This is the end of Television as we knew it
Our way for watching TV is changing on day to day basis. More than 70 years, television has been dominated by network broadcasters. Last few years, however, a whole bunch of new market players, such as web players and telecoms operators, have entered the market with ground-breaking platforms and innovative formats that utilize rising new technologies, and are changing our watching experience and viewer consumption behavior. Consequently, both the overall TV value chain and existing revenue models appear increasingly destabilized. In this transition, traditional players as well as new players fight to achieve better position in new established situation. While broadcasting satellite and cable TV operators were busy setting up, internet and TV started to integrate with common services on multiple devices.
This is not some kind of overnight thing or latest technology one season fashion. We can look at this like the result of three major development stages: PC and mobile devices become a means for watching TV – more and more content is either streamed or downloaded onto PCs or mobile devices using a variety of different service platforms, set-top boxes and gaming consoles provide internet-based video access – Set-top box manufacturers such as Roku or Syabas as well as major console manufacturers like Sony and Microsoft include software in their products which allow direct access to the internet and online video platforms, TV-sets include internet connectivity – Major consumer electronics manufacturers, such as Sony and LG, have started to include web applications in their classic TV sets, allowing the web to come to the living room.
Many years after television started as a simply transitory, the 2009-2010 economic downturn marks the beginning of a decade of restructuring for the TV industry. This new period will begin with an overall decline in the sector’s resources before increasingly varied consumption patterns spur a new period of growth. The decade running from 2010 to 2020 will also be a period that focuses on cost control, with the industrialization of TV production that will depart once and for all from its historical model.
The TV industry is gaining a strong position on the Web, unlike the music and print media industries. As a result, future television will play a central role in video services. This offensive strategy will likely pay off down the line, but does not completely eliminate the possibility of destroying value. There are some structural reasons for this, including a high competitive online advertising market and a lack of control over program circulation and distribution.
Necessary conditions for the future online TV are: consumers are comfortable with online visual consumption; technical solutions that give users access to Internet content on their television sets have been implemented; open Internet access is possible from mobile telephones; premium content is available on the Web; online video quality of service is improving; new players from industries related to the television industry have aligned their strategies.
While this future TV on computer via internet migration will be gradual, it will have a big and deep impact on the industry: the exclusive rights model will no longer be the standard; some consumers will lose interests for traditional managed networks; a globalization trend will be sparked, to the benefit of the major rights holders.
According to iDate’s report, the worldwide television market was, in 2009, primarily affected by the decline in advertising revenue of 9.2%, which could not be compensated for by paid television or public funding; these two sources of revenue increased 7.2% and 3.5% respectively. Up until 2008, advertising was by far the primary means of funding for the industry, generating about 50% of the sector’s revenue, compared to 40% for paid television and 10% for public funding. In 2009, the weight of advertising and subscriptions each accounted for about 45% of the sector’s revenue. By 2010, revenue from paid television should exceed overall advertising revenue worldwide, reaching a ratio of approximately 47%/44% by 2013.
According to the latest forecasts from Informa Telecoms & Media, over 20 million TV homes globally will be watching 3D TV within five years. Backed by key industry players including set manufacturers, content owners, broadcasters, platforms and satellite operators, 3D TV is expected to be in 1.6% of all homes by 2015. North America will lead the way in terms of number of 3D TV homes with 9.2 million; Western Europe will be the second largest region with 6.8 million and Asia Pacific third with 4.6 million.
Old school linear TV market is still the main player but it is significantly diminishing in importance. The introduction of HD resolution has given traditional linear TV another push but it will be hard to revive long-term viewer interest for personalized TV and on-demand video and all of that can lead to the end of today’s way for watching TV. If so, how will this affect the big key players in the television industry and how should they respond to these changes? Looking at successful players in the new TV ecosystem we believe, that players who want to be present in this new arena need to pay attention to presence on multiple devices and ensure “TV everywhere” as well as a best in class interfaces, identify key content, integrate different formats, bridge content sources and complement linear TV with interactivity, focus on a mix of free and paid services leveraging existing content as well as user/usage data and re-inventing advertising
This summary is based on the report “Future of Television” by Arthur D. Little.