What would it take to build an online TV service that regular people would use instead of cable or satellite?
Microsoft's new Xbox Live IPTV services are about as close as anyone seems to have gotten so far, but it still feels like a complement rather than a replacement. What I'm describing here is more ambitious than that -- which is why it's not going to happen anytime soon -- but I think it's also useful to think through. Doing so helps us understand the big challenges any provider would face if they tried to build something, and it also gives us a better sense of what needs to happen before there will be any large scale shift in consumer behavior. The obstacles really aren't technological at this point; broadband penetration is high enough. We're just dealing with the legacy business model of a television industry that's having trouble making the transition to a new distribution platform.
Anyway, here are a few elements I think any online TV service will need if it wants people to be a replacement for cable or satellite:
1. Live TV
Whether it's sports, awards shows, or political stuff like the State of the Union, this is the number one reason people cite when they tell me they can't or won't cut the cord. So any service which wants to sign up regular people will have to have some kind of live TV component.
2. Have the shows people want to watch
The other big reason people don't cut the cord: they can't watch the shows they like. (Hulu does an admirable job here, but they're at the mercy of what the networks will give them.) I don't know how you solve this without paying through the nose, but regular people aren't going to give up their cable or satellite otherwise unless they feel like they can get enough programming they care about. The scary thing for the cable and satellite companies is that the high price of service is leading to a generation of young people who are never signing up in the first place and who won't have all that many shows they care about.
3. Have a great back catalog of content
Think about how many thousands and thousands of television series have been created over the years and how only a fraction of those are available online. An online service with serious breadth and depth would be another factor in convincing people to sign up.
4. Price it right
This might surprise you, but I don't think the price for this service needs to cost the same as Netflix or Hulu. A true substitute cable or satellite only needs to be significantly cheaper than the average cable or satellite bill, which is usually in the range of $60 to $70. The right mix of live programming and on-demand programming could come in around $25 or $30 and still be very successful.
5. Somehow don't piss off the cable companies
Most people -- at least in the US -- get their internet over cable, so anyone offering an online TV service is going to draw the ire of the Comcasts and Time Warner Cables of the world. They're already raising the prospect of tighter bandwidth caps and expensive overages in response to the rise of Netflix, how do you think they'd react if twenty million households canceled their cable service and signed up for an online TV service? It's not that they're opposed to people watching stuff online -- they just want to get paid for it no matter what. The cable and satellite companies love TV Everywhere (which lets you watch programming on your PC, mobile device, or Xbox) because you need to be a paid cable or satellite subscriber to access the content. Sort of defeats the purpose as far as I'm concerned, but the cable and satellite companies are going to do everything possible to keep people on the hook. I honestly don't know how you solve this problem. You may end up treating them like the mob, where you have to pay them off every month to get what you really want.
Would love to get your thoughts, what else do you think is needed?
I think we are at the point where we need to talk about reforming the Telecom Act of '96, with the main item on the agenda being to make it illegal to tie connectivity with content services. If cable companies are not permitted to use their monopoly on the wires into our homes to sell content, I think the landscape would look completely different.
Bits are bits and we need to stop wasting the 5.6Gbps of throughput into our homes on reruns.
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the real issue is how to deploy a system that does this effectively. presumably, that's what Jobs meant when he told Isaacson that "cracked the code" for TV or whatever.
this implies a system that can effectively pull metadata from disparate sources, scrub and unify that data for consistent presentation (not trivial), and deliver the content via a simple yet compelling UI.
sadly, MSOs remain committed to IR remotes with the old "up, down, right, left" paradigm - which cripples the UI with a slow and tedious method to search and/or browse for content that is downright primitive in comparison to what many of us have become accustomed to on our phones and tablets.
some of the "smart TV" systems (internet connected TVs) from Sony, Samsung, and LG show promise, but in each case it's often necessary to switch video sources in order to use a STB, a game console, a media player such as BR/DVD/DVR, an OTT box such as Sling, Boxee, Roku, etc., or OTA sources. there is no consistency in UI (in terms of physical remote or on screen control) from source to source, and there is a lot of latency in every system as sources are switched.
mainstream consumers are waiting for a system that unifies the experience, improves the UI, eliminates latency, and kills the multi-remote table clutter once and for all.
there will be those here who *like* the control provided by dedicated systems - but that doesn't respond to Peter's question re: "regular people"
whatever Apple is planning will probably have that appeal. the problem with Apple TV today is that it's saddled with the up/down/right/left remote (albeit one of the better implementations) , the iTunes pay wall, and it's just a source - not a hub.
the "real" solution will integrate paid and free content (including local/live, sports, etc.) from multiple sources in one seamless experience.
worth checking out www.hillcrestlabs.com...
Once multiple tv systems can be delivered over one pipe, using IP, then issues like what is the best UX possible can be one of the terms of competition.
Any one of the current cable or satellite company players could offer this sort of service, if they could get content providers to make the deals (which it does not seem like they can.)
For example, why does a company like DirectTV need satellites in this day and age? Why not just offer a similar service over IP? Or why doesn't someone compete with them for that market?
#5 is the reason. It is also the reason why net neutrality matters and the fact that we all know that not pissing off the cable companies matters, suggests that we don't really have net neutrality.
It is a sad truth but politically at this time, cable companies are too powerful to allow direct competition with their cable TV franchises. The FCC could be imposing the sort of competition that would create this type of service but they are not going to do it. Too much influence from the current players who have been ready and blocking this sort of thing from happening.
It also seems to be the case that content providers are colluding with cable companies, some are now owned by cable companies, not to make deals that would allow the cable box to be bypassed for certain current programming. That is why your iPad can't stream certain stuff to a TV over Airplay. The content is locked up to prevent that very thing from happening.
We need an Open TV coalition to expose the way cable, content and policy are being tied together to limit competition for TV delivery over IP. Then we might actually get to a point where TV is untethered from your ISP and we might actually have competition and choice between many IPTV providers.
I know that this falls into your first requirement, but it is a variation worth mentioning. In an ideal world, an IPTV service would not just have live coverage of emergency situations, but it would also have the ability to alert you somehow, no matter what you're watching.
And... we don't watch sports.
Dish Welcome has (of note):
- Local networks
- Comedy Central
- Weather Channel
- The usual shovel-fulls of religious and shopping channels.
- Public Interest educational channels like UCTV and Link.
Comcast Economy has (may vary slightly by market):
- Local broadcast channels
- Univision (Spanish)
- Telemundo (Spanish)
- Cartoon Network
- Animal Planet
- Weather Channel
- Fox News
- Comedy Central
- Religious/Shopping whatnot.
- Community access whatnot.
If you're interested in a cheap way of getting something like HBO-GO, Dish Welcome + HBO (total: $31) is the cheapest way I know of, and you get AMC and Comedy out of it to boot.
The only catch here is HD. Dish charges extra for it and you need to own or rent an HD box. Comcast will charge you the HD box rental (an SD-only box is included).
If you can't negotiate with the leagues then you'd have to convince the networks to cut out the cable companies from equation and stream their sports content on the Internet. Again this goes to relationships. You'd have to convince the networks to annoy the cable providers which would require way too much money per subscriber.
The thing with sports on the Internet is that there isn't the same P2P threat that movies and music faced in the last 15 years that will force them to lower their prices for the Internet. Illegal streaming of live events is still too hard and unreliable to be used at similar levels that Napster had.
Not trying to prophesy here, but just making the point that Steve never believed in doing what everyone else was doing only a little better. If he threw his heart and soul into it, he went for the gold and tried to take what everyone else was doing and fix it... which means change it drastically. Based on his comments around this project, it seems like he may have invested himself in it enough for that.
In regards to the networks, they are finally getting a clue. I just watched the Sunday night Saints vs. Lions NFL game streaming live on nbc.com Sunday night and it was amazing... way better than watching it on television. The little picture-in-picture view of the above-field camera is awesome. Convincing these networks to treat Apple like another service provider may not be so far-fetched.
Other issues are the if-I-dont-watch-it-now-I'm-going-to-miss-it effect and the I-want-to-see-it-before-everyone-else syndrome, and my personal favorite: the if-I-can-watch-it-anytime-I-want-then-I-don't-need-to attitude, which is related to the if-I-can-always-win-there's-no-need-to-play idea in gaming.
Then remember that Comcast has around 22 million subscribers and TWC has another 12 million. 34 million x $0.10 is not chump change.
Now ask yourself how much they have to charge to get $3.4 million from only one million subs, instead of 34 million. And this is assuming the one million viewers all cut the cord and use an OTT option for viewing.
The price tag on your "a la carte" shopping cart is going to fill up pretty quickly if you don't have millions of other viewers subsidizing your choices. That is, assuming these smaller TV networks even survive without the regular paycheck from the cable MSOs.
1. A channel that is kept alive by subsidy either deserves to die, OR... it is exactly the sort of channel that is ripe for distribution on a lower cost medium like online. Look at TechTV, a channel theme that collapsed on cable, but the content of which has found its way to a much better outlet via IP in entities like TWiT and Revision3. There's no reason your Food Channel and DIY and the like couldn't follow suit.
2. Some consolidation needs to happen anyway. We have more channels than content to fill them. That's why basic cable is so full of redundant low budget reality crap. It's just filler so the channel owners can jack up the number of ad slots available and theoretical number of eyeballs watching. History International is the TV equivalent of a heavily SEO'ed 2 paragraph article with 10 ads flashing around it.
3. More and more, the classic Cable model is being sustained by one thing: Sports. There are a LOT of sports fans out there and they want their games as live and as HD as freaking possible, and more than any other cable constituency they are willing to PAY. ESPN/Disney and the leagues have become
4. THEME-BASED PACKAGES instead of tiers or a-la-carte. Cox was experimenting with this when I was with them a few years back. You subscribed to a basic package of mostly all-purpose channels (locals, Public interest, general interest (USA, TBS, WGN...)) and added themes on top of it, which could be Movies, News, Sports, etc, priced accordingly. This let them bundle weak channels along with stronger ones and still let viewers opt out of things they didn't care about categorically. Of course you still couldn't opt out of ESPN-1, because if Disney couldn't spread the egregious cost of that programming across an entire subscriber-base, the subscribers that do watch it might realize how overpriced sports programming really is and decide that they don't need it so much after all. (Similar to what is happening to Cable TV as a whole for the people who aren't shackled to a sports addiction.)
So, practically speaking, I think there needs to be the intermediate step of breaking up the tier-based system within the old distribution medium before moving to a new one. It will better illustrate to the programmers and cable companies that there is money to be made under a more horizontal business model.
for all this talk about disrupting television there is an awful lot of desire to make the online alternatives exactly like cable. what's most interesting is that the cable companies and studios want it this way -- what they're doing is working. they're sabotaging the disruption by appearing to give us what we want, almost, but never quite letting anything match the enjoyment and simplicity of cable.
How about letting me choose which channels I want to get? There's probably less than a dozen channels my family actually cares about, so turn off the rest and lower my bill if you want me to stick around. I don't channel surf, and I don't watch sports, so don't make me pay for all that other stuff. i'd still keep a "basic HD" set of channels, but I want to choose the channels.
Broadcast cable (e.g. multicasting) is still a great (and efficient) way to download TV shows into a lot of people's DVRs without having to send individual "on demand" Internet streams to all those cable-cutters (which also slows down everyone's cable Internet speed).
The single big thing that will never get anyone to jump is mentioned by beau above and that's sports. Microsoft attempted to bring this to the Xbox with their Summer Olympics plug-in a while back but it wasn't that great. A. it wasn't updating with the most recent stuff, B. none of it was live C. it required someone have another PC running in their place with WMC on top of it. The Xbox integration of ESPN360 is nice but again there are problems mostly with the overall quality of the feed and the #1 biggest problem with online sports is Blackout rules. Until blackout rules go away a proper online service providing sports is never going to take off.
Edit: I think one factor some are overlooking too is bandwidth, but I think that deviates a bit from what you're asking.
also want to watch when I'm ready. DVR's suck and are old tech which the cable and satellite companies don't have an interested in upgrading to something better. I can only record two things at once and when doing so I have to either watch one of those two programs or something I've already recorded. I'd much rather sit down to watch TV when I am ready and download exactly what I'm in the mood for. Also, DVR interfaces are awful and slow and the remotes (like many other television remotes) need updating.
I'm not a huge sports fan so I don't really care about live TV and at this time I'm having a hard time thinking of a reason why I would need live TV except for an emergency news broadcast. Maybe I'm not a typical television viewer. I can accept that.
As far as not pissing off the cable companies I'm not sure how that is possible at this time. They want to keep collecting the vast amounts of cash they have been for far too long. They have tons of money to use to make their product better and they don't. They couldn't care less about customer satisfaction.
Matching the money content producers get from the networks is going to be a challenge - especially given that ties between cable providers and content producers are growing tighter (Comcast/NBC Universal).
1 - The first includes #5 - but not just cable companies wanting to preserve their profits, the studios and media companies have profit margins to maintain too (for good or bad). Many of the less popular channels are owned and subsidized by revenues from higher-profit ones. You're still paying for all the channels you don't watch in your cable plan, and that does enable valuable and meaningful, even if niche, variety in programming to mass audiences. If we are able to pay less for our TV content, we would need to ensure that the production of new content isn't starved of funding, otherwise i think we'd suffer from the same kind of saturation of "pop" content that's happening to music. Only that with mass appeal would thrive, and the fringes would be littered with low-budget and low-reach media. It's not intractable, but it needs innovation in technology to drive a new wave to helping content reach audiences if we disempower the cable companies from doing it for us.
2 - Cable companies are not technology companies. That's why we still have cable boxes that are stone-age technology. They don't get it - and it's not their priority to innovate the user experience. There are many companies trying to do the innovation around the edges that have been mentioned by other commenter, but none have the control over the content and pricing like the cable hegemony does, and so the offerings really aren't compelling yet for consumers. It's either too cumbersome or clunky to stack these boxes on top of your cable box (because the cable box is still necessary), and so as glamorous as the UI might be the overall user experience still suffers because it's not reducing the complexity of it all. Or, added monthly fees (Xbox live) make it even more expensive, which is definitely not what people want.
3 - Studios licensing rules for their content are often ridiculously ridiculous. Valuable content in back catalogs sits unused for all the wrong reasons when it could be generating revenue and pleasing consumers. For example, either it's tied up in blackouts, or there isn't enough air time, or they're afraid of diluting its value by licensing it for digital distribution. It's short-sighted, and this needs to change from inside the studios or they risk the fate of the labels.
Apple, as much as I hate to say it, may be the only company with the clout to push change. They have the gravitas and proven revenue-driving potential to cajole big cable and big media to try new things. They also have the consumer devotion and UI prowess to make it easy, sexy and an instant hit. Unfortunately, with this Apple secretly moves into a choice position as your best-friend-slash-worst-enemy.
As another commenter suggested, an open tv initiative is sorely needed. Whatever special dispensation Apple receives to control access to back-catalog content should be available to any business wanting to help revolutionize TV in a way that protects everyone's interests and allows change to happen - at whatever pace everyone's comfortable with. Just let it happen already!
Growing up as a kid I would get the German equivalent of TV Guide every two weeks and would actually read it front to back and mark everything I want to watch on the major channels (about 12). I know it sounds weird. The other way of discovering TV content was channel surfing. Anyway - today I don't have time to channel surf (you may be able to discover music through radio in the background but that does not work for tv).
I can't think of a good source that allows you to discover all kinds of TV from serialized, to documentaries to live events. To me this is essential for the live after cutting the cord.
The price of cable is not the problem, the problem is that for the price you only get a giant tub of all kinds of food thrown in together instead of just the tasty stuff, neatly presented.
When I'm streaming Netflix my network gets clogged with the stream and anything else I may want to do online becomes a diminished experience. Even with a connection that gets me up to 2.5 - 3 MB/s this is still a problem. I can't imagine what it is like for people who don't even have half of that.
This would give people access to most news, sports, and popular programming. I'm actually surprised to see that MS hasn't done this yet on Xbox and I expect Google or Apple to step up here.
Local channels plus on-demand content (Netflix or Hulu) would make an IP TV service very appealing.
I was suggesting that local OTA stations feed their live streams to service providers who can then relay the stream to their market. The burden should be placed on the service providers to feed each user the bits, not the local stations. In the case of the Xbox, MS could include these stations as part of their Xbox Live Gold Subscription.
Licensing is definitely a major issue that needs to be overcome. This wouldn't be the first time new licensing rights would need to be negotiated for media. My suggestion was simply to make the point that CBS, NBC, ABC, and Fox are already used to working outside of the cable industry with their own broadcast services and should be able to make their own negotiations without much push back from the cable companies. I'm not part of the broadcasting industry but from someone not in the industry, an IPTV service would appear to be the natural evolution of traditional OTA broadcast services.
Microsoft stated that their are currently ~35 million Xbox Live subscribers. This makes them larger than the entire for install base for Comcast (~23 million) who is the largest cable provider in the US. This could definitely help with negotiations. And if CBS, NBC, ABC, and Fox decide to build the infrastructure they could potentially tap the hundreds of millions of Android, iOS, and Windows machines for streaming as well.
Apple has what, $80 billion in the bank? Comcast's market cap is about $60 billion, and they're not competitors, so an acquisition should pass nicely. Once Apple owns Comcast, it can take over Comcast's contracts with the networks to allow Apple consumers access to the networks through a Comcast business model while keeping the rest of Comcast's business intact on the side.
I think a more likely scenario is the Zune Pass style for TV online, where you pay a set monthly fee and you can pick-and-choose any content you like, without restriction, for a certain number of viewing hours or programs. Go over, you pay more, just like cell phone data. This protects the ISP as well from massive bandwidth costs, but also allows the user to select any show they want to see without a new package or channel subscription.
1. P2P streaming
Broadcatch instead of Broadcast... the sooner they use the wisdom and power of the crowds to share content (and somehow measure this, along with reasonable fees) the better. The days of pushing all the content down one big pipe should be behind us.
2. Let people build their own content experiences
For the first time ever, actually give people what they really want to watch, when they want to watch it. It may be a combination of streaming to a desktop or laptop to catch the latest episode you just missed, downloading and archiving of your favorite old shows and clips on your own system, streaming a mashup of your favorite clips with your commentary over to a friend, staying up to date on live news, sports and event coverage even while on the go via mobile streaming, catching new movie releases via the home theater system; this is an example of the most common uses I can think up right now, but the possibilities are endless. For some though, it might only be the mobile streaming of latest content and they may have little interest in old archives from the 50s-70s, for others it might only be occasional streaming an old childhood favorite from the 80s, for some it might be just premium sports content with betting odds and statistics, and lastly some might want to be able to click on a section of a newscast and get more relevant information (a-la Starship Troopers' "do you want to know more"). This level of interactivity is what it will take for internet-based systems to finally displace traditional broadcasts.
3. Every episode of every show ever recorded, right NOW!
It's time for the studios, cable providers and other content gatekeepers to as they say "shit or get off the pot" they are wasting valuable resources which can be monetized. People in their 50s-70s might want to watch shows from the "vaults" (archives), but if they wait 5-10 years will anyone still around be much interested in or able to afford access to re-runs of "I Love Lucy" or the orginal "Gunsmoke"?
4. Flexible business models
* Monthly Subscription (for packages of channels, similar to cable but a little more flexibility)
* Yearly Membership (for groups of content types, not channels; non-linear viewing)
* PPV/A-La-Carte for Live and Premium content
All can be priced in a way that it sustains the creation of new content
5. Start a citizen mass-movement on the scale of Occupy Wall Street, to push for legislation making the cable companies irrelevant
Its about time people stood up and said to the telcos, studios and broadcasters that they're sick of getting screwed, gauged and pinched for every penny they have, just to enjoy the privilege of watching an increasingly deteriorating level of quality of content.
With these things in place, and it may sound like a pipe-dream but I fully believe it is inevitable (the digital switchover is the first step in this) and probably coming sooner rather than later, Internet based Television will finally replace TV in a natural and organic way, and most people won't even notice the change in technology, except those who might protest or lobby for political and legal changes to enable the final stages.
If Americans really want to change this country for the better, we don't even need to get out of the house and go occupy anything. If everyone would just decide to turn off their TVs, stop watching movies, stop buying CDs produced by the big labels, and stop listening to the radio, the entire content industry would fold within 1 year as the advertisers bail out on them and independent producers like the TWiT and Revision 3 networks would step in to fill the void. Then all the time, money, and energy that gets wasted on entertainment in this country could be diverted towards more enduring endeavors. And those left creating content would be the ones doing it for love, not money, and the quality would actually increase. And we would all find new means of entertaining ourselves. I'm pretty sure no one would die from missing mainstream media, with the possible exception of all the executives in the industry that have no real skill other than stealing people's money (not saying they are all of that sort). Those folks might not be able to make a living in a world where people will only watch content that has some redeeming value.
It's amazing that the US doesn't have this already since you're always way ahead of us in terms of technology. For Apple to take over the space in France I guess they would need to become an Internet provider which I'm not sure they're going to do. But the channels and services are there. Add iTunes and Netflix (which we don't have) to that and it could be a perfect system.