Why The Internet Is Not Disrupting TV
Oct 26th, 2010 | By James Lewin | Category: Internet TV 
Mark Cuban shares some interesting thoughts at his blog on why the Internet is not disrupting TV:
If my memory serves me right, the common thread among industries (disrupted by the Internet) is that they all sold their products ala carte.
Music – By the CD
Newspapers – Single Newspaper (Dallas Morning News) sold by copy or subscription
Magazine – Single Magazine (Newsweek) sold by copy or subscription
DVDs – Single copy.
Blockbuster – Rent each DVD
In each of the above examples, the primary revenue stream from the product came from ala carte sales – the purchase of a single product.
Cuban goes on to compare this to TV:
TV is sold by aggregators who sell TV in bundles. Not ala carte.
Pick any TV distributor. They aggregate the channels they want to sell into bundles and sell them. From basic service to full service with every channel available. If you want to buy PPV or VOD content, you must first be a subscriber.
Look at Netflix. They sell NOTHING ala carte (like I said, smart as shit). You have to subscribe to their service, then you can select the content you want to watch.
Look at Spotify. Pay by the month or don’t play.
Cuban’s argument makes sense. It’s will be hard for devices like Apple TV and Google TV to disrupt traditional television when many traditional TV sources won’t make themselves available on the devices.
Cuban fails to take into account, though, the broader trend away from static, sit-back content towards new media that is more social and interactive. People are already dumping cable because they’re spending their time watching Internet TV – or using the Internet to do something more active with their time.
If Apple and Google try to compete against television, they’ll never win, because they’ll only have a fraction of the content to offer.
If they look at television as part of a broader variety of Internet activities that can be delivered to your living room, though, they can become the super-aggregators that Cuban is talking about – delivering Internet video, social media activities, video calling, games and, yes, television shows to your big screen.
Can Apple TV and Google TV compete with traditional TV? Leave a comment with your thoughts!
The problem I see with Apple TV is that they’re trying to be a distribution system when there’s already a few distribution systems in place. If people don’t want to pay for cable they can get TV off-air for free (less the cost of the equipment, which may not be much). And those who turn to the Internet are often looking to watch TV shows for free. Today the distribution system isn’t as important as the content, and the Internet isn’t producing content as good as TV does.
Good points Patrick!
Yes – it’s hard to want to buy google or apple tvs when they don’t have as much content as your local TV stations.
But if they do social media and Internet video well, that could changes things a lot, don’t you agree?
Arjun
The TV needs to become a swiss army knife and make online content like video podcasts, broadcast channels, premium broadcast channel content, on-demand video and music, streaming video and music, social media, video communications, web and gaming all in one simple to use interface. All the offerings must have an optimized experience for the larger screen. All of the products today are just offering a few of these pieces. The ones doing it best today are just missing big pieces and have poor user experiences. I think we are a year away from pulling all these pieces together, but combining the broadcast piece with the online piece is the key. I want both broadcast and online content on my TV. We just have not seen it yet.
Very interesting points, Rob.
Don’t you think that a lot of people will expect a device like Apple/Google TV to let you record video?
Unfortunately, the networks will not let people have what they want. I think this is going to hold back adoption for more than a year or two. Who wants an Internet TV that doesn’t have any good TV? Also, who can figure out all the remote controls you have to have?
I would like to see them in the mean time get social apps going on these things. It seems to me that lots of people would like to do games and facebook and things like that on their TV if the interface was good.
Rob –
You’re at the bleeding edge, but more and more people are wanting the exact same thing.
I don’t think the networks are going to give you what you want, though – a converged media center. I wonder if it’s going to come down to Google and Apple buying their own content and basically building out their own networks. It seems far-fetched, but they’ve got billions in the bank.
I’m a cord cutting early adopter, and I’m glad to pay for good content. But right now I have 2 apple tv’s, and that seems silly. I use the new one for heavy podcast, internet, netflix and 1 dollar fox content (hell’s kitchen). Then I have to switch to the old Apple TV for stuff like Mad Men, and ah… Top Model. I still feel like i’m working a bit too hard for this stuff. I assume that this will work out over time, like how the labels most all eventually came to iTunes when the money was proven to be there.
However to fellow Pittsburgher Cuban’s point, there are rumors that apple has been pushing for subscription services both in TV and music. Also, part of the disruption in music, the technological disruption is that in the late 90’s early 00’s the “project studio” which used to be crappy cassette 4-tracks rapidly evolved the ability to produce content on par with major label releases. High quality desktop video production followed suit, with the quiet first steps of the XL1, PD150 cameras and the iMac DV. But it is still too hard to create something on the scale of 30 Rock without the support of a large studio behind it. You need a lot of warm bodies.
You gotta assume the production studios are just going to go where the money is. Depending on the size of the production that could mean living under the shelter of an NBC, HBO, or Comcast. I figure Mark believes that these corporations will survive the move to internet distribution in tact, and arrive likely on somewhat comfortable terms.
But Google TV and Apple TV are most certainly ruffling the feathers of the big guys at this point. It is up to the consumers voting with their dollars whether A La Carte works its way into the business model. It worked well for The Office though.
Dave – maybe the way forward is for Google & Apple to create the platform for podcasters and video podcasters to deliver their own networks of content.
The networks aren’t going to play with Google & Apple, so maybe the companies need to find a way to grow around the networks.