Thursday, 30 October 2014
Is this the end of the TV ecosystem?
A lot happened in the last few weeks suggesting that the TV industry's traditional ecosystem may fall apart much faster than previoulsy thought. Interestingly, it is not really the accelearation in consumers' "cord cutting" that may drive the process (this is relatively mild still) but rather some content providers' nervousness about 'missing out'. As they watch Netflix and other streaming services come to live, some powerful content providers challenge the status quo to tap into the growing OTT market despite potential backlash from their traditional distributors (cable providers). Yesterday's FT article nicely summarizes the events of the last few weeks (HBO's and CBS's decisions to go direct and some similar effort from ESPN). Most importantly, the article reports on regulators' changing attitude: what if all Internet channels were also considered video distributors, so-called MVPDs? The economics are tricky and may not mean the end of traditional cable providers, who are still in the best position to deliver the Internet to people's homes: 4 channels at $10/month each and a good broadband link at $30-40/month amounts to $70-80, not far from a monthly cable subscription (with amuch richer bundle). The difference is that people can build their own bundles and with the number of potential combinations competition may massively increase pushing content access prices down. Ironically, the winners may remain the cable companies whose monopoly power on Internet access will not change much.