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Television’s Next Adventure

What to make of a world where video entertainment is jumping off the wall, flying through the airwaves, going over the top, and landing on your cellphone.
By Phil Harvey |

The future of TV is perhaps more fragmented, noisy, and competitive than ever. In other words, it has never been better. In the past, if you wanted to watch a show, you found out the date, time, and channel. Now, you need to find out which service carries it, what devices the service supports, and whether it’s free, a one-time rental, or a monthly fee. With competition and confusion both on the rise, the stage is being set for some major changes in the realm of television viewing. 

Tuning In

Netflix, Amazon, HBO, and Hulu are all examples of companies that stream TV shows and movies directly to consumers. Each one also produces its own exclusive content. These services are becoming increasingly popular, too. Dallas-based Parks Associates says that 55 percent of U.S. broadband households subscribe to these “over-the-top” (OTT) services.

Device makers have also become TV tastemakers. “Device makers are in a really good position to be able to consolidate the viewer experience,” says Glenn Hower, a research analyst at Parks Associates, adding that makers of smartphones and Wi-Fi-ready smart TVs aren’t necessarily a threat to OTT providers or pay-TV companies. Device makers may even help pay-TV providers reach outside their own geographically limited networks via OTT apps.

In that vein, Samsung’s Richardson-based mobile device team launched a service called Milk Video in 2014 for its Galaxy smartphones and tablets. It extended the service, which helps consumers find online videos, to its smart TVs in January.

Although Milk Video doesn’t carry live TV or create its own programming, the service does create a network. A business can now push an ad or a message to millions of devices through Milk Video—without buying a commercial on television—and they can collect data about who watched it, where they tuned in, and when. Hower says nearly 80 percent of smart TV owners view user-generated video content on their devices.

Live, broadcast TV has also gone online. Dish Network launched Sling TV, a service that provides live TV channels—including CNN, the Food Network, and ESPN—streamed to consumer devices for $20 a month. By contrast, Netflix, Amazon Prime, and other OTT services are entirely on-demand with no live broadcasts. 

These content options all have their pros and cons, but a few trends remain constant:

• High-resolution video, images, and screens on today’s devices are driving demand for more bandwidth. 

• The number of ways you can get high-quality video content will proliferate as more content becomes available on more Internet-based services and devices. 

• Mobile devices will become a bigger part of the mix and, in certain scenarios, they will be the screen of choice for programmers to reach highly-targeted audiences. The future of TV tends to pull in the direction of whatever company can reach the biggest audience possible, profitably, and with popular content. 

Running to 4K

The most active pay-TV company, on many fronts, is Dallas-based AT&T. The telecommunications giant has more than 120 million wireless customers, and it will have 27 million pay-TV customers pending the approval of its $49 billion merger with DirecTV. 

AT&T’s pay-TV service, U-verse, launched in 2006 and now has just under 7 million subscribers. More than 90 percent of its TV customers also subscribe to at least one other AT&T service, like high-speed Internet. But growth and Internet technology still weren’t enough to give AT&T a decisive lead. 4K TV, a new format of super sharp, lifelike television also known as Ultra HD, is coming, and most of AT&T’s U-verse households don’t have the bandwidth to handle it. 

New 4K TVs on the market today have four times the resolution of today’s HDTVs. Consumers will need new TVs to watch 4K content, and network operators and content companies will require much more bandwidth to push that content to their consumers. 

Netflix, which started making 4K content available last year, recommends that consumers have a steady 25 Mbit/s Internet connection if they want to watch 4K content—that’s five times more bandwidth than is recommended for watching regular HDTV. 

Fortunately for AT&T, DirecTV has already started providing some 4K TV content through its satellite network. It also has more than 20 million video subscribers and an exclusive deal to broadcast every NFL game on its systems. Those three things gave AT&T attractive reasons to merge.

Consolidation is a big theme, and four of the top five pay-TV providers in the U.S. are involved in mergers. When the dust clears, there will be two pay-TV providers with an audience of more than 25 million each. The third place finisher, Dish Network, has just over 14 million subscribers and should gain more via Sling TV.

Live and Direct

Of course, not all video content is meant for big TVs. In January, AT&T executives held meetings with technology partners and journalists to show off LTE Broadcast, a technology that allows a content provider—a TV station, pay-TV provider, or a venue like a sports stadium—to broadcast live, targeted video directly to mobile devices. A broadcast could be restricted by location, device type, other consumer data like what pay-TV service you buy, and so on. 

Like broadcast TV, LTE Broadcast technology allows for multiple users to see the same content simultaneously, in a controlled way. Just like HBO can have a subscription-only channel, wireless network operators like AT&T can create services where everyone but subscribers is closed off to exclusive content, but the content is reaching enough people to make it profitable to produce. It’s not clear yet exactly how and where LTE Broadcast will be used, but it has the potential to give pay-TV operators another way to set themselves apart from their OTT competitors.

Youtube: Everyone’s Network

Parks Associates predicts that the number of pay-TV households worldwide will exceed 1 billion by the end of 2015. YouTube already has more than 1 billion users, and half of its video views come from mobile devices.

In the United States, 82 percent of consumers aged 18 to 22 years have a pay-TV account, which is five percent fewer than older consumers. According to a Variety survey from last year, the biggest stars in the world according to American teenagers are people with YouTube shows, not Hollywood actors. YouTube doesn’t break out its revenues from mobile devices, but it does say that its mobile revenues are up over 100 percent year-over-year.

The largest TV networks and pay-TV providers still aren’t able to reach the sheer mass of people in the same targeted, personal way that online videos can—especially when those videos are viewed on mobile devices. And it’s worth asking: Do they really want to? “It’s great to find an audience, but an audience doesn’t put food on the table for you,” says Hower.

Companies like Dallas-based ViewMarket, a media startup, are looking for ways to connect today’s social media superstars with the pay-TV channels and broadcasters they’ve grown up without.

Alexander Muse, chief product officer and co-founder, says one of ViewMarket’s many projects helps owners of TV stations acquire content from, of all places, shows and video blogs that started on YouTube. 

“The cost of programming is high, and they want to reach a younger demographic,” Muse says. “If you’re an ABC affiliate, you don’t get to put the ABC shows on your site. You get to put your local news up, and that’s about it. Your whole business is selling ads around video, and you don’t have content to show.”

ViewMarket helps create and package content—mostly clips of shows and talk shows—that focus on key topics that appeal to advertisers, and the content looks slick enough that it doesn’t feel out of place on a local network affiliate TV station. “If you think about it,” Muse says, “a local hospital would much rather advertise against a wellness-themed clip show than they would a re-run of ‘Bonanza.’”

By bringing a base of talent from YouTube to broadcast television, ViewMarket perhaps illustrates that business models are changing quickly, even for the folks in the content business. “I don’t know if we’re in the right place yet, but we’re definitely somewhere near the right place,” Muse says.