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Cable Technology Feature Article

October 17, 2011

Video 'Disruption' Remains Key Challenge

By Gary Kim, Contributing Editor

“Being able to see what's going to disrupt the cable industry is very, very important” for the next CEO of Cable Television Laboratories, says Paul Liao, retiring CEO. Web services and protocols are developing “at a speed I don't think anyone could have foretold,” said Liao. “The next technology will probably come from out of nowhere.”

Most other observers, looking at the matter of online or over the top video, and its potential impact on cable TV, telco and satellite video providers, will grasp the potential for disruption in the video business. The founders of Skype (News - Alert), for example, apparently are going to try again to create a video business. 

Apple Inc. is preparing a movie service, according to the Los Angeles Times. Apple (News - Alert) reportedly has been meeting with studios to finalize deals that would allow consumers to buy movies through iTunes and access them on any Apple device. The service is expected to launch in late 2011 or early 2012.

The move comes as owners of movie content, and distributors of movie content, are experimenting at a higher rate with online channels. The studio venture known as Ultraviolet also is launching, for example.People who buy DVDs or Blu-ray discs for those and other upcoming titles, including Sony Pictures' “The Smurfs” and Universal Pictures' “Cowboys and Aliens,” will have access to digital cloud copies they can instantly watch on their Internet-connected TVs, smartphones and tablet computers. 

Ultraviolet purchases via the Web, without discs, are expected to come in 2012.But one might argue that technology as such has not been as disruptive for the video industry as it has been for the music industry, for a variety of reasons. For one thing, the video industry embraced content encryption early, the music industry did not. 

Also, the video industry has been very careful not to “give away” its content using online channels. Online TV viewing for new episodes typically occurs only after television premiere, for example, and then only remains available for a limited time. Not all series are available, either. But the advice to be aware of potential disruption is reasonable enough. 

Other content industries have not fared as well as video has. Music and print content businesses already have been "disrupted." Could books be next?

Some will argue, with the rise of Amazon.com (News - Alert), and the demise of Borders, that the disruption already has happened. But some think additional far-reaching disruption is coming. After all, changes in distribution are one thing. But new patterns in product development and creation are perhaps more fundamental.

In Amazon's case, some would argue that the Amazon.com brand, back office, logistics operation and now Kindle devices allow Amazon to become a publisher, not just a distributor. To use the analogy, perhaps Apple iTunes becomes a music publisher; Google becomes a media company; Comcast (News - Alert) becomes a studio; Verizon Wireless becomes a bank or TV network

That should immediately strike you as a dangerous example of growing channel conflict, and you'd be right. Amazon has the distribution network and growing success in e-book publishing building blocks in place. 

Above all, the trade publishing houses seem to lack Amazon's ambition, some might say. Amazon might want to make money from the entire publishing chain, not just distribution.Indeed, one reason content ecosystems are unstable is that as revenue and profit margins compress, expanding into an adjacency in any ecosystem starts to make more sense. There are potential conflicts, to be sure. But the lure of incrementally-important revenue and the ability to raise margins can be irresistible.

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Juliana Kenny