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How TV is Transforming

By Brian L. Clark

In case you missed it, The New York Times today declared an end to tube televisions (see Monday's technology section), saying they'll begin disappearing from the market after the holidays. In fact, Geoff Shavey, Costco's TV buyer, says his stores won't be selling tube TVs a year from now. So those of you looking to buy that extra set for the game room, get it in gear before your only choice is an overpriced, underperforming flat-panel or projection set. But the hardware changes are only the beginning of TV's transformation. More after the jump.

Meanwhile, from the "only a matter of time" file, Google announced today it was going to partner with MTV to insert ads into online video clips, including "SpongeBob" and the MTV Video Music Awards. MTV will sell ads and split the profits with Google.

The news follows a report I received last week from In-Stat that said the market for online content services would grow from 13 million households last year to more than 131 million by 2010. And that report coincides with a Yankee Group webinar I attended last week entitled, "Broadband Video: Witnessing the Birth of an Industry." Mike Goodman, Yankee's senior analyst for media & entertainment strategies, theorizes broadband video will impact TV the same way TV impacted radio. In short, video via broadband changes the business model and alters the current relationship between providers and viewers. That said, it also allows new companies to get a foot in the door.

I spoke with Goodman to get his thoughts on new video services and what this proliferation means to an audience already overloaded with too much crap.

You say these new services are going to "empower" consumers. Won't the proliferation also confuse them? For kids, teens and young adults, absolutely not. And it won't confuse that segment of the adult population that's comfortable with broadband video at work. Another segment is the email segment, and their association is email, casual games and photos and not much more, so the potential for confusion absolutely increases. That older segment is much less likely to watch video on a PC than a TV. To get them to use a PC, you must really simplify the process. It has to be like another channel on the dial—it has to be seamless.

Who's going to enable all this technology? Is Media Center the only real option?
They're not the only one. But it's a crawl, walk, run scenario. We're in the crawl stage. When I wanted to connect my Xbox 360 to my home network, I had to go through hoops. It does a lot of it, but if it doesn't connect on the first try. For someone who's not technologically sophisticated, it's very intimidating.

But the really important thing is the interface and the software. And that's when you get into some interesting questions. Should we build this to interface with Windows Media Player or enable the TV to surf online so I can access the content directly, whether it's through the PS3 model, going out to the PS network—there's no PC in that equation. Or do I use an open model where I can surf around and get any content I want directly to my TV? It's still way too early to say which is going to emerge as market leader.

How successful will AOL be in making video content available to folks outside the walled garden?
It depends on timeframe. I think to grow this market it has to be ad supported first. If you lead with subs, it becomes what I call a 10 percent marketplace. Only 10 percent will be willing to purchase. It's about building behaviors. You really have to make this an integral part of consumers' consumption behavior. That's what YouTube is doing now. You've built an audience, now you can monetize it. Then you layer on subs and transactional services.

AOL's approach is a little like YouTube's, but they're already one step down the path. When YouTube came they had to build first, then layer on advertising. AOL, despite all the losses, it still has a pretty big user base. And they're not worried about driving traffic since they're on stage two of monetizing it. YouTube is still about building behavior. AOL has seen the writing on wall and they know they're no longer in the access business; they're in the content-delivery business.

Speaking of YouTube, what do you see in the company's future?
YouTube's founder says the market is a clip culture world and going to stay that way. I don't agree but he was pretty adamant about it so that's indicative to me that what you see is what you get. In the long term, it's a lot harder to say because we need to see how the market evolves. As it stands right now, I see them sitting on the model they have.

Is TiVo looking to get involved in broadband video?
TiVo's not really interested. It's focused more on the TV side of that equation—the place shifting of video onto a portable device—more than to record online TV or integrating broadband into the set-top box. I think EchoStar has an integrated DSL box so they're coming out with set-top boxes that are going to be a critical component in bringing broadband content to the TV. It could be a game console or traditional box; it could be a more dedicated box like an Akimbo box. There are a lot of different approaches to what kind of box will deliver broadband video into the home.

Is there anyone out there who can possibly catalog all the broadband video currently available?
I don't think its possible. It's kind of what a Yahoo or Google and Cablevision are all trying to do. The Internet is really the ultimate in democracy. There are so many niche things out there, it doesn't lend itself to a single service provider bundling all this stuff together. The more important thing is a need for better discovery and navigation tools. If Comcast can offer a powerful discovery and navigation tool that makes it easier to find what you want, it's not a centralized approach. You're not trying to control. You're aggregating because you're providing a service that's beneficial. You're a pseudo portal, a tool that becomes a gateway for people to discover content and you provide for people from there.