Google's VP Predicts End of TV as We Know It ; HD Video at Apple Special Event?

Includes: AAPL, GOOG
by: Yankee Group

By Carl Howe

Little-noticed because of the slow pre-holiday week this week, The Guardian cornered Google (NASDAQ:GOOG) VP Vint Cerf at the Edinburgh International Television Festival, where he charmingly and convincingly (as is his wont) predicted the end of television as we know it. His actual words:

The 64-year-old, who is now a vice-president of the web giant Google and chairman of the organisation that administrates the internet, told an audience of media moguls that TV was rapidly approaching the same kind of crunch moment that the music industry faced with the arrival of the MP3 player.

"85% of all video we watch is pre-recorded, so you can set your system to download it all the time," he said. "You're still going to need live television for certain things - like news, sporting events and emergencies - but increasingly it is going to be almost like the iPod, where you download content to look at later."

Somehow, when Vint Cerf says things like this, they always sound so simple and obvious. But the implications of TV moving to become 85% downloadable and non-real-time are huge. A couple quick examples:

  • Cable TV lineup bundles become toast. You don't need 150 channels of TV for $99 a month if you're downloading the programs you want to watch whenever you want them. You just need a very fast Internet pipe. And $99 a month buys a lot of downloads, even if you opt for pay ones such as from the Apple iTunes Store.
  • Telco investments in TV become writeoffs. Telcos like Verizon and ATT are investing anywhere from $50 to $200 billion to supply traditional TV services to homes. But they may finish those rollouts just in time for real-time TV demand to fall off a cliff as consumers go to downloads. The result: investment write-offs as far as the eye can see.
  • Apple (NASDAQ:AAPL) and Google suddenly have new TV market power. Apple has spent more than two years developing its iTunes video store and Apple TV. Google paid more than a billion dollars for YouTube. Yet with the end of TV as we know it, these investments are now bargains as those properties become the new Boardwalk and Park Place of the new TV business, since they monetize the new Internet video model. And yesterday's announcement that Apple has opened an iTunes video store in the United Kingdom means these companies are only adding to their leads.
  • Forrester mobility VP Maribel Lopez and I discussed this exactly phenomenon the other day when we both contemplated not even bothering to subscribe to cable TV in the future. And while Vint Cerf, Maribel Lopez, and others like them are early adopters of technology shifts, those shifts in demand do have a way of snowballing into major trends, especially as the economy softens and consumers look for ways to save money.

    It wasn't that long ago that cable TV bills were $20-$30 a month; now many US households have cable TV bills in the $100-$200 range. The end of TV as we know it has bears the possibility that those bills may return to their past smaller sizes -- and in the process bring an end to the TV business as we know it too.


    Speaking of the Internet bringing the end of TV as we know it, everyone seems to be expecting new music and iPod offerings at the Apple Special Event in Moscone Center on September 5. But what has gone more or less unnoticed is the fact that Akamai, Apple's long-time Internet content partner, has announced that it is adding high-definition video to its Internet distribution offerings.

    A coincidence? Perhaps. But add the fact that Apple TV, a product whose revenue is being recognized as a 24-month subscription model like the iPhone, sports high-definition outputs, yet has no high-definition iTunes content yet, and you've got a high-definition shoe ready to drop sometime; the only question is when. Given we predicted high-definition movies and movie rentals would be announced in September back in June, we're expecting iTunes to add high-definition content as well as movie rentals next week.

    Full disclosure: the author holds both Apple and Google stock at the time of writing.