Media

The future of TV: Dead man walking or bigger than ever?

For the last two years, the television business has seen a decline in cable subscriptions due to cord cutting. But perhaps even scarier to TV executives is the increasing disruption that companies like Google and YouTube are causing as they jump even deeper into the TV game.

YouTube’s $100 million original content initiative, Google’s interest in becoming a cable company, and a few gloomy Q3 updates from moguls at TV networks and cable, have driven new speculation on the future of television.Depending on who you talk to, you’ll hear either pessimism about the current models or about a light at the end of the tunnel that new digital streaming revenues promise.

Here are a few thoughts on where the digital disruptions and the TV biz might be headed:

1. YouTube’s $100 million bet. It’s a bold move for Google to pony up $100 million to jump into the original contentbusiness and work directly with celebrities and Hollywood producers to build the next chapter of creative innovation for YouTube. It should also add buzz around the latest version of Google TV just in time for folks looking to buy their new Google-TV-enabled televisions for the holidays and Super Bowl 2012.

Time will tell if this move will attract quality programming from Google’s very promising list of content partners. We have seen similar attempts previously from AOL and Yahoo, with limited results, before broadband totally matured. It’s no surprise that both AOL and Yahoo are resurrecting their original programming efforts this fall to compete with YouTube. Many are curious how successful all three will be in 12 months.

Will Google’s creative partners give YouTube their top tier ideas and bring us Sopranos type-HBO quality original programming? Or will they just take the check from YouTube and save their best for a pitch to HBO or Showtime? Recently, Ad Age raised doubts about how many of the partnering celebrities will be involved in each episode.

But just like old-school TV networks, all you need is a couple of blockbuster hits with some great storytellers in your programming schedule to cover the loses from your stiffs. YouTube has 96 shows listed for the initial launch. One good show will open the door to more top tier talent calling YouTube to pitch their ideas.

2. YouTube sports content: It’s tough to compete with cable without rich sports content, given sports is a key foundation for the cable revenue model. YouTube needs an early win in the sports category. I am eager to see what the Bedrocket producers will deliver to YouTube with their strong pedigree of content execs: Brian Bedol, who created Classic Sports Network and College Sports Television and did quite well selling these properties to ESPN & CBS, has joined forces with Ken Lerer of HuffPost and his son Ben Lerer of Thrillist. They are developing a Major League Soccer show and another with Wasserman Sports Media. I’m also curious to see what Bleacher Report, Red Bull Media and Tony Hawk will deliver for the sports category.

3. YouTube kids’ content: The $15 million Disney-YouTube deal for original content is a smart move for Disney Interactive to reach kids trained to find videos on YouTube and bring that audience back to Disney.com. This is a new strategy that should help Disney.com with its recent traffic drop and Disney Interactive’s loss of $300 million in revenues over the last four quarters. Plus it will be a big hit with the tech savvy moms passing their smartphones to the back seat as a digital pacifier to screaming kids. Flash back to 2008, when plenty of critics were questioning the viability of YouTube’s revenue model. Nobody was predicting that Disney, the king of kid’s programming, would ever need YouTube to help it expand its audience to kids.

4. Glenn Beck’s ambitious experiment: Could Glenn Beck’s recent move to online be the shining example on how to move your broadcast enterprise from cable to online. If he pulls off what analyst Rich Greenfield is predicting — potentially $27 million in revenues in the first year and an audience that could be more eyeballs than Oprah Winfrey’s current OWN Network — then look for others either to go 100% direct and/or jump over to this new YouTube programming model.

5. International TV distribution: The current television business model has been slow to innovate to reach digital natives on a global scale. Yet international distribution is a key sector where YouTube is gaining significant traction. According to YouTube, 60% of daily video views come from users who select a language other than English — that’s equal to 1.8 billion video views every day. With YouTube’s audience at 13% mobile, that’s 234 million daily mobile views from an international audience. Given YouTube’s offering of 51 languages and localized sites in 35 countries, combined with Netflix’s and Hulu’s content restricted challenges to scale internationally, YouTube could be a big game changer with the right global hit.

It will be interesting to watch how the process of selling and distributing TV content globally is going to change. Especially with new international telecom players that want to pay for content to deliver to their online, IPTV and mobile customers. It will be no surprise if the current savvy executives running digital strategy at the networks become the key leaders in 3-5 years, driving international TV initiatives for the media companies.

6. Apple, iTunes and Apple TV: When will creative TV folks try to launch their new TV idea via Apple’s global app platform? Is there now a sustainable business environment for a producer with all the global rights and no restrictions to directly deliver creative programming to the 225 million iTunes accounts on iPhones and iPads in 123 countries? The idea of using a hyper-smart freemium model and maybe some gaming features to convert just 1% of this Apple base of customers to pay $0.99/month would yield a $1.5 million monthly budget to pay for production and actors. Add some targeted advertising/sponsorship to help the bottom line, and 2 million paying viewers starts to be a tipping point to compete with various cable programming that achieves 2 million eyeballs per episode. Don’t forget that YouTube is training a mobile audience globally to consume video on their smartphones and tablets and feeding this growing appetite with 400 million mobile video views daily.  (“For Lovers Only” is a good example of how this direct-to-iTunes approach is working for an indie film.)

7. What about the new kids who avoid cable?: These are the digital natives coming out of college and high school who have no intention of ever being a conventional cable customer and paying more than $1,000 a year in cable bills like their parents did. Dish Network Chairman Charlie Ergen expressed his concern on this front last week: “Young people who move to an apartment or get a house for the first time don’t subscribe to any MVPD (cable/satellite) — they only get their video over-the-top and get their network programming from Hulu and Netflix and search until they find something they want to watch the same way we used to watch TV by changing channels. … They’re not about to pay between $70 and $92 a month — that’s a lot of money to a young person today who is getting their first job — when they can go out and watch Hulu for free and Netflix for $7.99. So it’s a threat. It’s a long-term macro trend that is a threat to our industry.”

The economic challenges US households face are obviously another factor, as Craig Moffett of Bernstein Research points out: “The poor are not choosing between pay-television and Netflix’s streaming service. They are choosing between pay-television and a third meal.”

So where are we headed?  As one of my director friends told me this week: “TV is evolving. It’s just going to be messy at first.”

For the $500+ billion global TV business, I think the messy roller coaster ride is just beginning.

Ty Braswell, founder of Creative Digital Strategies, is a consultant specializing in helping companies grow their mobile TV and mobile app revenues. Earlier this year he wrote “Why 2011 will be do-or-die for TV” for VentureBeat.


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