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When will the Internet kill cable TV?

Television has had an awesome run. For over 60 years the medium has brought the delight and emotion of the big screen into the living room.

While episodic series, live sports, and talking-head news programs are viewed by billions of eyeballs per year, the technology and infrastructure used to watch them is dead in the water.

That said, no one inside the TV industry seems to want to acknowledge this.

For decades content networks like FOX, NBC, Discovery, ESPN, HBO, and countless others have been running the same racket with cable service providers like Comcast and Time Warner, and satellite service providers like DirecTV and Dish Network.

Year after year these providers shake you down for hundreds of dollars so you can watch programs on maybe a dozen or so of the two hundred plus channels they give you access to.

They strategically finesse their service tiers and up-sell you on things you don’t want, or even worse, things that should be included for free. They charge you extra for DVR. They charge you for the technology formerly known as High Definition. They charge you for a man to come to your house to drill holes in your walls. They charge you when their newly-released-but-still-obsolete equipment inevitably fails. They charge you for everything.

We’ve had to put up with this in the past primarily because that was the way things were done.

Online TV distribution

The Internet is a fantastic tool. It allows people across the globe to share knowledge, solve problems, and look at pictures of cats. However up until about the last five years or so, it has been severely hobbled — at least in the United States — by relatively low bandwidth availability. Watching video in real-time over the Internet requires a great deal of bandwidth, and high definition video requires even more. In short, the Internet was too slow.

Recently this situation has gotten much better with more and more folks gaining access to cable, DSL, or even fiber optic Internet connections.

Services such as Netflix, Hulu, iTunes, Amazon Prime, and Vdio have popped up recently to provide viewers with a way to watch TV programming without having to use traditional cable boxes or satellite dishes. With rapidly growing content catalogs and fairly reasonable prices, these services are making headway towards where the TV industry will go.

However there are still problems.

Numerous business models

Monthly Subscription, No New Shows, No Commercials

Netflix and Amazon Prime charge reasonable monthly fees for unlimited and ad-free access to their content catalogs of TV shows and movies. However they do not provide access to recently-aired episodes.

Monthly Subscription, New Shows, Commercials

Hulu also charges an equally reasonable fee for access to their content catalog, and their users also have access to new episodes from popular shows as they’re airing on cable and satellite.

The cost of this luxury comes in the form of commercial breaks.

À La Carte Sales, New Shows, No Commercials

Other services like iTunes charge a premium per-episode (or per-season) amount for the relatively wider array of content Apple has negotiated access to, which includes many of the “older” items available on Netflix and Amazon Prime, as well as recently aired episodes like those available on Hulu.

This content is provided ad free and is sold to users, who gain permanent access to the episodes they pay for. Users of streaming services, by contrast, do not retain any copies of content if they terminate their subscription.

Network specific services

Meanwhile, content providers have their own idea of how they want to see this play out.

For example, HBO and Showtime have introduced suites of apps (Go and Anytime, respectively) that allow users to watch their entire catalogs of content online. However users must also have traditional television service through a cable or satellite provider and pay the extra (generally $10-15/mo) for HBO or Showtime.

Because these premium networks already broadcast their content commercial-free on cable and satellite, an obvious solution for these networks would be to allow users to pay a monthly fee for direct access through their apps. They know this, but seem stuck appeasing cable/satellite providers.

Complicated production process

This mess is largely the result of a process in which a select few control the development and marketing of content, and another select group controls the actual delivery system for the content.

Basically, a concept is developed by one party. They then pitch this concept to a number of networks hoping that one of them likes the concept and provides enough funding to produce a limited set of episodes (six is apparently the magic number at the moment).

If a network decides to move forward with a series, they cut a check for it to be made and slot it in their weekly lineup when its ready.

This network offsets the cost of all those checks it cuts to content creators by charging service providers for the privilege of broadcasting their channel. At the same time, the network drums up advertisers to further offset the cost.

This equation seems to have one too many components.

Service direct

This solution may be oversimplified, but it seems content creators should just go directly to the service providers for funding.

Netflix allowed them to do just this.

They dipped their toes into the original content waters early last year with an eight episode season of Lilyhammer. While the show didn’t garner the critical acclaim or public attention Netflix might have hoped, it signaled the beginning of a trend.

In February of this year, they made a splash with the release of House of Cards. Not only did the show include star power such as Kevin Spacey, but Netflix released all 13 of its first season’s episodes simultaneously.

Perhaps even more importantly, it was rumored that that Netflix beat out premium networks like HBO and Showtime for the rights to produce the show.

The fact that a potentially A-tier show has finally been created outside of the traditional network sphere of influence is incredibly encouraging. Additionally, because Netflix is accessible on platforms ranging from cell phones to cheap set-top boxes like AppleTV to blu-ray players to Smart TVs, viewers have unprecedented flexibility to watch shows.

The show has received pretty positive reviews, and initial data coming back from users regarding how the offering affects their loyalty to Netflix appears favorable. People like consuming content when they want to the way they want to. Netflix plans to release more shows in the coming year, including the broadcast TV refugee and cult hit Arrested Development.

While the shows they’re footing the bill for look fantastic, I think it serves more as a proof of concept for how episodic content can be produced in the future. Rather than having to suckle up to the teat of a network for production and distribution assistance, independent production houses can create a series of episodes (crowd funding anyone?) and hand them off directly to distribution partners like Netflix.

Whether production houses can actually independently create A-tier TV shows without traditional network backing or not, the point is that there is no need for two partners in the process. Either networks like HBO, Showtime, or even Fox move towards directly distributing their product without cable/satellite service providers, or Internet video service providers move more towards bankrolling the production of TV content.

A superior user experience

Being able to select exactly what you want to watch and then immediately begin watching it is incredibly convenient and satisfying.

The cable/satellite providers band-aided the old broadcast model with DVRs in an effort to provide a similar experience. When TiVo and ReplayTV were introduced in the 90s, that was the best we had.

However DVRs rely on users finding something they would like to watch in the future, set it to record, then return later to watch it. The “save what I’m watching right now for later” effect had immediate impact, but again it was sort of paraphrased from the VCR days and forced users to concern themselves with disk space.

And while you can set programs to record on a DVR from your computer or mobile device, you have to plan ahead for that to be particularly useful.

Even worse, watching television live means being subjected to ads and revolving your life around the network’s schedule.

Some programming, such as sports and news, lend themselves to being broadcast live. However with the rapid improvement of live-streaming technologies, and the introduction of services like NFL Sunday Ticket being able to watch live events online is already a reality.

So what can be done?

Clearly the iTunes model of paying $30+ for each popular show you’d like to watch a season of is not a viable replacement for the traditional cable/satellite pricing model. People would either watch far less TV or they’d be broke.

But what if Netflix increased its monthly fee to $20 or $30 per month to offset lost ad revenue and posted all of this season’s Mad Men episodes at once like it did with House of Cards?

What if HBO opened up its catalog to Netflix or a similar streaming service and allowed people to use one digital destination to consume all of their episodic content?

Apple has long been rumored to be working on a streaming TV service that would include new releases. If anyone could figure out how to make the dollars and cents of offering a service that allowed all-you-can-eat consumption of old and new ad-free shows paired with a flat monthly rate, it’d be them.

People are dying for someone to figure this out.

For now, it must be more profitable for networks to continue dealing with traditional providers and charge exorbitant rates to à la carte services like iTunes, enforce ads on Hulu, and delay show availability on ad-free services like Netflix.

I also suspect that the rapidly evaporating DVD/Blu-Ray market is encouraging them to keep things this way as long as they can.

Just do it already

The end is near for traditional television distribution. The question is whether the networks will figure out how to keep themselves in the next-generation distribution process like record labels did with the music industry (at least for big releases), or if they’ll be circumvented like traditional video game publishers were with mobile/tablet gaming.

Regardless of which outcome occurs, I just want them to figure this out already. There are millions of people ready to pay good money for the right service.

The solutions are getting closer, but this song and dance has been old-hat for a long time. Just do it already!