than through the cable providers.

Apple, for example, is rumored to be working on a deal with media cable companies that would pay those companies each time consumers skipped a commercial. Apple would offer a regular tier with commercials, plus a premium tier commercial-free. Apple would take some of the extra money paid for the premium option to compensate media companies for the lost ad revenue.

This sounds farfetched, but it’s essentially the same service Apple already offers. When you subscribe to a TV show season or buy an individual show, you’re basically paying more for that show than normal viewers because the download has no ads.

It would be expensive for Apple to do this and an unappealing disruption to the existing business model for media companies. Specifically, they would have to confront all their advertisers with the news that viewers most likely to pay for stuff won’t be seeing their ads. (Consumers willing to pay more for zero ads are exactly the demographic advertisers are trying hardest to reach.)

But the biggest reason is that Apple itself is a major advertiser. The last thing it wants is people skipping Apple commercials.

So Apple’s commercial-free option may be unlikely. And if it does happen, it could be a bad thing for viewers.

The widespread acceptance of ad-skipping would incentivize studios to radically increase their use of product-placement advertising -- embedding paid commercial content into the programming itself.

Apple is already the leading maker of streaming video boxes. Apple TV has 56 percent of the market, while the number-two player (Roku) has a distant 12.5 percent, according to a report published this week by Frost & Sullivan. (Surprisingly, the onetime leader in the category, Tivo, is down to just 6.5 percent.)

That same report concluded that the main reason people buy Apple TV boxes is that they can stream HD content from Apple devices like the iPhone and iPad.

Apple isn’t the only Silicon Valley giant wooing media companies.

The Wall Street Journal reported this week that Google is talking to media companies about a TV service of its own to run on a new box reportedly demonstrated to some of those companies behind closed doors.

Google is in an interesting and unique position for TV content. For starters, it’s already got its Smart TV service integrated into TVs from major manufacturers.

Second, Google is a video-content studio itself, of sorts. The biggest threat to Hollywood and the studio system itself is Google’s YouTube. Google has been aggressively expanding YouTube by encouraging content creators with subscription channels and even a Hollywood studio.

Third, Google is starting to own the best pipes for TV. The company is installing ultra-high speed Internet in a growing number of cities with its Google Fiber initiative.

And fourth, Google is the only player in the mix with its own social network. Google+ is now the second biggest network after Facebook.

With its radical integration of everything into Google+, it’s possible that TV shows could be shared virally on the service and watched directly. Shows might also be shared socially. In fact, this feature already exists in Google+’s Hangouts feature, which enables up to 10 people to watch YouTube videos at the same time and interact during the shows. This capability might be especially compelling during “event” television, such as the Oscars, Superbowl or breaking news events.

Intel is also working on a TV service called OnCue, which is expected to launch later this year. The service would play through a yet-unannounced box that would function like a cable box, but which would deliver TV shows via the Internet.

The device is expected to not only stream shows, but record and retain them for up to a week. It also may offer music and gaming services.

The unannounced tagline of OnCue appears to be “TV has come to its senses” -- a possible reference to the use of sensors to identify who’s in the room so that suggested content can be customized and also the use of in-the-air gestures for controlling the service. Intel recently acquired an Israeli-based company called Omek Interactive, which makes Kinect-like gesture devices.

Sony reportedly plans to offer TV programming from its many devices, including Sony TVs, PlayStation and Blu-ray players. They recently filed a trademark application for the brand PlayStation TV.

Sony has been making some interesting news in the realm of content licensing recently.

For example, the company has changed its download policy for its Video Unlimited service, removing DRM and enabling any TV show or movie downloaded to a PlayStation to be available for download forever and on any device, including tablets and phones.

Speaking of the sudden rush of announcements from tech companies preparing to offer TV, the Journal reported that "the Internet-TV services could have major implications for the traditional TV ecosystem, creating new competition for pay-TV operators that are already struggling to retain video subscribers."

Yeah, no kidding.

The challenge is that media companies have existing deals in place with cable companies and others, which new contracts for delivering directly over the Internet would undermine. The new Silicon Valley players would have to outbid these older deals. Individually, they are unlikely to because they're looking to offer shows at very low rates. But collectively, they just might.

Any studio that opts out of deals with these companies risks being left behind as consumers embrace Internet-delivered TV over cable and, in a worst-case scenario, alternatives to studio-produced content.

So how does that “kill” TV?

Well, once a living room screen no longer needs to be able to receive signals from the air or from a table box, and gets all media from the Internet, it’s not a TV anymore. It’s just a PC with a very large screen: The dedicated TV becomes obsolete.

More interestingly, every Internet-connected screen -- PCs, laptops, tablets and phones -- becomes every bit as capable as the TV in the living room of functioning as a TV set. The dedicated TV becomes unnecessary.

Once television is just another web site, just another source of content on the social networks and just another app, the whole TV set idea will seem quaint and old-fashioned.

In fifteen years, kids may ask their parents: “What’s a TV?”

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