Over the top TV – plus ça change, plus c’est la même chose

By January 17, 2012TV

Netflix, Hulu, Youtube and Amazon, companies at the forefront of web delivered TV are increasingly resembling the traditional TV companies they seek to displace. They are now all complementing aggressive licensing strategies with large budgets for developing original content in recognition of the age old truism of TV – content drives subscribers. This leaves us in a situation where, like the old guard of TV, the new guard controls both content and distribution, but unlike the old guard they don’t bundle access (i.e. cable or satellite) in with the package. The access element is now commoditised and adds nothing to the package.

This emerging world is a far cry from the early hopes of web enthusiasts that content owners would have direct access to consumers and wouldn’t have to go through gatekeepers. That vision has been realised in the sense that content owners can host shows on their own websites, market direct to consumers and make money either via charging directly or advertising, but it is increasingly clear that the best way to access a large audience online is to do a deal with one of the companies listed above. Netflix and Hulu et al are the new gatekeepers.

From a consumer perspective I don’t think this is good. I fear that we will be faced with choosing between rival subscription packages which offer only a fraction of the shows we would like to see (something we haven’t had to worry about too much in the UK). Worse still, I fear that as the battle between the pure online players and traditional companies like Sky and Comcast intensifies the market will get more fragmented and the total amount of content in any given subscription will shrink. In the short term I suspect this will also be bad news owners of anything other than A-grade content, including up and coming hopefuls, who will find it harder to get in front of large audiences. Owners of A-grade content and top stars should do well as the TV rivals battle each other for material that will help drive subscriber growth.

Live sport programming is the next frontier. We heard in December that the 2012 Super Bowl will be streamed live online by NBC, but it in the UK at least there is no legal live online access to big games. Once there is I will turn off my cable subscription, but probably not before.

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  • Nic,

    Very good and important points, well said.

    I think a few mentions of this concern such as by you, will see us offered many evolving “forms” so what is available or how it is made available, will morph into something different yet again. It does usually happen – markets/p[roduct innovations/services seem to open up, then close up only to open again as an innovator comes along. The UK is different and has a prised-open market (by regulation to some extent!) but suffers from a lack of true competition so far in this and many other areas. (BT Openzone being an example regarding broadband/internet connections).

    It would be a good for customers/consumers to be able to buy what they want on an as-wanted basis, but all too offten the pieces chosen one-by-one are overpriced. The cost difference of delivery in bulk (a whole programme bundle) versus piece by piece choices has shrunk to near zero. There seems to be an opportunity to provide what viewers want, but this does also seem to be constipated by regulation and backward-looking licensing of entertainment programmes.

    I think – hope – the appetite for original, fresh, creative and adventurous material is entrenched and theren will be a rush to fill any lack of place for this to be showcased and offered to those who seek it. In other words new “gatekeepers” will emerge to satisfy appetites. Don’t you?

  • So far it seems to me that content bundles are going to be as much a feature of the new world as they were of the old, and that is in-spite of the delivery economics now being almost identical for bundles and pay as you go. I guess that means marketing economics are the driver – it is more efficient to recruit a subscriber to a bundle than a consumer to a purchase, possibly because we are seduced (or dragged) into bundles by the killer piece of content that we can’t live without (e.g. premiership football on Sky).
    Maybe more innovative and interesting gatekeepers will emerge. That would be great, and I can’t think of any reason why they shouldn’t. Could be an interesting area to go looking for investments – thank you.

  • Interested in your thoughts as to whether you think UK or Europe will have much say on how this will play out given the dominance both in volume of market consumption and control of content that the US has. Also where does the emergence of the BRIC block sit with their rapidly increasing consumption and buying power in this powerplay. 

  • Hi Damon – I fear that most of the innovation is happening in the US and that the opportunities for startups here will be fewer. I’d love to be wrong about that.