Same Sh*t, Different Screen: The Disruption Myth and Digital TV
Silicon Valley loves nothing more than a little disruption, and the disrupt du jour is in the TV industry. The meme? That digital is driving a revolution in television comparable to the one that upended the music industry a little over a decade ago.
I don’t agree. I think that today’s TV is a lot like it was a decade ago.
Let’s quickly revisit how the Web disrupted the music industry. When the MP3 file format became available in the mid-’90s, early adopters figured out how to share music for free. But, for the majority of listeners, the real power of the Internet wasn’t unleashed until Napster launched in 1999. The peer-to-peer file-sharing service was free, and grew so popular — at its height, Napster had 80 million users — that music piracy became a runaway problem. In 2001, Napster was shut down by a series of lawsuits.
A little more than a decade after Napster, the music industry looks radically different. Sure, Rolling Stone and “American Top 40” still rank the week’s top-selling songs and artists, but today’s stars are often self-produced and self-distributed — their success isn’t inextricably linked to backing from a major label. CDs have been relegated to attics, and listeners everywhere tune in via smartphones, tablets and PCs. The popularity of iTunes, followed by free and subscription streaming services like Pandora, Rdio, Spotify and iRadio, have made it impossible for even major artists to make the kind of money they did before Napster.
By contrast, digital hasn’t changed the TV industry all that much.
The scenes remain the same
While the world has changed dramatically in the past 10 years, what we watch on television hasn’t altered. For example, in 1982, the Super Bowl was watched by more people in the U.S. than any other program on television that year. Three decades later, the Super Bowl is still the nation’s most popular program. Despite the cornucopia of programming available to us, sporting events are still American’s favorite viewing, a preference that carries into the digital world, where tablet TV viewers watch live video nearly four times longer than video on demand, and PC viewers watch it 15 times longer.
Little has changed in recorded programming, either. While Netflix and Hulu, the new kids on the content block, have created original programming such as “House of Cards” and “Battleground,” the new shows look less like indie productions and more like mainstream broadcast series. And, although many had predicted that most mobile Web viewing would be of less-traditional programming like user-generated and short-form content, the fact is that long-form content comprises the majority of views, and is on the upswing. Mobile long-form video viewing increased 29 percent year over year, growing from 41 percent of total time viewing in Q1 2012 to 53 percent in Q1 2013, and more than half of the video viewed on tablets in the first half of 2013 was premium long-form content.
The means are business as usual
Where are the tectonic shifts in the TV industry’s business model? The truth is, digital hasn’t created a surge of independent producers — the economics of creating an award-winning program are just too daunting. YouTube has poured at least $300 million into the production and marketing of its original channels, and has opened production studios for its program creators in Los Angeles, London and Tokyo, hardly a bootstrapped operation. The runaway new series created by upstarts Lena Dunham (“Girls”) and Jenji Kohan (“Orange is the New Black”) didn’t stay upstart for long — they were scooped up by the big guns at HBO and Netflix.
On the whole, consumers are still paying the same for programming as they did a decade ago. Netflix and Hulu’s monthly subscription fees are at a lower price point than traditional pay-TV models, but given the original programming costs the two have taken on, those low monthly fees could easily rise. The Atlantic reports that Netflix needs 520,834 new subscriptions for two consecutive years just to break even on its “House Of Cards” production costs. Monetization is also a thorny issue for YouTube. Unlike Netflix and Hulu, the video platform is subsidizing its content with both advertising revenue and subscription fees, yet it’s still struggling to make the model work. In addition, The Wall Street Journal reports that the Google-owned platform has had trouble attracting advertisers, and its video revenue growth has been slower than expected.
As in the past, the vast majority of pay TV is still offered as a bundle — consumers pay a flat rate for a “package” that may include some programs they don’t want. And though we continue to hear consumer groups say that cord-cutting will save viewers gobs of money, the truth is that a la carte TV programming would be more expensive than most pay TV.
The screens are shifting
The one place where digital has driven big change for TV is in the screens people are using. A growing number of viewers are turning to connected devices — smart TVs, smartphones, tablets, PCs, Roku and gaming consoles — to watch their favorite programming. In the past two years, the share of mobile and tablet video viewing has increased by a factor of 10. In fact, during the first half of 2013 alone, video viewing increased 41 percent on phones and 59 percent on tablets. All signs point to continued rapid growth in digital device viewing. With faster networks, ubiquitous smart devices and bigger phone screens, we may soon see as much as one-third of views coming from mobile phones and tablets.
This shift to digital screens hasn’t been seamless, but it has been largely successful, and that’s because Silicon Valley and TV industry companies are working together. Developments such as emerging standards in audience measurement (beyond Nielsen) are helping TV-industry companies and Silicon Valley manage and monitor the transition, providing the tools to personalize and monetize content in the process. These partnerships are helping television make the shift to digital in a way that benefits both the industry and viewers. I believe these relationships are one of the reasons that digital hasn’t wrought the chaos in the TV industry that it did in music.
Going forward, I know that we’ll see more changes in television that are driven by digital. But we won’t see disruption or revolution; instead, we’ll see a smart evolution.
Jay Fulcher is CEO of Ooyala, a cross-device video analytics and monetization solutions company.
(Image courtesy of Talashow/Shutterstock)