YO BRO IT’S ME LITTY

A few of my recent video viewing experiences combined with a conversation with my old Official College Sports Network buddy Dimberg has me thinking about the future of television as we know it.

I wrote a post in June of 2008 called “The Internet Will Be Televised“. In the post I shared how intrigued I was by Hulu and how easy it is to hook up digital video to a large screen television. I also made predictions on which trends would most influence the television viewing experience. This included buzzwords like convenience, distribution channels, quality content, targeted audiences, and platform agnostic experiences. I don’t need to evaluate the accuracy of my predictions, because it’s now become pretty evident what will happen.

This month a New York City start-up called Boxee.tv officially launched its product. Its stated goal is to be the best way to enjoy entertainment from the Internet or your computer through your TV. Download the Boxee software and within minutes you’ll better understand how you will organize, find and consume video content in the future. Here is their video that introduces you to what they are trying to do.

I’ve also had a pretty awesome experience using ESPN360. Actually, my cable company (TimeWarner) doesn’t even provide the service, but I use a friend’s account to login remotely. The breadth of niche sports content is amazing and I’ve been using it to get my college basketball fix. I’ve also watched a few soccer games on ESPN360 and can easily envision a scenario where thousands of games are available to access on ESPN360 each week.

What has become blatantly obvious is that connecting digitally to a large screen television is way better than using a cable box. I actually wrote about how much cable service sucks in my previous post. There has been absolutely no innovation or advancement in the last few years – so, yeah, it still sucks.

Before I crown digital viewing as king, I’m trying to understand the economics. It’s the multi-billion dollar mosquito in the room.

Right now I pay over $100 each month for my cable service. That’s a staggering amount of dinero that I’ve come to terms with shelling out each month. The combination of Hulu, Boxee, ESPN360 and other digital channels costs me $0. I’ve been thinking hard about if cable is still worth the cost. If it wasn’t for live sports content, I would probably have axed it already.

This is where things heat up. Television networks and cable companies need to stop griping about how to split up their piles of gold (which they do whenever they have carriage fights) and begin figuring out how to keep their customers/viewers paying over $100 each month to access their content before they follow the fate of the music or print industries. When that happens, a giant vacuum basically comes and slowly sucks all the revenue out of the Industry. The consumer doesn’t mind because their experience is actually cheaper and better! If there is any lesson to be learned from the print/music sob story it’s the need to rally around technology and innovate when things are good and NOT just try to protect profits as long as possible.

I’ve listed out some things that television networks and cable companies need to do (and do quickly) in order to stay rich. If executed properly, the consumers experience will improve while the cable companies and television networks get to keep their monster revenues. If not done properly, we’ll all be watching television for free quite soon!

Equalize distribution channel monetization
I would pay just about anything to watch a new episode of the Jersey Shore. Currently, I can watch the show on MTV because I have cable. Besides advertising revenue based on audience, Viacom also makes a large chunk of their money by charging cable companies a per user fee to carry their channel. Approximately $2 of my cable bill goes directly to MTV. They are successfully monetizing me. I can also download the show on iTunes. Each show is individually priced so hopefully Viacom is making a similar margin as if I subscribed to cable. Finally, I can also go to MTV.com and watch the show for free. The show is on-demand, streams at high quality, and also comes with bonus content so the experience is just as good.

The prevailing thought is that I’m locked in as a cable subscriber so if I also view the show on MTV.com or iTunes it’s incremental revenue. Everybody likes to argue that digital viewing is additive and not cannibalistic. Therefore it adds incremental revenue, at least until consumers start to wonder if they still need cable. The best way to defend against this is to figure out how to charge for the content uniformly and monetize all distribution channels equally.

Charge for content, not cable
I should be paying to watch/access the Jersey Shore without regard to the platform I choose to consume it. I don’t want to pay for cable, I want to pay for content. If I’m paying for ESPN I want to be able to access it on television, the web, mobile device, my rad tv sunglasses or through the chip they implant in my brain (that happens in 2013). Cable companies are in the best position to be the content network partners because they have the paying relationship with the consumer and can ensure the aggregated audience (to ensure the advertising pipeline continues to flow).

This means I should be able to tell Boxee that I am a Time Warner subscriber and therefore get access to all the channels that I pay for through the service. I should also be able to have the shows upload to my iPod or mobile device.

A La Carte Pricing
I’m more than willing to pay for the video content I consume but I want more control over that process. If the cable company is going to bundle hundreds of channels that I don’t want and then charge me an extra $5 for the Big Ten Network then that seems like a rip off. Whoever gives me the most control of what I can access and charges me accordingly will get my check each month. (UPDATE: my bud Brodsky and the only guy i know actually smart enough to read the New Yorker just turned me on to this article about unbundling by James Surowiecki)

Advertising Innovation
Besides sports and live programming, the thirty second commercial unit/interruption is completely ineffective. It’s amazing to me how an entire industry can just totally ignore the effects of a widespread technology in DVR. Digital allows a two way relationship with the customer so start feeding me things that I want from brands that I use. I get it that advertising will keep my content costs down. But c’mon, do something more effective than waste my time with talking animals and cheesy jokes.

Lot’s of these concept are already happening in some form. Hulu is experimenting and innovating with the types of advertising units they incorporate into the content. Slingbox makes place-shifting seamless. Content provides like MLB are charging fans directly for their season pass and even distributing it through platforms like Boxee. Cable companies have begun to champion the concept of “TV Everywhere”. Comcast is in the process of launching Xfinity, a digital service that offers episodes of shows that are only available to subscribers of Comcast cable and internet services.

As I said, I’m interested to see how this all unfolds. The next 12-18 seem to be crucial for the Industry. It’s pretty obvious what needs to happen but in reality getting content networks, cable companies and other distribution players and disruptive technology to all play nice together seems almost impossible.

Please share if you have any ideas of grandeur on how a start-up can step into the tumult, mix things up, and grab a piece of the cheese. I also realize that Net Neutrality needs to be part of this conversation but not really up to speed of the implications of it. It’s a conversation that will be great to have.