Youtube is the new TV, Mark Zuckerberg says 90% of Facebook will be video in five years and even Twitter wants to be a video company. What does all this mean for the traditional TV industry? Networked India caught up with Gordon Castle, Vice President, Head of Industry Area (Mediacom), Ericsson for a detailed chat about unbundling, subscriptions, digital, Smart TVs and everything in between.
Q: Could you give us a quick overview of the changes you see happening in the next few years with the TV industry being disrupted by digital?
Gordon Castle: It’s really not about OTT (Over The Top internet-based services) vs traditional linear television. It’s really about how they come together that’s important. Overall consumption continues to rise and revenue for the industry continues to rise as well. Models are bundling and subscription continues to be the most popular way for consumers. This is all great but it’s not without its challenges. We like to say that tv is going to undergo more transition in the next ten years than it did in the last sixty years. And that transformation has happened through all aspects of how consumers are viewing content.
Our projections show that in a consumer population that has a smart device, 50% of the viewing is on the device. 50% will be on demand which means OTT integration is absolutely essential here. And then 50% of viewing will be on demand or by recommendation so the aspects of changing all of the EPG (Electronic Program Guide) vs recommendation to fulfill media integration become really really important.
Q: With all this talk of cord-cutting, is the traditional industry model still relevant?
GC: In various established markets it means that the traditional providers are going to have to adapt. Whether its more compelling experiences, better user interfaces, better content extension across devices – you’ll see a lot of models being adopted. Already we see broadcasters either trying their own individual thing or you see Netflix being subscription while Hulu is with advertising so we’ll see a lot of different models.
You’ll also see a rise in importance of the vertical ecosystem, ranging from the content, down all the way to the device and how tightly those are tied together. Overall where sales and revenue is concerned, money is still in the traditional space so those companies are really in the best position. They’ve got established relationships, premium content and the ability to provide better experiences.
Q: So Content Is Still King?
GC: The key aspect is that when we used to say content was king, we also used to say distribution was queen. Now it has become the main thing – distribution is also king. It’s what actually differentiates & that kind of leads you into thinking about what it means in different parts of the world. In areas of the world where mobile broadband has greater reach in terms of penetration, it’s the place where most people start consuming the internet.
Media experiences on those devices are the first experience and it’s important to leverage different networks to bring it all together. We see rise in hybrid experiences so that you can utilize the right network for the right thing. You can see convergence on the device, whether a set top box or phone in terms of using the right network.
Q: How big a game-changer will Facebook be with their big video push? If distribution is also king, then it’s the social networks like them and Twitter who’ll call the shots?
GC: You know a majority of the talk on twitter is about TV. So, absolutely, if it’s about helping people find content, helping them discuss content, social media like facebook have an impact but interestingly enough we also see a rise in linear because of this. Consumers really enjoy sharing experiences, they want to do something together – whether watching a match or a show -it’s actually a lot more fun to chat about it when it’s happening. So on social media chatter on twitter for example there are studies that show if tweets are happening during a show, it’s driving people back into the nearest malls or wherever they want to watch it and at the same time chat about it.
In terms of impact on the premium media experience, honestly, we don’t exactly know. Overall there is a shortage – there is plenty of demand and there is not enough of premium media experience. The premium media is today distributed through the highest value channels we can get, which we call traditional on-air and pay tv providers. We have seen Netflix, Youtube, Amazon and others all make endless efforts to produce original content which I think is totally understandable. since everybody wants to have a piece of that premium model.
They’re not doing the investments at the same scale as the studio model – many magnitudes different so I don’t think they’re doing that to turn the tables; they’re doing it to provide additional value on top of the video services. So social adds to the model but doesn’t replace it. The premium Pay-TV model is not dying, It is changing and expanding but revenue projections continue to be high and advertising continues to grow.
Q: You mentioned premium content and stuff like ‘Game of Thrones’ or ‘House of Cards’ do very well, with Hollywood stars and big budgets but on the other hand if you see the top Youtube channels, there is Disney Collector which is somebody doing commentary of toys, the whole unboxing video phenomenon, nursery rhymes is a huge category. Isn’t this questioning all assumptions that the tv programming people had?
GC: Except for the value proposition! To be honest I think that you do get huge audiences and there are certainly Youtube stars that are making a very nice living – a guy in Sweden where we’re based rants about video games and makes a fortune! Frankly I think people like that with a talent and skill will make it in the traditional video spaces as well. I think that if you just look at the relationship of the viewership and money there is a big magnitude of difference.
I’m not trying to discount the value of Youtube and new services – there is a huge growth and some really interesting things like viral videos, advertising dollars are rising very rapidly. We would project that the OTT space is doing 22% growth compared to 5% growth of what we think of as traditional television. It’s a pretty big difference but the basis of that difference took a very long time for the industry to get there. So the point is to bring it together. When we talk about converged media, we’re talking about the strength of premium media, the value proposition from a quality standpoint & coupling it with the growth of OTT. When we put those together, we really have this amazing winning proposition.
Q: Finally, what’s the outlook on the Smart TV phenomenon? Is it seeing traction with all the manufacturers pushing it despite what seems like consumer apathy?
GC: I think the tough thing about Smart TV overall is the complication of the coordination of the experience. If you compare smart tv to Apple TV to your set top box , most people doesn’t like to have so many different entry points. You really like to have that have brought together & I think that really will come together.
So you’re seeing more examples of things where OTT services are provided within the atmosphere of the PayTV provider & we think that will increase, so your ability to find content, to launch content will happen more and more in a single interface. We think the interface that makes sense is the one where you’re putting most of your valued content. So from a consumer proposition that’s kind of the home base where you want that home base to go to but Smart TV hasn’t had the breadth of content deals. Apple TV has a broader set, Roku an even broader set of applications on it. So all of these things provide you a bunch of applications for it but none of them still provide a full integrated experience. I think that’s where we’re heading – an integrated experience.