By: Holman Jenkins; The Wall Street Journal, Opinion Journal
This may not be the year America cuts the cable cord and drops its subscription to pay TV. But it will likely be a year of sublime creative destruction in the home-video entertainment business.
Comcast’s proposed acquisition of NBC has elicited the usual panic from the usual worrywarts wondering who will possibly be able to compete with the new cable-cum-programming giant.
A better question is: Who won’t?
Dozens of players (including retailers and gadget makers) are entering what’s called the “over the top” TV market, with nothing to lose and every reason to innovate in competition with each other.
The toughest hurdle has been connecting the television to a potentially bottomless supply of Internet programming in a way not daunting to the average viewer. Coming this year are TVs with direct Internet connections, which could change things fast. Of note is Best Buy’s recent announcement that every Web-connected TV it sells will soon come with a subscription to a Best Buy library of entertainment. Sony has similar plans. Think Wal-Mart, Blockbuster and Disney won’t be in the hunt?
Ditto the cablers themselves, who are burnishing a concept called “TV Everywhere” in hopes of satisfying your appetite for on-demand TV (while somehow keeping you paying your cable bills at the same time).
Yeah, right. The losers won’t just be cable and satellite’s existing business models. The losers will be Verizon and AT&T, whose Internet-powered television this column cheerleaded for. Too little, too late, too cablelike. Likewise, Sony and Microsoft, which have spent billions developing high-powered, Internet-connected game machines as Trojan horses in the living room, only to find the set-top box market suddenly crowded and perhaps obsolescing.
In this world, Fox Broadcasting’s victory Friday in winning retransmission fees from Time Warner Cable might seem a case of one corpse feeding on another, slightly healthier corpse. Broadcasters are supposed to be on suicide watch because they lack even cable’s dual revenue streams (advertising and subscription). But the free-to-air TV distributors may yet have a card up their sleeves.
Nobody would mistake Qwest Communications, the former Baby Bell, for one of the winners of the telecom war of the ’90s, but having not followed AT&T and Verizon into the TV business, its executives now are able to say freely that live-transmission TV doesn’t make much sense in an on-demand world—that is, except news and sports, the only programming that large numbers of people are likely to want to consume at exactly the same moment.
It just so happens that over-the-air broadcasters, now that they have multiple, crystalline hi-def digital channels at their disposal, may prove the best way to deliver live programming over a given geographical area. After a recent column on this subject, several readers emailed to say they’ve already dropped cable and now get their video from a combination of free HDTV plus on-demand downloads from the likes of Netflix, iTunes or Amazon.
And surely one of Ben Bernanke’s unenumerated greenshoots lately has been the unexpected surge in HDTV antenna sales since last year’s digital switch. Look to Western Europe, where the digital transition began earlier. Viewers willing to rely on over-the-air digital broadcast TV have grown to 42 million from 31 million in three years, according to the International Television Expert Group. They are expected to hit 59 million in 2013. A new European standard-setting body called HbbTV (for hybrid broadcast-broadband TV) has even been launched to consecrate the wedding of on-demand and over-the-air.
One future wild card will be the strategies adopted by program creators. Will the established networks and studios fight to preserve cable’s business model (while cutting themselves in for a bigger share of subscriber fees) or will they seize the broadband opportunity? To wit, the proposed tie-up between Comcast and NBC gives Comcast an ownership stake in Hulu, through which NBC, ABC and Fox jointly have experimented with bypassing cable to stream their shows directly to viewers. Now regulators will have to decide what Comcast’s motivation is likely to be: snuffing a proto-cable competitor in its crib or developing Hulu’s full potential? (Even Comcast probably doesn’t know at this point.)
In the long run, we wouldn’t care to bet which programming aggregator will be a winner, but here’s a guess at what TV viewing will look in five years: You will point an iPhone-like device at the nearest screen in order to play any kind of video, whether stored on the device’s own memory, downloaded from a third-party site or plucked from an over-the-air signal.
Somehow, too, programmers will get paid, or there won’t be programming. One thing is also clear: If you’re playing in this sandbox, there is no better leverage than owning rights to college and professional football, especially during bowl season.