In Broadcast - October 2013 - 22

I N T E R N A T I O N A L

WWW.INBROADCAST.COM | ISSUE 24 - OCTOBER 2013

N E W S

InUSA

Reshaping The Television Business
OTT is all about customer choice and convenience, but when will ‘cutting the cord’ and ditching
traditional linear broadcasting be a viable option...

By
Michael Grotticelli
Contributing Editor

ony and Viacom have reached
a tentative agreement to
make Viacom’s popular cable TV
channels available on a new Sony
Internet TV service in the US.
That deal, coupled with the launch
of an equally big new Intel Internet
service this year - and others yet to
be announced - could result in a new
landscape of competition for the
North American television business.
The battle lines are drawn between
traditional pay television providers
and the high-tech electronics
companies that want to use their
signiﬁcant resources to distribute
over-the-air broadcast signals as
well as other content over the Web.
Joining Sony and Intel in these
high-stakes Internet games are
well-known companies like Apple,
Roku and Google on the hardware
side and Netﬂix, Amazon and Hulu
Plus on the software side.
It remains to be seen whether
these new alliances and services
will end up reshaping the television
business or be a simple repackaging
of traditional programming for a new
generation of display screen devices.
Sony’s long-rumoured service will
bring popular cable channels like
Nickelodeon and Comedy Central
to the PlayStation and to Sony TV
sets. It’s part of an effort to build
a credible alternative on-demand
service to cable and satellite TV that
reportedly has also included talks
with Walt Disney Co., Time Warner
and CBS. The new Sony service
could launch by the end of the year.
While Sony would need to
strike other programming deals to
create a compelling alternative to
conventional pay television services,
even a single deal represents a
big shift within the entertainment
industry. Multi-channel system
owners have been reluctant to

Chromecast allows mobile users to
play back programming from the
device on their home TV set

license their programmes to Internet
TV services for fear of undercutting
their existing lucrative distribution
arrangements. Exclusivity contracts
with some pay TV operators often
make it difﬁcult for programmers to
license their channels to newcomers.
The US Justice Department
is examining the impact of such
restrictions on the development of
online services, looking into whether
America’s biggest cable and satellite
companies are acting improperly to
stiﬂe competition from online video.
Sony isn’t the ﬁrst to pursue such
a deal with a major programmer. Intel,
Google and Apple are all said to be
seeking similar arrangements with
programmers, with a similar goal
of building a OTT Internet service.
Industry analysts say that deals
like these prove that video and
TV consumption online is directly
challenging traditional pay TV
business models. In Europe, cable
companies are already offering overthe-top services on smart televisions,
and public broadcasters are
releasing apps for smart TVs. Sony’s
relationship with Viacom is just one
more of the emerging business
models reshaping the delivery of
television content to consumers
using a myriad of devices.
Meanwhile, companies like
Apple, Intel Corp., and Google
are conducting extensive research
of their own, looking to shake
up a business that has remained
entrenched in its ways.
Take Intel, for example. Erik
Huggers, a Dutch-born former
BBC executive, has assembled a
350-person team with a variety of
talents to tackle the issues involved
in television today. The company
is about to launch a new Internetbased television service that’s could
shake the very foundations of the
television business. Intel plans to
use a server farm to record every
programme aired - local, national
and international - and store it for at
least three days in a “cloud.”
With an Intel-designed set-top
box, users can switch on the TV
in the middle of any show and
simply go back to the beginning live TV with full record/play/rewind
capabilities.
Intel, whose service is to be called
OnCue, is testing its technology
platform with 2,500 staff. Expected
to launch by year’s end, [This has
now been pushed back to 2014 Ed.] it represents more competition
for the existing television business.
Google has announced a device
called Chromecast that allows users

The new Sony service could launch by the end of the year

of mobile devices to play back
programming from the device on
their home TV set. Google is also
working on its own Internet-based
video delivery services.
Of course, such efforts with
computer and online services have
gone on for the past 20 years, but
there is a feeling that its time has
come; especially as the quality
of Internet transmissions have
dramatically improved.
However, while it’s certain that
cable and satellite TV providers are
threatened in the long-term, they
currently have strong positions.
Yet they are struggling with higher
programming costs and subscriber
chur n while Inter net-based
competition has become cheaper.
As mentioned earlier, negotiations
with media companies for content
rights could delay new services
and limit some features, but that’s
not expected to last. There is
growing consensus that underlying
technologies are evolving to the
point that major changes in the TV
experience are all but inevitable,
whether delivered by new entrants
or incumbents.
Propelling this increased IPTV
activity are changes that have
made the Internet a more viable
delivery medium, including the
growing proportion of customers
with broadband service that can
accommodate high-quality video
signals. Many viewers now have
Internet connections in their living
rooms through various devices,
used largely to stream or download
video programmes from a variety of
sources, including Netﬂix. They also
use tablets and smartphones to view
movies and TV shows as well as to
serve as companions for action on
the big screen.

Of course, the continued bundling
of programmes on cable or the
Internet wouldn’t make much of a
difference to viewers. The so-called
“cord cutters” are cancelling their
pay-TV subscriptions in favour of
IP-delivered on-demand content.
These unbundled cable services
allow them purchase individual
channels “a la carte”.
For all of the new deals, the devil
will be in the detail. Early speculation
indicates that content owners like
Viacom will still be selling a bundle
of its channels, just delivering them
over a different distribution platform.
At the same time, these agreements
are signiﬁcant because they show
that programmers are eager to make
deals and are being more ﬂexible
about where and how they deliver
video to their customers.
Many feel the traditional television
business has held back technologydriven change for at least a decade,
probably longer, because there
was so much money to be made.
Times have changed. In today’s
highly competitive landscape, the
industry can no longer just dig their
heels in and say “no” to innovation
and customer choice. Stay tuned.

ROKU offers a range of traditional
video streaming boxes

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