English
Executive Trends: What to expect the day after OTT (Part 3- December 2015)
Part 3: Linear TV fragmentation
In the times of "Content is King" (though at the recent Asia Television Forum it was suggested to replace this phrase by "Customer is King") there is wide agreement that the golden age of linear broadcast television will soon be over, with zillions of customers expected to be craving for 'on demand' television. But, little is said about how this may happen. Current verdicts are heavily influenced by the millennials, but these people will presumably age, as most others have. With age, their preferences will presumably change.
According to the line of thought prevalent at this time, linear TV will just cease to exist. In the same spirit, half a century ago it was diagnosed that radio would vanish with the advent of television, etc. The problem with this reasoning is that media never vanish; they just adapt to the new environment and survive. Yes, they lose dominance, but remain being an interesting business where many people can still make money.
The process obeys the law of "technological generations", where a change in the way a medium is consumed by the user --say, laptops vs. desktop PC's regarding the Internet-- drastically changes the balance of power among the companies dealing in that particular field. This happened to Polaroid when digital photography emerged; to IBM when it gave away to Bill Gates the PC fundamentals, and more recently Apple's revival with the iPhone and Uber's current challenging of the taxicab industry.
Agreed, in the 2020's most telecommunications signals will be delivered via fiberoptics or satellite over the long haul, by wireless spectrum when it comes to the 'last mile'. But, at the same time there will be billions of people (the population is aging in most parts of the world) who will want to sit down and be entertained after a presumably long day of work, at home or elsewhere. This calls to prepackage for linear TV channels, where somebody has found what type of entertainment will be adequate for each audience profile.
There may be hundreds, maybe thousands of these channels, provided that the user will not have to select among them; the existing EPG's are awfully inadequate. Supermarket research shows that sales plummet when the potential customer is exposed to too many choices; television data indicates that most people never watch more than six different channels; an average family watches no more than thirteen different channels. And, the same happens with frequently visited websites, though frantic emotion seekers are more common due to the active behavior required by the Internet, compared to the passive television-watching mode. The conclusion is that people hate to go through a maze of alternatives.
Programming the hundreds of linear channels that will replace in the future the dozens of broadcast titans of our time will be as easy as programming a computer-operated radio station nowadays. And, funnily enough, Netflix is showing the way: you only have to reverse-engineer its algorithm and, later, fine-tune each programming sequence through iteration and metadata.
Who will pay for this? Well, advertisers are already being trained by programmatic advertising and will have to re-allocate what now goes to broadcast TV; rates will depend on the audience achieved, measured through the Internet. True, the money available might be less than what is being billed to free TV advertisers at present, but most industry pros will agree that it is not necessary to spend $4 million per episode to produce a good television show.
What's the difference between these linear channels and current pay TV? On the one hand, people will be reluctant to pay $160 a month for watching six to thirteen of a bunch of 150 channels they mostly ignore. On the other hand, what is really missing is an efficient micropayment system by which you can charge a small amount of money --keep in mind the Apple experience with iTunes, and Netflix's first monthly rate rise--, later pay the resulting monthly amount bundled with your phone bill or charging your bank account. Sports events might command a higher rate, but at the same time they will be stronger with advertisers; this should keep the price tag under control, unless somebody gets too greedy and a backlash results.