The Future Of Television, From Sweden With Love-Part 2

The Future Of Television, From Sweden With Love-Part 2

Part 2: Why is this future being made outside the United States? 

Anyone who has not been hiding behind a rock for years would know from past failed initiatives that this future is thwarted by the big boys that own content. Anyone who has seen the music industry start countless lawsuits knows that the TV industry dwarfs the music industry by a factor of 10.  In other words, it is insanely hard to sue any big player in the TV industry. Ask Hulu – still an unwanted stepchild between broadcasters. Ask Netflix  – it has taken them a lot of money and time to get their act right in their own backyard. And international competition with TV gets exponentially harder (as a Swedish Netflix user, there is probably a minor subset of content available compared to the US).  On a side note, this also explains why they are investing so heavily into creating their own content.   Ask anyone why Apple, Google, or Microsoft has not been able to surpass TV in mass entertainment. The competition is hard.  Why do the folks that own content make it so pricey?   Well, it’s the classic innovators dilemma. Operators, networks, and everybody else is making tons of money with their existing business model. It probably won’t last forever, but why fix what ain’t broken, right? Replacing billions of real dollars for millions of digital pennies is a bad idea right? Right.   There is another significant problem. The entire TV value chain in the US is vertically integrated; i.e. the studios have a vested interest in the networks that have a vested interest in the operators.   Combine the two problems, and you know who is calling the shots in the meeting between large TV companies and the Internet giants.   The marriage between the Internet and TV is absolutely unnecessary. It won’t be in the next 5 years. I would even argue 10. There are some warning bells foretelling change, but they’re not big
enough to rattle the foundation of the industry today.   There is also the fact that, for a market of 350 million Americans, there are 4 large operators.  Contrast that with the EU, a market of 500 million, where there are probably over 300 operators. Given that operators do not own most production houses or networks in Europe, it is relatively easier to acquire content . Add that to the fact that TV in each market is very local. While Hollywood still has its presence by licensing content to major networks in most countries or through their own networks, outside the US, local formats and tailor-made concepts make TV viewing very popular in every market. This makes each broadcaster and production house very powerful, and ensures that a single Hollywood driven concept (i.e. Netflix) would never be able to replace a TV operator everywhere. This is the reason why German RTL will always outbid Netflix to serve Germany with Hollywood content along with local productions.   The US may make use of Aereo in an attempt to avoid fighting lawsuits. Yet Aereo will probably never be a complete replacement for your set top box, but rather a service that eliminates part of the problem.   It’s easy to see that you don’t want to piss off the guys who are making more money than ever, producing content people love. Most would want to bridge the gap between their needs and consumer wants. If that’s the starting point, the disruptions in the TV industry can still happen. The consumer would win, so would the entire TV ecosystem.

So what’s happening in Sweden? 

A Swedish disruption. Not an Ayn Rand style disruption.  A very cautious disruption that puts the user and the industry at the core.   In Sweden the only bad guy is the TV operator. This change bases itself on the premise that networks need more distribution but have no vested interest in the distribution companies. The core business model of the networks has amplified i.e. if you are an ad-funded free network, ads will still continue to be there. Even Hollywood agrees that this is good for the industry – especially if American content gets more popular in more countries. Broadcasters that spend millions acquiring content and adapting it to the local market are making more money by making the content they buy or produce available anytime for the user in an aggregated place. Instead of killing the top-set box, Sweden is making the content industry stronger.

It is a disruption that is more of a gentle transition of power than a coup d’état.

A disruption in which the lost generation, the cord cutters, and TV-avoiders come back to watching fantastic TV content on any device. A disruption in which the viewers have flexible packaging and pick channels they like.  A disruption that seamlessly pairs devices including TV on the phone or tablet over the air, no hardware required. A disruption that suits binge on-demand viewing or live broadcast. A disruption that is slowly taking us closer to the Utopian dream of television, starting in Sweden.

Mahesh Kumar

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