The Growth of Internet TV (Part 1): The Problem with Internet TV

Pick your service from
Pick your service

You know what the cable/satellite and TV/movie industries are afraid of?  They’re afraid of how the next generation consumes media.  The cable industry (which I’ll use to refer to both cable and satellite) has gotten very used to having people getting their big cable packages with a huge variety of channels, where the consumers only want a few of them.  Several TV channels are usually owned by the same company; Disney, for example, owns the various Disney Channels, but also ABC, ABC Family, and the ESPN channels, among others.  These gets you to see ads and make money off of selling those ads (and the cable companies don’t hurt either) and force the cable providers to bundle and sell all their channels in various packages or get none at all.  The movie industry makes some good cash on selling movies in the theaters (assuming the people watch it) and lots more on the post sales, such as Blu-Ray discs and digital stores like iTunes.

And the consumers eat this up.  Even in the down economy, movie and TV consumption is still going pretty strong, and cable TV programs like “The Walking Dead”, “Breaking Bad”, “Duck Dynasty”, etc. are still the talk of the town.  Just about every student I talk to at my university campus loves to talk about any number of these shows.  Many of these students wouldn’t know what to do without these cable shows.  It’s the same way with movies.  You just have to look at some of the buzz these trailers create.

So what’s the problem?  That would be the Internet.  Kids, teens, and university students look less and less to watching actual TV and instead are turning to the online media to purchase and consume their favorite shows and movies.  They don’t want to get cable packages, they plan to just get the Internet.  And it makes a lot of sense.  With a decent Internet connection, they can do their business, play games online, socialize, and watch shows and movies from any number of outlets.  Some services will stream or rent video to them, like Netflix and Hulu, while other services will let them directly buy digital media, like iTunes and Google Play.  Either way, they get more bang for fewer bucks with an Internet connection than a cable TV package.

The consumption habits of the Internet viewer has also changed.  Sure they’ll watch their favorite shows when they air, but most know they can always turn to Netflix, YouTube, Hulu, and other online media outlets.  They’re less inclined to be angry at missing a show, because they know they can catch most of them later online on their own time.  I ended up getting so far behind in Walking Dead season 3, but I wasn’t too upset because I could always watch it on Netflix when it came out later.

This is key; the modern viewer wants to watch these shows and movies on their own time, wherever, whenever, and however they want.  And they watch these things in bulk.  Many viewers, myself included, will tend to watch multiple episodes of a show in a binge if they have the time.  During lulls in work period or during a lunch break, it’s not uncommon to see workers and students watching their shows one after another. It’s part of the reason Netflix has released all the episodes of their original series, like House of Cards and Hemlock Grove, all at once.

Well wait, if Internet TV is so great, why isn’t it more popular?  Why isn’t it more prevalent?  Ignoring the fact that we’re in an medium transfer period (meaning that the primary form of media consumption is changing, like going from radio to TV), there are a few reasons why this is the case.

First, media is scattered.  Take the 2011 movie Thor; it’s available for streaming on Epix, Netflix, and Amazon Instant.  However, The Avengers, from the same company, is only available for streaming on Netflix and on rental or purchase from companies like iTunes, and Amazon.  Looking at the TV realm, Doctor Who was only available on Netflix and Hulu for streaming or BBC, but not Amazon.  Then a few short months ago it switched.  This is due to licensing agreements between the streaming services and big media.  Now channels having certain exclusives certainly isn’t new, they own the content and on the TV side air it only on their channels.  However, this is annoying if you’re trying to find your favorite show and it’s on a service that you don’t subscribe to (I have run into this several times).  Mainstream media wants to keep control on their content, which they do have a right too.  But why limit its access when they can offer it on numerous services and potentially gain more viewership and profits?  Don’t give it spotty access, let it go out and multiply.  This also helps the streaming services themselves because it means I’m less likely to switch from the service I’m on to another service that has more of the same shows. Original content, like House of Cards on Netflix is one thing, and business will also give some exclusive deals toward some services more than others.  I’m ok with this, video games and books do this all the time, but when the majority of content is spotty in access, it just upsets customers and makes others more likely to pirate.

Secondly, there’s bandwidth.  Bandwidth over the last few years has increased to a respectable level around the world, in some places more than others.  While cities like Chattanooga in Tennessee, Kansas City in Kansas, and Austin in Texas have begun using gigabit connections for businesses and individual households to provide incredible Internet speeds.  But this isn’t true everywhere, as Akamai reports that the average Internet speed is about 7.4 megabits down.  Compare this to the gigabit connection of the previously mentioned cities, that’s just over 0.007% the speed these gigabit cities have.  Business and households are both quickly using more bandwidth and want faster speeds with which to do what they want or need. Whether it’s for communication or for fun, the need for a reliable and fast connection is needed now more than ever. Yet ISP’s seem less willing to push bandwidth and speed, instead opting for price raises and bandwidth caps, both of which people revolt. Few people get anywhere near the levels of most current caps, and the ISP’s claim that it helps free up space for the majority of people who use their services. But note that almost all the companies imposing data caps for home and business connections are cable or satellite television providers. Also, caps do little to impact the traffic because most of the data being used, and when the most slowdowns occur, is when everyone gets home from work and school and starts Skype, watching Netflix, etc. test it some time, if you live in a neighborhood with lots of people online, your speeds will likely go up when others are away from home, like late at night or during the midday.

Lastly, is compatibility, which is a problem both on the side of the media companies and the side of the dealers that sell them. Granted this deals more with purchasing and downloading files rather than streaming, their are exceptions to this (I’m looking at you YouTube and Hulu). Let’s go back a little in time, back to the days of the iPod. When the iTunes Store started selling music, the music you bought was copy protected and limited to only Apple devices (and Windows if you had iTunes). No other media player could play those without stripping the copy protection, which had its own legal problems. All this was done in the name of stopping piracy. However, a better solution was reached, which now expands to music you legally purchase through iTunes, Google Play, Amazon, etc. Any music you purchase through a service has your account information tied to that track or album. So unless you know how to strip that data, uploading that track to a pirating site makes it easier to track you down. But it provided another effect, namely that if people could play their music files that they purchased wherever they wanted on whatever device they wanted, regardless of who sold them the song and the player, they had less need to pirate the media.

Sadly the TV and movie industry has not learned the same lesson. Granted, there may be other technical difficulties to it the process, but there was not been a nice solution to purchasing movie files from a vendor and laying them on any device. Case in point, you can’t purchase a movie on iTunes and watch it on your Android, or purchase a movie from Amazon to watch on your generic media player. Copy protection is still in effect. Streaming unfortunately has some of these problems, but more limiting what devices you can watch stuff on. YouTube still allows users to limit watching of their videos to computers and not mobile devices. This used to be a problem with technology when smartphones were young, but now it seems mostly down to user choice. Hulu Plus is an even worse offender: while paying for the service, shows and movie can be restricted from playing on tablets and phones. Services like Netflix seem to have overcome this problem, and as a content creator I want my media to be legally accessible from whatever device I can so more people can keep up with my stuff. Why is that so difficult?

Internet TV has a number of flaws to overcome, but it is the future, as I will talk about in part 2 of this article series.

Could Apple Upend Streaming Media by Competing with Spotify and Netflix?

For awhile now, there has been talk of Apple creating a Pandora or Spotify competitor.  Pandora is the online radio service that allows users to create automated music stations based on particular artists, songs, or styles of music.  Spotify is another similar service that not only allows you to make automatically generated stations, but also create custom playlists of particular songs you like.  Google recently announced at their developers’ conference, Google I/O, that they were bringing such a service called “Google Play Music All Access“.  For $9.99 a month users will be able to stream music from the entire Google Music library, as well as their own songs, in genre specific station formats, as well as adding specific songs they like to their own stations.

Speculation has been rampant that Apple will do something similar with iTunes.  Not long ago they introduced iTunes Match as a competitor to Google Music and Amazon Cloud Player.  Both Amazon’s and Google’s solutions allow you to upload your audio library to their servers with your account and listen to it anywhere you want through the web for free, before hitting the song limit that is.  Apple solution, however, costs $25 a year, and will instead scan your iTunes library and add high quality versions of the songs in your library from their servers, and only upload those files which it does not recognize or which iTunes does not have in its store.  However, these are not the same as they use music you have already purchased, rather than the entire library of the iTunes, Amazon, or Google Play Music stores.

If Apple is planning on offering a streaming subscription service, they are most likely negotiating royalty fees and licensing rights with the record companies.  And if they do announce this at their upcoming WWDC (World Wide Developer Conference), then iTunesFlixsome might call this a “me-too” move, even if speculation has gone on longer with Apple than Google on this move.

Admittedly this move makes sense, as Apple has probably the largest digital media library of all the online stores.  And we know that people are more than happy to stream music and pay for it, as indicated by Spotify’s 6 million paying subscribers out of the 24 million active users (in other words, 1 out of every 4 Spotify users pay for the service).  But what if Apple decided to do something more?  What if they not only offered a streaming music service, but also a Netflix competitor.

As mentioned before, Apple’s media library is by far the largest and most valued of the digital media stores, generating $4.1 billion in revenue for the company.  If Apple were to offer customers a streaming music and video service for $9.99 or so, then Apple could potentially 1-up Google and now compete more directly with Amazon, Netflix, and Hulu.  Not only would they have the brand recognition of iTunes, but they would already have a potentially large user base and network already in place.  Anyone who has a copy of iTunes, which already runs on every Mac and iOS device, as well as on Windows, could already have access to the iTunes Streaming network, which one could call iTunes Now or iTunes Streaming.

Big media, meaning the TV, movie, and music industries, could also benefit from this.  Apple proved that if you give people access to buy digital media at a fair price, piracy could be reduced.  Netflix has also shown this to be true as places with Netflix have decreased rates of online piracy.  Furthermore, they would be more likely to already have licensing deals ready with the movie and TV industry, as well as the music industry, and potentially be more friendly than competing services like Netflix.  Finally, there is the potential for continued consumption of the same series.  Apple could immediately offer the viewer not only the option to stream another episode or view content of similar type, as other online streaming services do, but could also to offer the user the ability to directly buy the content or a season of content straight from iTunes.  This means the content companies would not only get a royalty fee from viewing, but from direct purchasing of the content as well.

Realistically, Apple would not likely be able to stream all of it the content because some companies would want to maintain control of certain programs.  Case in point, HBO’s “Game of Thrones,”  which is only streamable through HBO’s own HBO Go, but on no other competing services.  People can only purchase and download episodes from iTunes.  Certainly HBO would not be the only service limiting this kind of access.  This brings up the point that Apple already has its renting service, but has been limited to movies since 2011, usually about $4.99 for an HD movie and $3.99 for a standard definition movie.  Apple stated previously that people preffered purchasing shows through iTunes rather than rent individual episodes for 99 cents.  This only helps the point though that it will be successful by offering a flat monthly or yearly rate for streaming movies, shows, and music from the iTunes Store directly.

So far, there has not been much indication to this idea, besides the streaming music option.  But it does not mean that it cannot happen.  Apple has pulled surprises before; this could just be another one.

(Posted on my other site