At Time’s Techland Blog, Ben Bajarin writes:
I was at the Consumer Electronics Show where [Tivo and ReplayTV] debuted, and their booths were as packed as any on the show floor. Both offered such a simple premise: pause, rewind and fast forward live TV. In my opinion, these two companies paved the way for the disruption we will eventually see. Why? Because they showed us how much better our TV experience could be, and how crappy the technology was that our current television providers provided us with.
I remember having discussions with executives at both TiVo and ReplayTV during their startup years. In particular, I remember a conversation with Anthony Wood, one of the founders of ReplayTV and the now founder and CEO of Roku. I asked Anthony why the current TV providers didn’t think of this first. His answer, plain and simple, was “because they are not technology companies.” So profoundly true. And the fact that they are not technology companies is the simple reason so many of us in the tech industry want TV to be disrupted. We know the technology and the experience can be so much better.
No. The reason that the existing TV companies weren’t thinking about innovating the TV experience is not because they are not technology companies (which they are), but simply because they don’t have to. The market to deliver television and broadband is not competitive. The major cable providers don’t compete with each other in the same market. Whether any particular household subscribes to television service through Comcast or Time Warner or Cablevision depends not on that household’s choice to pick one cable provider over another, but by the local monopoly franchise granted to a cable provider.
Cable companies are not competing with each other to win market share at the consumer level, but are competing with each other to win market share at the municipal level. They compete for the franchise right. So there’s no need to push forward with technology to make the viewing experience better — only to be generally competitive with other cable providers in other markets so as to prevent an overwhelming groundswell of desire to change.
If the cable companies competed directly for the same customers, the quality of the product and experience would be far more customer friendly.
In most regions, consumers have few other options for internet or television service than their local cable monopoly. DSL internet service from the phone company is no longer competitive with the speeds that cable modems can offer. Satellite television service requires installing a satellite dish and service can be disrupted by bad weather.
In New York City, Verizon is supposed to provide competitive broadband/video fiber optic service to all households by June 30, 2014, but many areas of the city still lack the access to the competitive fiber optic network. NYC Public Advocate (and mayoral candidate) Bill Diblasio notes Verizon is not yet serving many areas of New York with Fios. Outside of the Fios service area, Google is wiring cities with fiber optics, and an impressively ambitious internet and TV service, but its rollout is limited to Kansas City (and then coming to Provo, UT and Austin, TX.) Otherwise, no cable company has to deal with a truly competitive service provider. Arms-length competition, where providers simply need relative parity to each other, doesn’t force providers to innovate in the same way that they would with direct competition.
And since Tivo and ReplayTV launched more than a decade ago, the DVR market has become less innovative and competitive. In more than seven years since Tivo introduced its first HD device (the Series 3), the Tivo software interface still is not fully updated to HD — a substantial amount of the user interface in the latest Premiere DVRs has been carried over directly from the decade-old Series 2 design. In fact, for sharing recorded content around the house, many cable company solutions are better than Tivo.
ReplayTV was forced out of business through litigation over its automatic commercial skipping feature. Cable providers are competing successfully with Tivo not by offering DVR that is functionally competitive with Tivo’s offering, but by offering DVR service that works well enough for most viewers, is easier to install, and is a single fee with the cable bill.
If cable providers had to compete with each other for customers, the quality of the television viewing experience would be orders opt magnitude better than it is today. But fortunately, we are on the cusp of a period of rapid, transformative innovation in the television space.
Innovation is coming not because the cable television market is becoming any more competitive, but despite the best efforts of the cable companies to prevent consumer-friendly change.
Most broadband connections (largely through cable companies) are fast enough to stream HD-quality video reliably. Devices to stream internet content to an actual television are inexpensive and work reasonably well. Netflix, Amazon, iTunes, Hulu, HBO GO, ESPN, MLB, the NBA and the NHL all stream high-quality content to Roku and/or Apple TV that make it possible to replace cable television with on-demand access to a vast library of quality content and/or live sports. And although some cable providers do not authenticate their users for HBO GO access on Roku or AppleTV devices, the increasing quality and availability of streaming content is forcing cable companies to actually compete not just with one competitive cable box provider, but with the wealth of video programming on the entire internet. And so, to be competitive and keep customers spending on video programming, rather than just treating the cable company as a broadband provider, the cable companies have to offer the ability to time-shift or place-shift content, whether by video streaming to tablets, access to on-demand programming, or network-based DVRs.
The oft-maligned bundling of cable channels actually providers more value, at least in terms of the breadth of programming available, compared with ala carte internet video.
So, the problem isn’t that cable providers aren’t technology companies — that assertion is preposterous considering that cable providers are also the primary provider of home broadband in the US. The reason that the television industry is ripe for disruption is because the consumer market is non-competitive.