Internet TV – it’s the end of the world as we know it

This post has been brewing at the back of my mind for some time now, and is in large part the product of conversations with Alan Patrick over at Broadstuff  (if you are interested in this space the relevant posts on his blog are well worth a full read).  On the way in I was thinking that today might be the day it made the transition from neurons to electrons and then when I read Fred Wilson on Tivo vs The Web I thought carpe diem.

TV will move to the internet.  No news here, everyone gets that.  What I’m not sure about is whether everyone gets just how disruptive it will be.

I think that TV is headed the way of written content.  We used to buy it in bundles (newspapers, books) and now we zero straight in on what we want via search and filters.  So it will be with TV.

To borrow from Chris Andersen’s Long Tail, current TV consumption is shaped by scarcity of distribution.  There has been limited spectrum leading to limited numbers of channels.  So programmes were arranged sequentially in those channels to make sure that enough content was broadcast.

The internet removes the limits on distribution – THIS WILL CHANGE EVERYTHING

Many of the IPTV plays we see and much of what I read doesn’t fully understand this.

Some things I think will change:

• Set top boxes – no need for those in the future.  PCs will be connected direct to TVs.  Everyone is talking about it, from Fred in his Tivo post above to Doc Searls in his latest Suitwatch email newsletter.  When you downloaded the last episode of Lost Series Two and watched it on your laptop you didn’t use a set top box – it will be the same as that.
• The notion of ‘Channels’ disappears.  We can see the beginning of this already.  On satellite movie services up to ten channels can be dedicated to showing a single movie on loop, so people can start watching it when they want.  In the future you will create your own programme bundles of the stuff you know you like and stuff you find via search and filters.  Just like reading blogs.
• Timeshifting appliances – VCRs, DVDs, PVRs – these relics of the channel model will also go
• Satellite TV – as broadband networks improve satellite will be priced out of the market.  I wouldn’t wanna be Sky right now.  They get this.  That is why they are bought Easynet.
• Payment models – at the moment we pay a bundled price for TV access and a selection of channels, plus separate subscriptions for broadband, landline and mobile – four different subscriptions that are increasingly from a single provider.  The content part will, if I am right, splinter into lots of different pieces.  To take the print analogy again we will get some free papers and subscribe to a few different magazines from different players.  Getting advertising to work in this world will be challenging.  Also, targeting may allow consumers to reduce their bills.  I currently subscribe to way more than I watch just to make sure I get ALL the Chelsea games and a full selection of easy watching drama.

This radical world offers something new and better for consumers – something they will want.  Many of the IPTV plans at the moment just don’t do enough to get people to change from a TV service that is already good.  There is much more that could be said here and might be the basis for a future post.

None of this will happen quickly though – broadband needs to get better and home networking easier which will take time.  I predict there will be space for successful products in the interim – Slingbox will be one and the internet Tivo may be another.

So what does all this mean for us as entrepreneurs and VCs.  I think in deep tech there will be a need for innovation in home networking and core network switching and routing (by way of disclosure Esprit has a number of investments in this space DisplayLink has silicon that lets you run multiple displays off one PC and Polatis has a revolutionary optical switch).  At the internet layer we will need filters (think Last.fm for TV), aggregators (think RSS for TV, TIOTI has an interesting play here) and maybe video search.

I’d be interested to hear about others.