The Coming War for Your TV Desktop-Redux
Just realized that its been exactly two years since we published this byline on Business Insider, so thought it would be a good moment to revisit and see how things have progressed. It was a pretty popular article at the time, generating almost 4000 views, and I noticed the NY Times recently wrote a similar piece as well updated to the current market realities. I've marked up inline some of updates based on a lot of recent developments and news.
The last twelve months has been one of the most remarkable times I can remember in terms of sheer innovation and disruption in the digital video market. The long awaited “watch what you want , where you want, when you want” vision seems to be closer to becoming reality than ever before.
Whether it’s subscriptions on iTunes, the ubiquity of video on demand from cable companies, the explosive growth of Hulu, the growth of broadband and fiber to the curb, or the fervent adoption of the iPad, the confluence of all the access, devices and offerings is making video everywhere a certainty.
These various armies of video enablement are marching towards a showdown that I believe will be the next battleground where video fortunes will be decided. This battle royale that I am referring to is for the control of the TV “Desktop”.
Update: Ok, TV Everywhere has clearly become the name of choice at this point.
What exactly is the TV “Desktop”? It’s what used to be in the twentieth century the “Electronic Program Guide”, the dreadful scrolling interface we have all had to endure when trying to find a program to watch on television. It still lingers, but clearly its days are numbered. Its limitations became even more obvious and unbearable with the arrival of web search. There is a better way to search, browse and discover video content, it just has not found its way to the television yet.
Update: Well wish I had better news here. The cable TV program guide is only modestly better than it was 2 years ago.
While browser based (online) video is the current “shiny object”, watching television on the PC still pales in comparison to the amount of television watched on traditional networks and devices, namely your cable programming viewed on television. Getting the anywhere-anytime video to the TV is the Holy Grail for publishers and broadcasters, and the destination where everyone wants to get to, but only some will make it there successfully. As the multi-platform, multi-device world arrives, finding, organizing and searching for television content becomes even more crucial, and is equally critical real estate for everyone in the TV consumption value chain. I sat down the other day and wrote out a list of all the segments and players, and I was surprised by just how many are vying to control this valuable asset:
Next Generation Services: Comcast, Time Warner Etc.
Through their “TV Everywhere” initiative, they hope to be the gateway to all your TV viewing, regardless of platform or device. They control the pipe and critical payment and account authentication gateway and have the content relationships. Comcast is aggressively investing in the platform and data sides of their business, and the NBC acquisition leaves no doubt as to their belief that access to content is vital.
Update: Game on. Xfinity etc is super focused on maintaining control by providing authentication gateways to over the top content.
Next Generation Devices:
1) Traditional players such as Motorola and Cisco.
The set top box developers own a critical piece of the value chain, but their slow pace of innovation leaves them exposed, and they lack the relationships with the content providers.
Update: Not seeing the set top box folks making a lot of progress here even though they own a valuable piece of the equation. Cisco buying NDS is a big play here though.
2) New entrants such as AppleTV, GoogleTV.
These players suffer from the same challenge Tivo endured. Do consumers want another box in the living room to watch TV? The reality to date is that few consumers want to have several pieces of hardware in order to watch television. This was a big part of the reason Tivo struggled, despite having such a superior product.
Update: Google TV whiffed at their first at-bat badly. The new Nexus Q seems like an admission that Apple TV is the better approach. I continue to believe that Apple's Airplay feature is the big sleeper that's going to erupt and be Apple's true play in the living room.
3) Gaming Platforms including Nintendo, Sony, XBOX.
The biggest advantage here is that consumers have already added these devices to their consumer electronics “must haves” and they are connected to televisions, and increasingly, to the Internet. Streaming video to gaming platforms is growing explosively.
Update: XBox seems to have been the most aggressive, launching several very substantial updates to the television/video features of the platform. More recently, adding SmartGlass to match Apple Airplay functionality, although de[ending hugely on the success of windows smartphone and tablet adoption. Microsoft is clearly betting on XBox as the living room strategy.
4) Consumer Electronics players such as LG, Samsung, Sony.
With 30MM digital TV’s sold each year, the opportunity around connected consumer devices is real. The consumer electronics brands want more than just a one-time sale. If they can generate some annuity revenue from some combination of content promotions, subscriptions, or a-la-carte content sales, their profits could explode. For mobile, the inclusion of an HDMI output on devices such as the 4G Sprint Evo creates fascinating opportunities to view the mobile device as a form of portable set top box.
Update: Lost of movement here as well. Samsung and LG both pushing their television "app" platforms hard, and adding voice and motion sensing features to their remote controls.
Next Generation Middleware: NDS, Rovi, Hillcrest Labs.
These players develop the applications that integrate the content and metadata into an interface that can be used on the set top box. Owning both the metadata and application know-how combined with a datastream of user behavior puts them in a unique position.
Update: Seems harder to ascertain. Cisco's acquisition of NDS certainly suggests committment to this piece of the television technology stack, and NDS has some sweet technology in the pipeline if they can bring it to market.
Next Generation Applications: Netflix, Hulu, iTunes, Amazon, Boxee.
The subscription movie cable channels like Showtime etc are terrified of Netflix. Its brand strength, ease of use and ability to go over the top has fueled its rapid growth. The risk is Hollywood decides it has too much channel power and begins to crimp its access to first run content. The others have access to content, and have seen tremendous growth.
Hulu, however is being pressured into a subscription model, suggesting the power that the content providers hold over its destiny. Boxee has run into barriers with the content providers. ESPN3, and HBOGo are examples of content companies going direct to consumers, albeit still in cooperation with the ISP’s. In ESPN3’s case, it’s via your ISP’s willingness to pay for it on your behalf, and ESPN3 broke records with its multimillion simultaneous streams of the US-Algeria game.
Update: Netflix has had kind of a crazy ride with their misstep around the Qwikster concept, Hulu has continued to grow nicely, and Amazon has added streaming to the Amazon Prime offering. Boxee as a platform seems to have fallen short. Most of the media customers we work with are focused on MSO-based TV Everywhere initiatives, iTunes, XBox, and the LG/Samsung TV "apps". Boxee has pivoted somewhat towards more of a companion TV type app.
The weapons in the battle for the TV Desktop are varied, and will ultimately dictate the winner:
- Access to content: without content, it will be difficult to create the value proposition to the end user.
- Access to consumer: Most of the contestants described above believe they have access to the consumer. Whether it’s Apple via iTunes, Samsung via TV sales, or Microsoft via XBOX, access to the consumer is critical.
- Metadata: All TV Desktops of the future will rely on a complete set of metadata. This metadata will not only need to include proper titles, descriptions, actors, genres etc, but increasingly will need to include frame level metadata to unlock future advertising, search, and content recommendation opportunities.
- User Experience: The experts in online consumer experience bring a lot to the table competitively, with Apple and Google obvious examples.
- Channel dominance: While not providing an insurmountable barrier, channel lock certainly helps, and the cable companies and set top manufacturers will be difficult to displace.
Regardless of who wins, it looks like consumers are close to having a new interface for television that matches the experience they have come to expect on the Internet, and the value of the TV Desktop will ensure an epic battle over the next few years.
Update: Seems like this battle is playing out as predicted. We are a bit closer to predicting winners. The authenticated TV Everywhere approach has gained a lot of strength as the content providers look for strategies that help them grow brand, audience, and revenue without irritating the cable operators. TV Apps are hot, but the broadcasters are getting fatigued by the lack of standardization. By our count one would have to write18 separate code packages to cover the full spectrum of TV app platforms. Social TV has also exploded in the last 12 months, with dozens and dozens of players. No one has yet figured out how to add value to Live TV, and you'll see RAMP make significant announcement in this area towards the end of the year. Looking forward to your comments!