Disruption in TV industry
Ever since the first TV broadcast happened in late 1930s, the penetration, choice of content offered, and average viewing hours per day has gone up and so has the cable subscription fees. The turning point in the industry came in 1995 with the delivery of first ever TV program via internet. Nearly two decades after that, internet TV, VOD (video on demand), YouTube, Netflix, Hulu etc. have penetrated the market but the TV industry is still doing its business in the same manner. However, some recent developments in the market with the entry of players like Aereo suggest that it's time for the long impending change in business models.
Let's just briefly check who the players are and what the flow of money presently is-
Multi video programming distributors- MVPDs are cable companies and DTH (direct to home) satellite TV providers like Dish TV. They earn their monies through the subscription fees paid by the consumers and local advertising revenue. They buy programming content or channel bundles from the networks.
Networks- Networks like Viacom provide programming content in the form of channels with TV shows. Usually networks give a "bundle" of channels to MVPDs for which MVPD pays affiliate fees. So it's the networks which make channel bundles not the Pay TV companies.
Over the top services (OTT) - OTT is the term used for web based or broadband delivery of video and audio without a set top box. It includes Netflix, Hulu, Itunes, Amazon etc.
Then there are 3rd party OTTs which include the likes of Google and Apple TV. These are on demand boxes which enable delivery of content on your TV or computer, tablet, phone etc. The OTTs either charge a subscription fee (e.g. Netflix) or pay per view (e.g. iTunes).
OTTs have been trying to cut licensing deals with networks in order to populate their libraries with desired content. The challenge here is that the networks want to charge retransmission fee and sell "bundles" rather than a-la-carte.
Networks have long been the most powerful players in TV industry. On the other hand the OTTs are struggling to come up with a business model that would generate revenues for them and provide customers more choice (a-la-carte) at lesser cost along with mobility to consume content anywhere, anytime.
The company that looks like the game changer here is Indian innovator Chaitanya Kanojia's Aereo backed by media baron Barry Diller. It provides tiny antennas on rent which can pick up broadcasters free over-the-air signal and transmit them to an Apple TV or Roku device for as low as $8 a month. Consumers can watch live or record on a cloud based DVR (digital video recorder). The channels can also be streamed on computer, Ipad or Iphone. It doesn't carry all channels, but only those that are broadcast over the air (does not carry "cable only" channels) and it does not pay any retransmission fees to networks like cable companies and other OTTs do.
Major broadcasters, including NBC and Fox, filed a case against Aereo in New York, alleging that Aereo's technology is copyright infringement, but court ruled in favor of Aereo, while in Los Angeles Aereo lost a similar case. There are chances that the litigation might end up in Supreme Court or the congress in which case the broadcasting laws will have to be changed. As of now Aereo's services are available in New York and Aereo is planning to reach 20 cities in the first expansion phase.
Aereo's future is not clear but its entry sure has disrupted the status quo. While the big broadcasters like CBS are considering pulling their signals off the air and go cable only, cable companies like Time Warner who were paying retransmission fees to the networks till now are considering using similar technology as Aereo. All this can lead to huge revenue losses for broadcasters.
Customers want mobility in consuming content and to pay only for content they actually consume, Aereo gives them this choice. Early adopters have already picked it up and seems like the industry is on the verge of the next big change which will make the broadcasters rethink on new ways to distribute content.