Broadcasters scoffed at the notion that cable would ever threaten their domain -- until it occurred less than two decades later. Now, cable and broadcast are similarly discounting the Internet's ability to circumvent their TV stranglehold -- despite creeping evidence to the contrary.
Recent data points render still more evidence that media's status quo is fleeting. The issue now is how long and how much media companies are willing to bet against transformative change.
- The Federal Communications Commission's proposed expansive broadband plan will require multichannel video program distributors to install a gateway device or equivalent in all new subscriber homes and in homes requiring set-top box replacement beginning Dec. 31, 2012. The move aimed at making home video more competitive will survive anticipated legal challenges from cable and telco operators whose set-top boxes dominate 76 million US households, according to Andrew Lipman, partner at Bingham McCutchen's Telecommunications, Media and Technology Group. Cisco (CSCO) and Motorola (MOT) manufacture 95% of the boxes.
- An involuntary open broadband infrastructure will universally support new addressable ad business models and metrics. Broad adoption will shift advertisers from buying TV programs and mass demographics to paying premiums for niche audiences and individual consumers, according to Parks Associates analyst Heather Way. Cable operators' $150 million Canoe Ventures addressable advertising solution will not work through its complex compatibility issues across legacy cable systems before Google (GOOG) and others come rushing into the interactive TV ad space. Per TechCrunch, Google has started to remarket AdWords client campaigns to follow target consumers across the Web in pursuit of an e-transaction.
- A "sharp deceleration in growth" in telco TV business (Verizon (VZ) FiOS and AT&T (T) U-Verse) and cable's moderating video subscriber losses, according to a new report from Bernstein Research analyst Craig Moffett, will have heavily capitalized incumbents struggling to retain share of a competitive market. Moffett forecasts that modest subscriber gains could settle in by 2012, in time for the anticipated mandate that cable, telco and satellite providers share their set-top box space with a flood of rivals. "New pathways to the home for video or other entertainment could also reduce the value of cable's video distribution bottleneck," Moffett warns.
- Broadcasters will surrender unused spectrum over the next decade as consolidated TV stations continue moving toward a multi-pronged revenue system drawing on retransmission fees, on demand and advertising. With less than 10% of the nation's households watching TV over the air, the reallocation of spectrum will provide growing room for all manner of new Internet video and advertising, mobile and hyper-local competitors. Broadcasters already are seeing an end to their historical government-create monopoly and "license" to print money that, as Bernstein's Michael Nathanson notes, continues to assure some TV station operators among the healthiest margins anywhere in American business.
- The much ballyhooed April 3 release of Apple's (AAPL) iPad will heighten the challenges and opportunities to traditional video players showing increased signs of anxiety. As if increasingly strained relations among Hulu's broadcast partners wasn't bad enough, TV content players are resisting Apple's efforts to catapult video into digital high gear with 99-cent uploads or TV monthly fees, new apps and other inventive iPad strategies in a battle over control. Analysts suggest the iPad could expand revenues for video by creating new digital economic models and a revolutionary portable device for enjoying content on the go, just as Apple's iPhone did with the video game market. That's one reason Disney (DIS) CEO Bob Iger says the iPad will be a "game change" -- with or without the traditional media players onboard.
Disclosure: No positions