TV giants adapt to new age

06 January 2011

NEW YORK: Verizon, TiVo and Time Warner Cable are among the companies adapting their approach to TV, in recognition of the changing industry landscape.

The rise of online content providers like YouTube, Netflix, Hulu and Amazon reflects the fact many viewers now look to the web for broadcast entertainment.

"You can't have a discussion in the media business today without this becoming the sole topic of conversation," Craig Moffett, an analyst at Bernstein Research, told USA Today.

CBS, Disney, Discovery, Fox, NBC, Time Warner and Viacom deliver around 90% of professional material, and could prove hesitant to undermine established revenue streams by shifting online.

"It's hard to imagine that they will shoot themselves in the head," said Moffett.

However, the advent of internet-connected television platforms including Google TV and Apple TV might make this a necessity.

SNL Kagan estimates 16.5m US households possess such gadgets at present, although just 2% use them to access shows and films.

It anticipates uptake should reach 46.3m residences in 2014, with 7% of US homes utilising the web instead of pay TV.

Indeed, the organisation reported cable subscription levels declined for the first time in 2010.

Shawn Strickland, Verizon's vp, consumer strategy and planning, agreed the trend was apparently unilinear.

"I'm really shocked at how much content is available online," he said. "Every day, you're seeing a new announcement that's breaking down the wall."

"The pace of change here has been mind-blowing … We've been looking at this issue for the better part of a year, and our perspective has pretty much done a 180."

As such, Verizon believes "cord cutting" by current pay TV subscribers "will happen" at some stage.

Alan Wurtzel, NBC Universal's president of research, adopted a similar standpoint.

"Alternative platforms are taking a significant number of viewers away from the traditional TV screen," he said.

"I don't think any of us have appreciated how quickly behaviors are changing."

Cost may be one factor behind this transition, with people watching fewer stations than before.

The average price of a station customers actually watch grew from $1.36 in 2000 to $1.84 in 2010, according to Credit Suisse.

"Low-cost streaming services like Netflix will increasingly become a 'good enough' substitute for traditional pay TV," Spencer Wang, an analyst at the firm, predicted.

TiVo, the DVR pioneer, has seen new entrants try to challenge its position, but ceo Tom Rogers suggested rivals are generally perceived "not as a substitute, but as a supplement" to existing services.

"Somebody who uses Apple TV only could be spending easily $100 to $120 a month just for a few hours a day," he said.

"An awful lot of mainstream households for the first time are recognising what's out there in broadband … And their mind-set for the time being is, this is more choice - and this is really good."

Time Warner Cable expects the market will move beyond set top boxes in the future, and ultimately hopes to offer material online, and through smartphones and tablets.

Chief executive Glenn Britt also argued revenue-generating models evolve alongside new technologies.

"There's perhaps an illusion here that (internet TV is) something that's free. It's not," he said. "(We view it) as an opportunity, not a threat."

Jon Swallen, senior view president, research, at Kantar Media added equal benefits apply to marketers.

"Fragmentation of audiences leads to expansion and fragmentation of advertising inventory," he said.

"There is more choice, more flexibility, more negotiating power than they've enjoyed in the past."

Data sourced from USA Today, Wall Street Journal, New York Times; additional content by Warc staff