Ask any child of school age and they should be able to tell you the story of Thomas Edison and how he achieved great success in discovering / inventing the light bulb, fulfilling a life-long dream of light without fire. It’s a great lesson in iterative achievement, as the Edison experiment required over 10,000 attempts, before finding the one combination of materials and conditions that brought about a sustained glowing lamp we call the light bulb. As the story goes, midway through the process, a reporter asked Edison why he simply didn’t give up after literally thousands of failures. Edison reportedly said, "Young man, you simply don’t understand how the world works, I have not failed at all, rather, I have successfully identified thousands of ways that do not work."
This long introduction serves to illustrate just where we are in this broadcast age of uncertainty. And like Edison, the broadcast industry is in this iterative time now identifying the ways that don’t work, on the path to a viable model that does. Recently, Netflix provided a spark of inspiration, as did Hulu. Both companies showed remarkable promise in over-the-top content delivery, as Netflix claimed 166% net subscriber growth in 2010 over 2009, and Hulu said its company earned a whopping $500M from Internet advertising.
But like the experimental bulb that flashed bright and burned out for Edison, both business models are in danger of going away as many in the industry say they are not sustainable. Netflix subscriber growth and profitability are based on content deals made years back that grossly undervalue the content. The video streaming model is coming under fire from ISP (Internet Service Providers) dealing with constrained bandwidth issues, aggravated by prime time use of the pipe by Netflix. Hulu, having proven that Internet users will indeed consume Internet ads, claims a 47.1% ads per viewer - a frequency rate that is 4 times greater than their next competitor. But even original backers of this site, like NBC are said to be pulling back some of its premium content, over concerns of diluting value of the programming to its prime satellite and cable carriers (see yesterday’s Display Daily for more).
In the meantime, CE makers like Samsung, LG, Sony and Vizio are moving ahead with various SmartTV strategies that include new technology widgets and an Apps store to access Internet content like TVs shows, movies, weather, social networks and games.
They are also embracing new trends like the second-screen. This solves many of the lean-back / lean-forward issues faced by early WebTV adopters when the technology that could bring the browsing experience to the living room hit barriers like consumers aversion to keyboards and mice (lean forward computing) in the living room.
Think about it, you lean back while channel surfing, and while texting. Now smart phones and tablets can establish a one to one (ad-hoc) connection to the TV. This preserves the community experience of TV viewing, while empowering complex search and social activities associated with the Internet-on the second (personal) screen that also serves as a sophisticated remote-you always have with you.
Other set-top-box (STB) solutions only add to the convoluted market space. Boxee, Roku, AppleTV, and GoogleTV all take unique spins on Internet content delivery, as does upgraded versions of conventional game platforms like Xbox and PS3.
The one certainty in all this is consumers will always choose the economics of free, over subscription fees, and the highest perceived value wins. Case in point, the Netflix offering of $7.95 per month for unlimited video streaming is a killer deal, and its subscriber growth proves this out. Hulu offers primetime TV programming for the cost of watching a commercial up front and dominates the ad driven space on-line because of this.
Both are sparks of inspiration that point the way in the search for the perfect solution that will eventually keep the light bulb burning. - Steve Sechrist
Note: Catch the expanded version of this article in the upcoming issue of Large Display Report that publishes March 1st.