Friday, January 13, 2012

The Future of Programming Distribution Is On The Web

CES is winding down and the talk from the show is not 3D TVs as much as it is about connectivity to the web. Televisions, tablets, laptops, and smartphones all accessing online content, from social networking sites to YouTube and gaming. And even more pronounced, none of these discussions included partnerships with cable operators.

"YouTube announced in December that it logged 1 trillion hits in 2011 and is anticipating an even bigger year ahead as more politicians and newsmakers turn to the site to distribute Web ads, speeches and weekly video casts." Their push into niched channels seems a clear shot across the bow of the cable operator. And they are putting their money where their mouth is by investing tons of cash into acquiring content. Disruptive technology at its best. So you have consumers watching more and more hours online and web companies like YouTube delivering even more content to consume; where does that leave the cable operator?

The challenge facing operators is that the rising cost of network licensing fees are causing the subscription model to start to break. The easiest culprit to blame are the sports networks whose share of the costs is far greater than the bulk of other channels. It is why Time Warner Cable is fighting back so hard against MSG on a renewal fee that will only lead to a higher pass through cost to consumers. And the consumer isn't taking it anymore. They are striking back at their cable providers by cutting back on services or cutting the cord completely.

YouTube can expect to gain more viewership as TV manufacturers enable connectivity on their TV sets. With Apple expected to offer something as well, the roof could be blown off the industry. And as content quality improves, the best new series could be from folks like Google or Facebook. In addition, it will become far easier to surf and search the web for relevant content and viewers will begin to consume more web based content over cable networks. Networks that survive may have to learn a new business model, one that excludes a subscription fee but may instead discover a wider variety of new revenue streams such banner ads, mobile ads, and perhaps even product purchases, to enhance its :30 ad model.