Streaming giant Netflix reported its latest quarterly earnings yesterday, and while the figures may not have been as high as some analysts hoped, they still pointed to a continued growth in online media consumption. The service now has almost 29 million domestic subscribers, while CEO Reed Hastings expects it to house anywhere from 60 to 90 million subscribers in the coming years.
Meanwhile, rivals like Hulu Plus and Amazon Prime Instant Video trail well behind Netflix, but still share millions of subscribers themselves. Aereo, a different kind of online TV service that lets you watch and record actual broadcast TV on your PC, phone or media streamer, is only expanding–and winning court battles against enraged networks–as well.
All of this is to say that the internet is more prevalent than ever when it comes to watching your favorite shows and movies. But while the big three streamers let you watch the same programs that you see on TV, they\’ve never been full-on substitutes for the pay-TV model that still dominates the majority of living rooms today. They’re great on demand TV lockers, but they’re not trying to fully replace cable or satellite TV.
Despite their wide selections of content, Netflix and company are all still subject to the whims of TV content providers–just look at the hundreds of movies Netflix lost from Starz in 2011, or the almost 2,000 movies and programs it lost from major studios just earlier this year.
And although these services are trying to make up for these inherently risky content deals by creating their own critically acclaimed programs, the fact remains that they cannot survive unless they play nice with the established giants of the entertainment business. The same goes for Aereo too, whose lack of cable content handicaps its service from the get-go.
The Potential Disruptors
Today though, rumors abound that other tech titans are trying to fundamentally disrupt the usual pay-TV market for the future. Last week, for instance, The Wall Street Journal reported that Google has been approaching various media companies to try and get them to license their content for its own streaming TV platform. Google’s service would theoretically serve as a full competitor to traditional TV services, one that works over the web and provides all the same content you get through cable or satellite today.
If that sort of plan sounds familiar, it’s probably because chipmaking leader Intel has already announced its intentions to launch an internet TV service by the end of the year. That platform, reportedly called OnCue, is also meant to compete with traditional TV providers by offering live, on demand and catch-up TV, as well as a range of apps through Intel’s own set-top box.
Reports say that Google and Intel aren’t alone in their attempt to shake up the traditional TV market, though. Apple has long been rumored to have its own TV service in the works, while previous reports have stated that Sony is working on a similar offering that would stream the service to PlayStations and other Sony products. But whoever the players may be, the tech world appears to have some serious interest in the TV game.
Staying in Place
Yet, from Google to Intel to Apple to Aereo, each and every one of these would-be internet TV alternatives will likely run into the same problem: the traditional pay-TV market is going to fight back, like it always has. These tech companies are “trying,” and they’re showing “interest,” but at the moment they still aren’t able to do anything too disruptive. As with Netflix and the current crop of streaming media services, established TV companies will hold their ground, and consumers may still be without true alternatives to regular TV.
Take a recent Bloomberg report, for example, which said that pay-TV operators like Time Warner Cable are trying to keep media companies from dealing with tech TV hopefuls by offering them certain incentives to keep their content exclusive to traditional platforms. The report says these incentives can be higher payments for compliance, or threats to drop their support entirely. Either way, they demonstrate an entrenched attitude against internet-based competition that isn’t created on the cable companies’ own terms. They want to maintain the ecosystem that is in place now.
That “on their own terms” bit is significant, because traditional TV is still moving towards the web. Comcast, Time Warner Cable, Dish Network and other TV mainstays let their customers watch programs on their mobile devices with their own apps, for example. Many individual channels like ESPN, HBO, USA, and ABC, among others, do the same. This is all undeniable.
These platforms show a willingness to at least use the internet for content, but the problem is that they’re all locked down for existing paying subscribers. You have to already be paying for the traditional TV model in order to get a whiff of the alternate one. In these cases, the pay-TV industry’s goal is clear: leverage the new industries to keep the old ones in place.
Pay-TV’s relatively increased openness to the internet is also borne out of necessity. The FCC’s latest report on the status of competition in the video programming delivery market found that cable’s market share grew by nearly 200,000 households from the end of 2010 to June 2012, but that its percentage of the market place fell from 59.3% to 55.7% during that same time frame. And even then, the increases that it had mostly came from satellite TV and telecommunication services from the likes of AT&T and Verizon. As the internet becomes more and more ubiquitous, cable companies are trying harder and harder to deal with it in a manner that keeps them on top.
The way that they do that, according to most reports, is by keeping media companies and content providers away from potentially disruptive challengers like Intel, Google and Apple. “The barrier is the deals—incumbent video providers are not about to let themselves be ‘disrupted’ without a fight,” wrote John Bergmayer of public interest group Public Knowledge in a post last week.
“Through their buying power, they can prevent content from going online,” he continued. “The media marketplace is so concentrated, on both the production and the distribution side, that just one or two companies can veto new entrants.
“The company that ends up launching a true Internet cable service will not be the company with the best technology or the brightest engineers and designers. It will be the company that is able to come up with a business plan that doesn\’t scare the incumbents. That\’s too bad.”
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