It is obvious television viewing is merging with the web and as such, cable companies and other triple-play providers understand they are in increasing danger of becoming providers of dumb pipes. Of course the reason carriers are adverse to this distinction has to do with more than idle cocktail party conversation -- And what do you do? "Well, my company provides stupid data pipes." How nice - I think I'll go get a drink; it was nice talking to you.
You see, carriers want to continue selling enhanced or smart services so they can charge more for each. DVR? That's $10/month. Pay-per-view that's $6.95 per movie. Applications? That's $1.99 each, etc.
But we all know this model as it applies to TV is doomed and within five years we will probably see 20-30% of television watched in the US streamed over the net. This by the way assumes there is no major catalyzing event. I for one think there will be a catalyst which will likely be Apple and/or Google rolling out some new product and/or service which makes watching TVoIP a no brainer. If this happens in the next 18 months or so, expect 30-40% of US TV to be streamed over the net in five years.
In Google's case, picture an Android-powered set-top box with YouTube HD integration which in turn is connected to all major network programming and movies. In Apple's case, their unappreciated TV product gets a major upgrade in features and functions and perhaps links with their much-rumored tablet which like the iPod and iPhone can act as a smart remote control allowing previewing of other channels before viewing them on your main screen.
If you work for a carrier providing video with a business model which doesn't take the above into account, please stop reading, take a deep breath, update your resume and post it quickly on Monster.com. While you wait for the phone to ring, let's consider how to modify your business model to take advantage of this trend.
- You can hire lobbyists to limit net neutrality legislation which you will argue will reduce your investment in broadband which is so essential to our future. Then you slow every video packet you can find on your network. Let's face it, as much as consumers think things should be free and there should be no early termination fees on networks, in reality -- banks and companies don't invest money unless they think they are going to see a return on their investments. I have taken both sides of the argument regarding net neutrality and for the record; I am concerned that carriers have a tremendous amount of control over our networks. But at the same time we should all recognize the massive investments operators are making to provide us wired and wireless broadband. We need these carriers to make a nice return on these investments so they can continue to invest.
- You can try to strike up a deal with Google, Microsoft and/or Apple to see if you can somehow get a partnership going to ensure you can still generate revenue as consumers start streaming more and more TV.
- You can buy content. Take a look at what Comcast is doing with NBC - they will be entering a JV which gives them a 51% stake of NBC Universal which is valued by the two parties at around $30 billion.
- You can attempt to insert yourself as a middleman between web viewers and content. This in my opinion is toughest route but I hope I am wrong in thinking that carriers are not good at building entertainment portals people will gravitate towards. AT&T recently rolled out a portal called AT&T Entertainment and after being live for a few weeks Quantcast says it has roughly 46,000 US unique visitors while Alexa says it doesn't register at all. Then again, AT&T.com has a rank of 500, mostly due to webmail and this means it gets massive traffic levels as it is ranked in the top 500 sites in the world. It is subsequently tough for any sub-site of AT&T to make a major contribution to traffic generation in a few weeks.
Every time the web has become a major resource for providing a service such as shopping, auctions or music, a new player emerges to be dominant and traditional players struggle. Look at how Craigslist, Amazon, eBay and Apple have taken massive amounts of share in the spaces they now play.
TV is the next frontier and Microsoft has been in the space for years with its IPTV offering but Apple and Google are better positioned for the future based on a model which leverages the very fast and dumb pipes today's carriers provide.
How service providers adapt to this changing world of video content delivery will determine their profitability for years to come. The one certainty is this transformation is happening and rapidly. If there are acquisitions to be made to shore up carrier positions, now is probably the best time to do so as valuations in the TVoIP space are likely to only go up.
Hopefully this article has helped your company form a solid TVoIP strategy which means you can just let that phone keep ringing.