The Wide Weird Whacky World of Digital Video – Quantum Theory in Action
Date
October 29, 2009
Hulu loves free while News Corp wants them to charge. Disney loves Hulu but is still playing the field. Comcast won’t share its content with non-subscribers but Cablevision will. Confused? Though on the surface these positions seem unrelated, they are consistent with (and predicted by) TDG’s quantum theory of media. So, can quantum media make sense of these apparently contradictory moves in the market?
The last few weeks have seen a number of noteworthy announcements related to media convergence and consolidation. Though seemingly unrelated, these events are the logical implications of TDG’s quantum theory of media – an alternative theory of media creation, aggregation, distribution, and consumption in the age of pervasive personal connectivity.
A few of the most interesting and telling declarations in the last few weeks include the following:
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While most PayTV operators pursue “TV Everywhere” as an “entitlement” to regular TV subscribers, Comcast’s “On-Demand Online” will likely feature a value-added charge for consumers who want to view their favorite TV programming on other connected devices. Comcast perceives the world of online TV a bit differently than their brethren, as if it has a value distinct from the core TV subscription. According to TDG’s preliminary research, Comcast is correct in this assumption: 48% of adults who subscribe to both PayTV and broadband services would pay as much as $10 per month to have their TV services delivered to their PCs.
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Cablevision is poised to launch a stand-alone Internet video service with a separate fee structure, meaning one does not necessarily have to subscribe to the core PayTV service in order to enjoy online TV programming. This is an excellent example of in-front-of-the-curve thinking and no doubt other operators will follow suit. It also portends the day when cable operators will use broadband as a way to reach beyond the confines of their own TV territories and into the backyards of other cable operators.
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News Corp. has made clear its intention to charge fees to view some of its online video content. A key stakeholder in online TV aggregator Hulu, News Corp. also owns major TV brands including FOX that hold solid market share among key demographic segments. Once a major player like News Corp. throws its considerable weight behind the pay-to-view side of the equation, TDG expect others to do the same.
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Disney, a new and important Hulu investor, continues to lead all content networks in regards to using the web to promote viewership of its cable TV shows and movies while at the same time seeding the soil for a future fee-based online distribution model. Disney is keen on the idea of delivering video content directly to the consumers whenever and wherever they happen to be and without the screening of a network operator. This is the modus operandi of its soon-to-launch Keychest service.
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Hulu’s CEO Jason Kilar recently defended his company’s ad-only model against incumbent attacks that online models that give high-value content away for free could undermine the entire film and TV industry. Kilar argues that simply because Hulu is an advertising-based model did not mean it is giving the content away for free. With more than 40 million viewers and aggressive growth in the number and size of advertisers, Hulu’s ad-only model is getting closer to break-even but given the disposition of its key investors (among them News. Corp, Disney, and NBCU), TDG believes that Hulu will likely introduce a tiered or subscription-based revenue model at some point in the next 14 months. The window for free onlineTV may be about to close, and long before many expect.
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As if that’s not enough to make your head spin, now imagine Comcast Comcast succeeds in buying NBCU and (surprise) ends up owning a major stake in Hulu. Comcast would then control delivery of high-value video programming to all consumer devices under the banner of a multi-screen video offering that just happens to be (you guessed it) part of a larger bundled-service offering. The combinations are almost unimaginable, but the appeal to consumers can be calculated.
Behind all of these market moves lies one single driving force: the consumer shift from programmed mass media to on-demand any-device access. Viewed through this quantum lens the seemingly contradictory becomes predictable. Disney must distribute its content through multiple outlets to ensure the target audience will find its shows. Hulu will provide both free and paid content models because content providers need both but also need to reach consumers online. Cablevision, and ultimately all PayTV providers, needs to provide broadband packages or it will fail to reach the ever-expanding broadband-only customer base. Comcast needs to expand its content offerings because quantum consumers want access to shows, not a cable subscription!
To invoke Bill Mayer, it is time for “New Rules,” standards and expectations more consistent with what we are actually observing in the media universe; a world TDG describes in quantum terms. And we are not alone. Comcast’s COO Steve Burke recently invoked similar imagery at CTAM when he warned the audience that content providers and cable operators that do not take heed of pending “shifts” in video delivery and consumption might soon find themselves without a business. Indeed! He also referred to these shifts as the “the biggest social movements” of his lifetime. We could not have said it better ourselves.
Rest assured the age of quantum media is only now beginning; more frequent and dramatic shifts will soon follow so we encourage you to stay tuned – your company’s survival may depend on it!
* For further reading on the impact of these quantum shifts, we encourage you to read CNET reporter Greg Sandoval’s excellent essay entitled “The End of the World as Hollywood Knows It”.
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