Does television risk going the same way as the music or newspaper industries? That is the question asked in a far-reaching new report, The Value of Content, by the Boston Consulting Group (BCG). The report, commissioned by Liberty Global, argues that a major industry shake-up is on the way because of the increasing popularity of online content. It forecasts that this could happen much more quickly than anticipated and that “significant numbers” of TV channels could fail. Television is, of course, no stranger to change, and it has always managed to adapt to new challenges. But the report argues that today’s challenges mark a paradigm shift away from the normal pattern of evolutionary change. A proliferation in the number of ways in which anyone can access online video content means that consumers are becoming choosier about what they watch and when they watch it. Industry players who make or hold the rights to what people want to watch, and can distribute it in the way they want to watch it will succeed – while those who stick to more traditional ways of doing things will fall by the wayside. So what is driving these huge changes in our viewing habits?
First and foremost, new technology. New streaming networks and software are now capable of delivering high-quality video directly to televisions and other connected devices. By 2017, 74 percent of the European Union and 96 percent of the United States will have access to “video-ready” fixed broadband. Then there is the increased availability of high-quality content – produced for consumption online or on television. And thirdly, new and cheaper models of online content creation are driving large audiences to channels such as YouTube. The most successful YouTube series to date was made for less than US$50,000 dollars an episode – but each one attracted several million viewers. By 2020, according to the report, we will be watching an average of 24 hours of online content a week. Half of all entertainment viewing in the United States is expected to be time-shifted by then, with the European Union following closely behind.
These changes to the way we are consuming content are being accompanied by changes in what we want to watch. The clear winners are must-see sports events, compelling mass entertainment and original niche programming. It used to be the case that free-to-air and subscription TV channels were the only ways of delivering the large audiences that advertisers wanted. But now that video can travel over any broadband internet connection, the advantage of scale traditionally enjoyed by the industry incumbents will disappear. With advertising moving increasingly online, this will drive big changes in relationships between the different industry players. So what could the industry look like in the future? The report outlines several scenarios. The first is a gradual evolution, where consumers will use online services alongside their existing TV offerings.
The increasing value will be placed on formats that work well in a non-linear world, such as serialised drama – to the advantage of those that create or hold the rights to that content. Less value will be placed on infrastructure, while those allowing consumers to access content across multiple platforms and devices will do well. The second scenario sees traditional infrastructure-based distributors extending their navigation into online channels so they can deliver everything through a single interface. The report says distributors who can make this transition will be well positioned to preserve their standing as the primary gateway to content, to the detriment of online-only platforms. Content creators and rights holders will also benefit t in this scenario because their content will be easier to access. Another outcome could see traditional distributors and online aggregators investing more in exclusive sports and entertainment content, using the current business model adopted by the likes of BT Sport or Netflix.
The price of top content would rise and smaller players might not be able to compete. Another scenario could see content and broadcast networks delivering directly to consumers via the internet, bypassing terrestrial, cable and satellite pathways. This could have a severe impact on traditional distributors and online aggregators, while those with the strongest brand and best content could thrive. The final possible world sees leading online aggregators to turn the tables by licensing content such as big live events from free-to-air and subscription TV channels and combining it with their own non-linear service to offer the best of both worlds.