What’s the Ultimate TV: iTV, Google TV, Kindle TV?

There is a lot of speculation (including teasers from Jobs and Cook) about how Apple will upend the TV experience with an iTV device – the same way it did for phones.  Whether that happens or not, the space is ripe for disruption, and several players are primed to take a pole position.

Re-imagining the TV viewing experience
TV viewing has largely remained the same for the last 50 years. The number of broadcasters, the number of channels have increased, but the concepts of “shows” and TV programming schedules haven’t changed. The TV ecosystem has largely remained stagnant between broadcasters, device manufacturers and cable/DTH operators. Other than the advent of Pay TV for premier content, the business model has largely remained the same. Among consumer devices, the TV remote has remained the only constant – still inflicting upon us a very primitive user experience. For something which is used for a couple of hours every day by a vast majority of the population and for something which is present in every house, the lack of innovation is almost breathtaking.

Its not about the device
While the device itself (TV and remote) is due for a major overhaul, Content, is where real disruption is needed. What we need is
1. Large variety of content available on-demand and at a reasonable price

2. Simplified pricing structure and flexibility to choose content

What we need is an iTunes (music) like equivalent for video content. iTunes provides a good library of TV content, so does Amazon Instant Video and Hulu Plus. But a lot of content is still not available and the pricing is still prohibitive – for ex: A season pass for Modern Family on iTunes costs $30. Thats HIGH when you can get 45+ channels (including ABC which broadcasts Modern Family) on Comcast for $30/month.

It has been incredibly hard to get major content producers to license content (at a reasonable cost) for internet based distribution. Bill Gurley wrote an excellent post articulating the fundamental reasons behind this and why this is unlikely to change. An innovative ad supported business model is needed to subsidize the high content costs and make it compelling for the vast majority. However, the traditional pre-roll, mid-roll and post-roll ads (which are staple fare on TV) are not effective. The relevancy is low and those ad units will never match the TV ads in terms of revenue. Native ads for video which are contextual and highly relevant are needed.

Personalized content and discoverability
With the profusion of content (from traditional broadcasters, independent studios, mom and pop home videos), content discoverability and personalization become critical. While I know that I would like to see cricket occasionally (when its not totally one sided), and see some popular shows, I really would like to discover new shows, new movies and new videos. My viewing choice is determined by whats popular, what trending, whats recommended by my friends and other reviewers I trust. Content search based on viewer preferences, content relevancy and social influence is fundamental to the experience.

TV and Remote
Ironically, the biggest device in our lives, perhaps really does not need a major overhaul. Display technology will continue to evolve, but from a interaction standpoint, I still would like to sit down, relax and watch TV. With a companion TV remote app on my smartphone, I should be able to perform a wide range of interactions – browse the web, search content, interact with ads, make video calls from TV and so on.  Once voice based control is enabled the experience will become even more natural. For ex: instead of browsing through the catalog, you can just say “I want to see The Dark Knight”. So, all you need is a set top device (such as Apple TV, Roku, Google TV) that can connect to your traditional flat screen. Kinect like motion gesture based control is all rage, but believe me (I have a Kinect at home), motion based gestures and leisure dont go together.

So, who will be the king of the hill?
To disrupt the TV experience, you really need to control three levers

Content:  Netflix is the leader here, but its content licensing costs have been steadily going up and its not clear if they will be able to sustain.  Apple seems best positioned with its history of striking partnerships with big  media companies. Google with Youtube is clearly the leader at the other end of the content spectrum – dominant in indie content. Amazon is a strong contender – they have steadily built the digital downloads business and by  heavily promoting Amazon Instant Video to Amazon Prime members, they are focusing on building loyal customers who will in-turn buy more products from Amazon.com.

Ad supported model: An innovative ad supported model is needed to bring down the content costs and share meaningful revenues with content providers.  Google is clearly the undisputed leader here, even though they still haven’t yet cracked the video monetization puzzle. With the continuous innovations that they are making to the Youtube platform, I think its only a matter of time before they are able to monetize video content effectively and build a sustainable content licensing model where everyone wins – content providers, Google and consumers.

The Device: While the device (set top device or integrated device) is key to provide the last mile connectivity, it may not be as important as the above two levers. First, its very unlikely for a single company to capture a dominant share of the market. Second,  whatever is the end device (Apple TV, Google TV, Roku, Xbox or others) its unlikely that they will restrict content streaming  from other players. Ex: A Youtube app would be there on the Apple TV as well.

The TV space is going to get very interesting in the next few years and it will be exciting to see how the ecosytem shapes up. What do you think?

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