Chaos In TV Industry Reaching Peak

It looks to me like the chaos in the TV industry is headed towards it's peak level in the next few years.  For a long time, there have been indications that the wrenching transformation of the music businesses is going to be visited upon the video content and device business.

Battle for TV Goes On (Picture from Flickr user Ed Brambley)

At times, it has seemed like the video content and device companies have taken bold steps to avoid that fate, and with some success.  The rampant piracy of the Napster era seems to have been pulled back and there are an increasingly good set of online services for video watching for consumers.  Still, this may not be enough to stop wrenching change.

So, if there's more and more good content available online, why is there still so much pressure driving change?  I think there are four reasons:

1. Devices:

The devices people use are in transition, and that transition is far from complete.   Traditional TV set-ups are based on over-the-air and cable transmission of channels which are live all the time and use of physical media.  In the new era, most content will be delivered on-demand over IP.  

A wave of new boxes - from cable providers to consumer electronics companies - at aggressively low prices is going to sweep the industry in the next 18-24 months.  At $99 or less, these boxes are within reach for almost any consumer.  Google TV won't debut there but it should get there quite quickly.

While these new set top boxes are surging into the market, the big hope of the CE companies - 3D - is fizzling.  New data shows that people who have seen 3D TV are actually less likely to want it.  Bad news for the big TV makers.  (Link)

2. Content

The availabilty of content online is getting better, but overall, it's not very good.  It's costly, inconvenient and limited.  If you are a top-tier cable subscriber, your access to content online is increasingly good, thanks to services like TVAnywhere.  If, however, you're a cheapskate or you live outside the US, your options are few.

Even within the US, it can be maddeningly frustrating to try to watch TV on anything but your TV.  I have Hulu+, and while I pay $10/month for this service, I can get only about ⅓ of the shows in my queue on my iPhone.  I do not believe that consumers will be satisfied with 

3. Distribution

The TV channel is becoming a waste of bandwidth.  The idea that you should get hundreds of channels simultaneously piped into your home is pointless, chances are most of them are showing re-runs most of the time.

As TV shifts to on-demand and IP-based, there's no need to have channels, per-se, anymore for most content.  And as all content shifts to IP-based, any provider can deliver that content.  Globally, this is good news: most people will now have a choice of content distribution companies - be they cable, DSL, or wireless: it's all the same: delivery of IP to the end user.

That is not to say that there isn't demand for live continuous streams.  People still watch live events like sports and news, and many people still enjoy plopping in front of the couch and watching whatever is on.  Not because it's great, but because it's relaxing not to select anything, just to watch.  Even so, that need can be accommodated more efficiently over IP than by giving you 500 continuous live channels.

4. Advertising

Hulu in the US has shown it to be true beyond a doubt: targeted ads are much more valuable than mass market advertising.  Advertisers are still trying to convince themselves that big budget superbowl ads have a place.  And maybe they do, but most advertising is more productive when it is targeted online to individual users.

All these transformations are in progress, and the final shape of TV in the future will not really be seen until they start to converge in a single device and service - with a clear integration of content, payments, and advertising.  iTunes played that role for music: device, user experience, service, content and payments all came together in a single solution.  Such a vision still does not exist for television.

And in the background to all this transformation: one more thing: piracy.  After a decade of lawsuits music piracy is alive and well.  Thanks to reasonably priced legal alternatives, there are many people in the developed markets who have passed on such behavior.  But it's still there, on college campuses and in emerging markets.  And video is actually now consuming more bandwidth than audio.  

News that the Blu-Ray disc keys have been permanently broken (link) is a timely reminder that no solution is very secure.  It's hard to think about free as competition, when free is illegal.  But it's real - and without the creation of value-for-money alternatives to illegal copying - it will get larger and not smaller.