Thursday, May 18, 2006

Can TV's and PC's Live Together Happily Ever After? - New York Times

New York Times: "David G. Sanderson, who heads the media consulting practice at Bain & Company, offers four reasons most people won't be downloading their favorite shows onto their TV's any time soon: limitations in broadband infrastructure, the degree of readiness among electronics makers to provide a product with mass appeal, the behavior of consumers and the agenda of the players in the TV ecosystem.

Mr. Sanderson's first two points — basically whether the Internet-based network and devices are ready for prime-time — are where most of the action is and where things could change if businesses keep investing and innovating. Still, for now, there are logjams associated with delivering large quantities of video over the Web and the unresolved 'net neutrality' debate over whether heavy users should pay more to telecommunications carriers for the large amount of bandwidth they use.

His second two points — about consumer behavior and the entrenched players — are actually more complex. The consumer question boils down to whether enough people want to give up access to the dozens or hundreds of channels they pay for through their cable providers to buy programs over the Internet. And that is closely related to his point about the industry structure, which is a function of the willingness of cable networks to risk giving up their guaranteed monthly subscription fees in favor of a free-wheeling Internet alternative.

'The reality is that I don't think you're going to see the current cable offering — hundreds of linear channels — replicated on the Internet,' Glenn A. Britt, the chief executive of Time Warner Cable, told me recently. 'One reason is the Internet isn't physically capable of handling that volume, but obviously, with a lot of money and time, that can be alleviated. But the second thing is that we actually provide a very important economic function in the TV distribution chain."

CABLE networks are not about to jeopardize the millions they receive from guaranteed subscription fees each month — and it is probably no coincidence that the versions of TV programs sold through iTunes or Google Video are inferior in picture quality to what is offered by cable companies (while the growing popularity of high-definition TV shows that viewers want higher quality). Even Sharp's new Japanese TV, the Internet Aquos, only accesses online video material from a closed-circuit service, and displays it at inferior quality."

As for the public being unwilling to give up the hundreds of channels it receives by subscription to obtain programming from the internet, I think industry analysts may be mistaken or overlooking the potential for a successful hybrid of the two. Instead of asking consumers to pay for numbers of channels (usually ridiculously overstated because they are counting a bunch of shopping channels and other "no cost to them" offerings), providers should offer subscriptions to thematic content libraries.

For example, at present I pay about $85 per month for Dish Network's Top 180 channel pack, local channels, PBS, and HBO/Cinemax including DVR and monthly magazine. Of those more than 180 channels, I watch less than 20, and its not unusual to cruise the guide and find nothing I want to watch at all. I don't listen to the myriad of music channels listed, I don't care to watch sports, and I could care less about home shopping channels or glorified advertising channels.

However, I would happily pay a subscription fee to have access to all programs in the libraries of the Discovery Channel, The History and History International Channels, BBC Channel 4, Canadian History Television, National Geographic, and PBS (both local and East Coast). I would continue to subscribe to HBO for new programming but be willing to pay an extra fee to have access to all existing programs in the HBO archives as well.

I would continue subscribing to local channels for local news and network offerings and would want to continue to subscribe to a news tier that contains CNN and Headline News. Then I would like to be able to pay for programs "a la carte" like you do with iTunes for the occasional program I may wish to see that may appear on a channel I don't currently subscribe to.

I think hybrid arrangements like this may actually result in more revenue opportunities for the providers while resulting in more satisfied customers.
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