What is the Future of TV?

I want to preface this post by saying I have very little knowledge about the business side of television.  The below analysis is the result of some surface investigation combined with my own experience in building new technology platforms, attacking distribution inefficiencies, and disrupting markets.

This weekend, I decided to finally take a look at the HBO series Game of Thrones.  After watching a few episodes on iTunes, I took to the Internet to do some deeper research on the characters and the creative process in making the series.  But, I unexpectedly found something else that was very interesting…

Game of Thrones stands to become the most pirated TV program of 2012.  In fact, piracy for Season 2 has reached beyond 25 million downloads already.  Now the interesting piece – a significant amount of these pirated downloads are originating from viewers that would gladly pay to view the show, but cannot.

How could this be?  Well, HBO owns the show and the only way to view the current season is to be an HBO subscriber through Cable or Satellite. HBO does offer the “HBO Go” streaming Internet service, but this is only available to existing HBO cable/satellite subscribers.  Why would HBO allow this piracy to become so rampant when they could distribute Game of Thrones through iTunes/Netflix and monetize it more efficiently?

To find the answer, let’s take a step back and look at the distribution of content.  HBO funded the creation of Game of Thrones and owns it rights.  HBO is a network that has deep relationships with the cable and satellite companies, which it uses for distribution.  Together, this network/distributor partnership has created a viewership base that it can control and monetize.

Unlike the pre-iTunes music Industry, the traditional television industry and the network/distributor partnership has still managed to maintain profitability even with the advent of pervasive broadband Internet because viewers still spend a lot of time watching cable and satellite TV.  However, the Game of Thrones piracy situation has exposed the traditional model as being incredibly inefficient by today’s standards.

I believe this traditional model will change.  The television Industry will inevitably undergo a massive change where traditional distribution mediums like cable and satellite will become increasingly primitive; and eventually completely replaced by Internet distribution.  In this future, there will be no television channels or traditional remote controls.  Everything will converge to the ideal user experience – the ability to choose the content you want to buy and view it from any web-connected device.

However, this change is not necessarily in the long-term financial best interest of the network/provider partnership.  And that is the reason why I believe Game of Thrones is not available for Internet distribution today.  The traditional players are in a difficult position as they know that the more viewership is shifted to Internet platforms, the more the financial viability of their traditional model becomes exposed.  Naturally, they are defensive about enabling a new model that will compromise their main leverage position (their viewership base).

In the end, the traditional model will fade away, but how fast this happens will depend on who can enter the market with a disruptive Internet distribution platform – one that quickly can own the viewership base.  Once this happens, I believe traditional networks will be reduced to older content licensing companies and content creators will have a newfound control over their financial destiny.

Although Netflix, iTunes, and Hulu have made significant progress, I believe for the television Industry to be changed overnight, a more dominant platform must be established that has a mission of aggressively buying the viewership base.  With that in mind, let’s see what Apple has in store for their upcoming iTV platform.

3 Responses to What is the Future of TV?

  1. GSA July 18, 2012 at 2:04 am #

    I hope to one day be in your position as someone who has achieved his/her dreams and aspirations and have benefited from it. I’ve been given a means to do so from my late fathers east-African based shipping company which is among the best in the region.

    I’ve read your interest in basketball, more specifically the Memphis Grizzlies. One advice I would give you if all goes well is to trade Gay for two future first round picks, specifically. Do this at next seasons NBA trade deadline. Hopefully, once you do so and see the benefits which have been created you’ll see what I foresee.

  2. superhorst July 20, 2012 at 1:16 am #

    Good insight. I’ve been catching the show Game of Thrones since then, and it’s been a great experience

  3. Stuart Ben July 25, 2012 at 5:46 am #

    I just hope for the sake of all of us that the TV broadcasters won’t be left behind (as newspapers have).

    You are completely right that the TV industry will undergo changes, one main problem is that the changes are happening in a million different directions. for instance, Just recently we have seen the introduction of SAT-IP technology, (meaning IP-enabled devices such as tablets, PCs,laptops, smartphones, will be able to receive satellite programming).

    I agree 100% that most pirated viewers would be happy to pay for the TV content and beleive this day isn’t far. I just hope that a successful model does arise soon

    Thanks for the great post.