- The 1950-1990 period when broadcasters came to dominate home entertainment in many countries and could attract 90% of the available audience. The TV and advertising industries grew rich together.
- The 1990s with the arrival of multi-channel cable and satellite ‘pay TV’. Free-to-air audiences started shrinking but advertising held (relatively) strong as the new “narrowcast” channels grew new revenues (from viewers).
- The 2005 game-changer launch of YouTube by three former PayPal employees. They created a user-generated world of “Broadcast Yourself” and millions of home movies, personal clips and shaky video for a fast-growing online audience. Broadcasters were lulled by the home-spun content and by stats which showed viewers spent a few minutes per day watching YouTube while TV viewers were ‘captive’ for hours. But Google saw the promise of ‘TV meets the web’ and bought the company for $1.7bn in 2006.
- The 2010+ emergence of professional programmes on YouTube, followed by wave after wave of increasingly slick channels from new-style ‘broadcasters’. Many of the channels are now attracting substantial audiences especially among young defectors from network TV. The latest milestones in the exploding online market are: YouTube’s launch of low-price subscription channels; Netflix’s screening of original drama; TV catch-up services; and mobile viewing on tablets, laptops and smartphones.
revenue totalled $238 billion. The biggest money is still in advertising-funded network TV. But broadcasters have been losing younger audiences at an alarming rate and the tipping point – where those ‘video’ advertising dollars start to flood from high-cost broadcast into low-cost online – may soon be reached. Goldman Sachs recently reported in the US that TV audience ratings had dropped by 50% over the last decade and that the advertising-crucial 18-49 years audience has fallen by almost 17% in the last year.
Media buyers are increasingly active in video content and now recognise online TV as a viable advertising medium, juiced up by young audiences, interactivity and data-cookies. They have also been prepared to pay premium prices for YouTube advertising which viewers have chosen not to skip – a pay-for-impact mood that is sweeping right across media, whether traditional companies like it or not.
The other factors which may drive momentum away from broadcasters include the “yellow pages factor”: the systemic shift which swept away long-established print directories was aided, in many markets, by an advertiser base which felt it had suffered too long at the hands of profiteering near-monopoly publishers. Some TV media buyers recognise the parallel with broadcasters. Further, TV airtime and production budgets are so large that a relatively small swing of revenue towards low-cost online might provide a quite disproportionate shift in the balance of power: the tipping point, in fact. It might all be pointing one way.
And the TV viewing changes are coming thick and fast.
To underline its significance, CBS and Fox have, incredibly, threatened to stop broadcasting and switch to cable if they lose the legal case against Aereo.
There are some key differences between this service and the UK’s TVCatchup app that actually lost a first-stage legal case. Aereo is received on iPads and laptops through a micro-antenna, so is said to involve viewers sharing the programmes with each other.
The legals symbolise the vulnerability of traditional broadcasters everywhere.
Another reason to watch Aereo, though, is the person behind it: Barry Diller.
Diller has been at the centre of major developments in US TV and online across the past 40 years. His rags-to-riches story started in the Los Angeles postroom of the William Morris talent agency after one abortive term at university. He moved fast around tinsletown and reached spent the top of Paramount Pictures. But his biggest splash was eight momentous years with Rupert Murdoch, creating Fox (the fourth US-wide TV Network) when few insiders gave them a hope. He moved on to build shopping channel QVC and the Home Shopping Network turning it into Interactive Corp (IAC) through which he now controls more than 150 web companies including Expedia, Vimeo (a sort of junior YouTube), Match, Ask, and Dictionary.
In 2010, his Tina Brown-created Daily Beast site merged with Newsweek – which he is now selling on again, having conceded defeat in producing it as a digital-only magazine.
Diller spun off travel review aggregator TripAdvisor from Expedia. And, then there’s Aereo winning fans for its content on subscribers’ smartphones and iPads.
He quite simply sees broadcast and cable TV as “a system that has certainly outlived itself” and predicts that programming will eventually shift to open internet-based platforms: “The wall that broadcasters and cable companies have built around their services is not long for this world. It’s not clear who will tear it down, and it’s not clear when it will actually happen, but the “centricity” of the video world is going to shift from cable and satellite to the internet. Younger folks are the ones who are going to make it happen. I don’t want to beat up broadcasters. I want to help move the centricity … from closed systems. The more you can get all forms of video over internet protocol, the better off the world will be.”
YouTube talks back. TV means reach, YouTube means engagement.”
- Yahoo and the US satellite service DirecTV are two of the companies said to have bid $1bn+ for Hulu, the pioneering online TV service that ought by now to have built a decent US (and international) lead. But it has been hobbled by the conflicted interests of its three owners News Corp/ Fox, Disney/ABC and Comcast. Expect the eventual auction winner (which might still be one of the existing part-owners) to internationalise Hulu.
- Microsoft has been talking up its strategy to “own” home entertainment for the 10 years since it audaciously launched the X-box games console against Sony’s then all-conquering PlayStation. At last month’s launch of Xbox One, the company portrayed its third generation, voice and gesture-activated games console overtly as the centre of an interactive entertainment universe spanning live and recorded TV, sports, movies – and games: a media-platform first, games console second. A real statement from Microsoft which will now create a raft of non-games online channels.
- Intel (yes!) wants to become an online TV player. No price or schedule has been announced but the company aims to “offer a full array of cable TV channels over the internet” via “a beautiful box with a front-facing camera and the kind of industrial design that makes you not want to hide it in a cabinet.”
- Major cable network Discovery has just launched TestTube, its first online video network, with no-charge original series targeting younger viewers. It’s available on YouTube and Xbox.
- The worst-kept secret is Apple’s late-2013 plans to launch a branded TV set, which may be called iTV. It is assumed that the curvy and clever hardware will come with a range of completely new online TV services – in a bid to create an iTunes-level of international leadership. It will also broaden Apple’s competitive offering against its nemesis Samsung whose smart TV leadership will need a response
- The resurgent 28-year-old AOL (owner of Huffington Post, My Daily and TechCrunch) is relaunching its GoViral video service as Be On, to look more like a conventional online TV platform. CEO Tim Armstrong is promising new channels in 2014.
John Malone’s Liberty Media has just completed its $23bn purchase of Virgin Media, the UK’s distant-second second pay TV network and broadband provider. The CEO, intriguingly, is former Murdoch pay TV executive Tom Mockridge. The telco BT’s YouView (with all the UK’s free-to-air TV networks) has piled up 400,000 subscribers in eight months. With BSkyB’s NowTV, the country’s online TV market is set to explode. It is assumed that either BT or Liberty will soon snap up the ITV commercial broadcaster. ITV’s own investment in production (but not in online channels) points that way. Elsewhere in the UK, Jamal Edwards’ London-based online youth channel SBTV is becoming a substantial international business. It is a sure sign that, whatever online winners emerge, many young people will not be coming back to broadcast ‘linear’ TV.
- Australian is embroiled in a debate over the federal government’s running-late and over-budget plan to build a super-fast National Broadband Network (NBN) . It’s a soft political target, of course. But one interpretation of the controversy is that the nation’s leading broadcasters are desperate to kill the broadband project in order to ‘manage’ the pace towards online TV. American media coverage ofthe NBN spat is illuminating: “Those who see an NBN as an example of big government using public funds to interfere with private enterprises miss the historical precedent. The United States encouraged privately run railroads to link its shores – the first national network. When those railroads abused their power, the same country used public funds to build roads and highways to compete with, and some would say, defeat them.” Even by the standards of free-to-air broadcasting, Australia’s commercial TV networks have been insanely profitable. The three channels have traditionally made similar profits to their UK counterparts (despite the 1:3 population ratio). So this is another group of companies with a lot to lose. Now, Aussie broadcasters are considering “hybrid broadcast broadband” a pan-European initiative aimed at ‘harmonising’ the delivery of entertainment through connected TVs and set-top boxes. They can expect a lot more disruption than that.
Here are my predictions of what will start to happen to online TV over the next 12-18 months:
- Cross-over broadcast-online audience measurement will sharply boost online advertising revenue
- The launch of major international online channels will challenge national broadcasters
- Live coverage of some sports will be streamed exclusively on their own channels
- Online and offline retail channels will become major media outlets with content and ecommerce
- Some daily newspapers will become international online TV channels for news, sport and business
- Some major broadcasters and cable operators will switch over to online
- Political groups will start to discuss the value of the broadcasting spectrum that could be freed up – and auctioned off – as and when viewing switches predominantly to online and cable.
Some of these predictions are not that brave, of course. Almost every world sport has (or is planning to have) its own online channel, although some say that live streaming on YouTube lacks the signal quality of its video on demand. Aussie Rules Football is streaming all its matches live to international audiences on its own channel, and there are now plans for the country’s cricket to do the same. Sponsor HSBC’s YouTube coverage of the British Lions rugby tour shows how non-media companies will increasingly create ‘own brand’ channels. Will Britain’s The Guardian (already one of the world’s largest newspaper web sites) be the first daily to establish an international online TV news channel, eventually to replace its hard copy?
It is easy to believe that, having lost movie-viewing leadership to cable, satellite and online, network TV will now steadily lose its sports and news dominance. And that is added to the growing defection of so much of its young audience – and at least some Simon Cowell-inspired light entertainment. Not a very promising outlook for traditional broadcasters, many of whom must launch online channels of their own – and face the downward profits spiral familiar in other areas of traditional media.
Like all media, the online TV winners will be from among the largest (national and international) and also the smallest (local and hyper-local). The in-between majority will be fighting for their lives. Back to Barry Diller: “There’s going to be some creative destruction”.