We’ve been seeing some interesting developments in the media space, though they’ve been a bit overshadowed in a news sense by more dramatic technology announcements. Media and media-related consumer behavior is important because it’s the driver of many new business models (too many, I think) and also because it’s the major driver of change in network services and technology.
One interesting item is that more people are abandoning TV news in favor of online news, except for weather, traffic, and some local events. I can understand this at one level; national news is increasingly more like a variety show than a news program. Mobile and online news sources are obviously growing, but Pew research shows that they’re more often used as a source of information about shopping than for “news” in a strict sense. However, apps that provide weather and traffic information could be an issue at some point for TV news programs.
The reason this could be important is that any form of live programming is an enormous stimulus to channelized delivery. In fact, any regular consumption of TV programming, especially popular material, that’s streamed is going to create disproportionate demand for capacity. And guess what; bits cost.
Our research continues to demonstrate that even in 20 years, channelized television will still account for over half of all material viewed. The reason is simple; economics. The real question is how we’ll transition to a more personalized experience for the other half of the material. Every on-demand HD show streamed to a viewer (using 7 Mbps per show as our metric) requires a level of quality capacity equal to five T1 lines that would have cost a thousand dollars a month only 20 years ago. The same show in linear form consumes no bandwidth at all. So the question is whether loss of news credibility for channelized TV creates wider reliance on streaming. Answer: Yes, among the under-32 age groups where channelized entertainment is too sedentary to fit into their behavior patterns. Elsewhere, our research says decisively “No!” But it could hurt local station economics because news advertising is one of their largest sources of revenue. Thus, it’s the changing money-flow that we have to worry about here before we start speculating on revolutionary technology changes.
Dish networks wants to join with Blockbuster to make its own run at the VoD space, combining satellite delivery for channelized material (still the option with the lowest costs) with the mail-me-the-DVD and streaming choices for on-demand. They sense Netflix vulnerability after the “misstep” the company had with splitting off its streaming and DVD rental businesses. They’re right, but wrong at the same time.
The Netflix problem is the classical parasitic problem. People want to watch stuff they like. In any streaming service or mail-delivery option, the consumer grabs the material they like best in the first month, and from there on things go downhill. The only salvation is an avalanche of fresh content, and that can come only from television because movies aren’t made in enough volume. But if streaming cannibalizes TV ad revenues, then the TV networks who are producing the content have no incentive to push their material through the streaming channels; they have the opposite incentive. Netflix is facing higher costs and reduced chances of renewal as its material ages, and so they’ve just done a major Latin American expansion. Fresh eyeballs are as good as fresh material. The only reason Dish can even think about this sort of thing without revealing a mental impairment is that they can’t really do VoD from a bird in the sky. A crippled strategy is better than none.
Netflix’s deal with DreamWorks is being touted by some streaming fans as proof positive that the streaming model will Eat the World, but I think these guys are also showing some signs of impairment. The deal doesn’t kick off for two more years, and when it does it’s first for the DVD delivery mode for most material, with limited streaming releases later on. So why the hype? If you were Netflix’s CEO, wouldn’t you want to show off something positive after a very bad week?
What this shows is that content is still king, and that content ownership and the ability to produce new material is the one irreplaceable asset in this confusing market. That bodes well for Comcast and other distribution giants who own media assets, and bad for the streaming up-and-comings, who almost universally do not.
