Analog to Digital – Disruption in the Television Industry

I don’t watch a ton of TV and I am pretty much the last person to be watching an award show. However, last Sunday’s Emmy awards along with recent readings from Clay Shirky on Cognitive Surplus got me thinking more about the television industry. Here is a well-established traditional industry that has been significantly disrupted by digital business trends and that disruption is likely to continue.

cloud-tv-may-2014-thumbnailTelevision has continued to evolve from its humble over-air analog broadcast beginnings to the digital multi-screen entertainment platform that exists today. Throughout this evolution the availability of new content and viewing mediums has shifted how consumers view and incorporate television into their lives. As new entrants move into the television market, traditional media and entertainment companies will need to evolve to embrace digital trends. The companies must adjust their business models to survive in a television ecosystem that continues to be enabled by digital business. Let’s explore three trends that have drastically altered the television industry.

Appointment Television vs. Time shifted Viewing

The traditional broadcast model revolves around a strict weekly television schedule with shows and advertisers vying for the coveted primetime slots during weekday evenings. Participation in this appointment Television model forced consumers to take the time to sit down at a specific hour to watch a specific show. Programming scheduled in these time slots enjoyed maximum exposure as consumers would rearrange their calendar to watch their favorite shows during the only time they aired.

Today, viewers now enjoy time-shifted television, the ability to watch television programming outside of the regular schedule via on-demand services, Digital Video Recorder (DVR), or streaming services. The time-shifted method of television viewing breaks down time constraints and puts control of programming into the hands of the consumer, not the network. Ernst and Young has some reports out that dive into these trends in even more detail and are a good read to get a sense of where the industry is going.

By allowing consumers to view programming on their own terms, on their schedule, time-shifting has broken down the traditional prime-time model. Viewing advertisements is now optional, as they can now be skipped past in recordings, reducing the impact of advertisements and forcing new methods such as in-show product placement/sponsorship. In addition, content can be viewed at a time of the consumers choosing, which has led to the binge watching phenomena (viewing many episodes back-to-back), which has increased the connections between multiple episodes and allowed producers to focus on story telling at a macro level, instead of 48 minute windows. Networks have responded by refocusing content to live programming that requires viewers to participate at a specific day and time. Enter the phenomena of reality TV.

Ubiquitous Screens and Multi-screen Viewing

Consumers have more devices and screens than ever before. Households have moved from owning a single TV 40 years ago to today where most households now have between 5 and 10 screens in the home, those numbers include tablets, PCs, notebooks, smartphones and televisions. Each of these devices is connected to the internet. This concept of ubiquitous screens combined with time-shifting capabilities means that television programming can be viewed on any single or multiple screens.

The availability of screens has also allowed consumers to shift their preferences to multi-screen viewing of television programming. Television viewers now consume multiple forms of media at the same time while viewing programming. It is common for a consumer to be watching TV on a television while checking Facebook on a computer and posting to Twitter from their phone. This is commonly referred to as multi-screen viewing or second screen.

Even though 90% of all media interactions take place on a screen, television no longer commands our full attention. Television networks and creators of content now need to tailor their programming to non-traditional viewing devices. A quick google search pulled up the fact that 77% of viewers are now watching television on another device. This has led to the creation of smaller clips and highlights viewed on video platforms, YouTube among others. In addition, viewers want to be engaged across multiple platforms and actually be part of the conversation around the show and even interact in the programming itself. The raise of after-shows (Chopped After Hours is a great example), fueled by the online discussion and interactive voting are testaments to the interaction enabled by multi-screen viewing.

Content Choice and Non-Traditional Content Producers

Broadcast television relied on a line-up of television shows that catered to a wide audience. Later cable television introduced more networks, further specialization, and a larger selection of programming. Today, consumers are no longer bound by wireless spectrum constraints or a limited selection of specialized stations. High speed internet along with powerful amateur video production software and recording equipment has allowed almost anyone to offer television like content through the adoption of social platforms for content disruption. Content creators no longer need to be tied to a network and can self-publish material on any topic that they wish to a growing audience of viewers.

In addition to the amateur producer, content choice has expanded due to the number technology companies that have entered the television programming arena. Netflix, Amazon, Apple, and others have decided to produce their own original content and compete directly with traditional networks and other produces. Netflix followed up last year’s Emmy performance with another big showing. What was originally a move to reduce reliance on content providers and deliver more options to consumers, has led to new revenue streams along with accolades and awards. These tech companies simply do not want to be beholden to content producers and have the financial means to not just enter the market, but re-create it. Just take a look at what they spend in 2014

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It has been reported that Netflix will spend $5 billion in 2016.

Today, consumers have more content options than ever, but those programming options are not necessarily on traditional television networks or even being viewed on televisions. This trend is eroding the traditional advertising model used by networks to monetize their business model. As viewers shift viewing habits to more specialized content and content produced by non-traditional providers, advertisers will follow. This change will force the additional adoption of subscription and freemium viewing models that many digitally focused television companies such as Netflix, Amazon, and Hulu have already embraced.

Shifting consumer behavior around television viewing is shifting the industry. New entrants and changing technology sets are further pushing this evolution away from network television and towards more flexible consumer oriented models.

What do you think is next for television?

3 comments

  1. Nice post. There are some who say that we’re in the “golden age” of television content, because there is so much high-quality competition. A student last semester did a presentation on how the ability to binge watch affects how content was being produced. It was a pretty interesting and convincing take.

  2. I feel like the reason Netflix and HBO are at the top of this is because they had a head start on this due to the nature of both businesses because they both already had so many users paying for subscriptions to their service before online streaming was so common. When the technology was made available, they both made the streaming platform available to their subscribers for free. The original trade of Netflix was to deliver rental DVDs to users’ homes and HBO had people subscribing to their service for high-quality movies and original TV-Series commercial free. It’s also interesting to see how Twitter is going to effect the growth of the streaming service industry now that they have access to an NFL contract and they just streamed the debate this week.

  3. I think you have done a great job outlining the problem that television companies are facing. It will certainly require some creativity, not just traditional business skills. I think you included some great examples of how the industry is changing and how companies are trying to adapt to it.

    It’s hard to tell where things are going in the television industry, but I am excited to see what happens! It appears that a lot of companies are picking up on the love for streaming, and a lot of networks are streaming their own shows on their websites – but you have to sign in with your cable company first. I think that is particularly interesting because it keeps cable companies relevant. I am wondering, though, how long that will last before networks start making their own package deals with one another and completely get rid of the need for a cable company in the first place.

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