In a brilliant analysis of a rapidly growing crisis for TV stations, Henry Blodget writes:
As with print-based media, Internet-based distribution generates only a tiny fraction of the revenue and profit that today’s incumbent cable, broadcast, and satellite distribution models do. As Internet-based distribution gains steam, therefore, most TV industry incumbents will no longer be able to support their existing cost structures.
He writes that:
“TV business models for the past half-century, from broadcast to cable to satellite, have been built on the following foundation:
* Not much else to do at home that’s as simple and fun as TV
* No way to get video content other than via TV
* No options other than TV for advertisers who want to tell video stories
* No options other than cable–and, more recently, satellite–to get TV
* Tight choke-points in each market through which all video content has to flow (cable company, airwaves), which creates enormous value for the owners of those gates.”
And why is this changing:
“* Other simple and fun options emerging at home: Internet, video games, Facebook, IM, DVDs
* New ways to get TV content other than traditional TV companies: Hulu, YouTube, iTunes, Netflix
* Video-story options for advertisers beginning to emerge: Hulu shows, for example (But NBC, et al, making a lot less per viewer now than they do on TV)
* More options for getting video content: telcos, cable cos, wireless cos (soon)
* Fewer choke points in each market: With an Internet connection anywhere in the world, you will soon be able to get to almost anything. And not just to your computer–to your television.”
He then outlines all the wrong things TV moguls are trying to implement to stave off the inevitable (see the full article for a full overview!).
In the end …
“You won’t have 5 channels, or 50 channels, or 500 channels. You’ll have millions of channels. You’ll be able to watch anything you want, live or taped. You’ll be able to watch it wherever you want–TV, computer, mobile device. You won’t have to sorry about “slinging” video content around or programming your DVR. You’ll just plug a pipe (Internet) into a box (device) and watch. This is where the future is going. That’s obvious. The only question is how long it takes us to get there–and who gets killed along the way.”
“When will this happen? Over the next 5-10 years. And it will leave today’s TV industry looking like today’s newspaper industry.”