Sleeping Giant

November 12, 2008

Internet Television has enormous potential.  Currently, I don’t think there is anything in place to overtake cable television as the dominant means of (not always) mindless entertainment and, more importantly, advertisement intake.  But the stage is being set, and all the trends are pointing towards it.

The cable companies may have made a mistake by introducing OnDemand and DVR services.  It was a great idea four years ago, when the goal was to take some business from Tivo and offer an advantage over the satellite companies.  But it set a precedent, and whet our appetites for more low-commercial, time-insensitive content.

The internet, as proven by Joost, Hulu, and a slew of others,  can deliver this content more efficiently and in greater quantity. Hulu can control whether the viewer skips the advertisements, which is a huge (and underacknowledged) advantage over cable OnDemand and DVR services.  As an advertiser and sole source of income for most of television, I want my commercial seen.

Most new High-def televisions can receive input from a computer, which makes small monitor size almost a non-issue.  PC remote controls do exist, but are not widely integrated because public awareness of internet TV is still young.  In a few years, I expect a lot of people will be sitting on their couches, watching the internet.

Internet television is immune to the FCC…sort of.  As long as it get its shows from major networks and basic cable who are regulated, then (I’m gonna create an obnoxious name now) iTV will be affected vicariously.  But as it become more popular, I would expect to see popular sites like College Humor, The Onion, or Pitchfork Media creating uncensored content for channels on Hulu, Joost, or their successors.  Maybe major networks will create uncensored programming just for the interenet, or iTV providers will create their own content.  I also expect the FCC to make a power play as iTV grows, but for now its freedom offers a large advantage.  I like objectionable material.

TV on the internet offers another huge advantage over cable and satellite, much lower overhead.  Yes, it needs a high amount of bandwidth and server maintenance.  But how much do you think Comcast pays in line and broadcast maintenance, and the hiring of tens of thousands of employees for customer support, installation, and God knows what else.  Comcast has to have offices and operations in every market they’re in.  Hulu has to have one location, I assume.  A few at the most.

Live television is the one advantage that cable and satellite have, but it’s a nut that’s almost been cracked.  We saw few services that offer it in class.  There’s a few more promising one’s out there.  Zattoo seems to have already figured it out, but its currently only available in Europe.  I’m setting up Livestation as we speak, verdict pending.  The channel list looks a little weak, unless you’re a Discovery channel addict.  When you can stream the Super Bowl you can say goodbye to Comcast.

I think the biggest setback (it’s a biggie, and a recurring theme on this blog) iTV has now is the ability to generate profit.  I think the answer lies in a subsription fee, but Hulu and Joost aren’t good enough to be able to pull that off.  People are willing to pay for it, my $60 monthly cable TV bill is proof of that.  Here’s what an iTV provider will need to have.

  • Way more content than the other guys.

As long as Joost and Hulu are free, its going to be tough convincing the public to pay for internet     television.  But if the variety of programming is massive enough, I’d be glad to pony up some dough for a new service.  I’m picturing a Netflix of TV, 40,000 titles to choose from.  Have old shows, obscure cult classics, international programming, and *sigh*… Friends.

This new service should be able deliver this content for a fraction of the cost of Comcast’s overhead

  • A cheaper price tag than cable and satellite…for now.

The aforementioned lack of overhead should allow this service to charge between $15-$25 per month, under half the cost of basic digital cable.  This would allow the networks who provide the programming to keep all of their advertising revenues (I assume Hulu keeps a portion to cover its costs), and assuming these commericals are unskippable, offer a big incentive to go with the service.  This is how the service would accrue tens of thousands of programs.

As it grows in popularity, and people switch and lose cable all together, the service could create reasons to increase the price.

  • Live and local programming.

This is another thing that Hulu and Joost lack, but Zattoo and Livestation have proven it can be done.  Giving local affiliates an easy to use program for broadcasting with the service would be a must.  Live sporting broadcasts would also have the same commercials as the cable counterparts.

  • Shorter, more effective advertising for non-live programming.

Fewer commericials is a big incentive for iTV, and will be key for growth in the early life of the service.  There’s no reason to fuck it up.  Instead, offer commercials in mostly shorter time blocks, 15 seconds.  Have maybe three or four minutes of commercials in a 30 minute show (13-17 commercial minutes is standard on cable.  That’s still 12-16 commericals per show, and they’re mostly immune to fast forwarding or channel surfing.  Also, the viewer picked the show from thousands of others, so the chances of him finding something better to watch are very slim.  This increases the viewing chances of advertising from cable’s 25% to around 95% (completely made up, but probably somewhat accurate figures).

This should allow programmers using the service to charge ad rates comparable with cable and satellite.

  • Better tracking of viewer habits.

This one’s easy.  Cable needs companies like Nielsen to install equipment on consenting viewers televisions in order estimate the viewership of its programs.  This service would be able to easily track every show that every viewer watches using very basic interenet technology, making it a more accurate tool for generating ratings figures.  People would kill for that kind of information, and the service could even sell it, becoming a Nielsen competitor, and offsetting costs.

Whew, that post was a doozie.  See y’all in class.