Tuesday, August 16, 2005

MOVING TO THE ON-DEMAND WORLD – KICKING AND SCREAMING…

In an ideal world all our content and services would be delivered to us where we want it and when we want it. It would be nice to watch a news bulletin or an episode of our favourite serial while waiting in an airline lounge, on our laptops. Or at least, be able to set aside time for watching the sports round up without having to give up our Saturday nights out. Or even to get our fix of news, scores or travel updates while on the move – i.e. on our mobile phones or handheld devices.

We get spoilt easily. Its hard to remember most of us grew up having to go to a bank to withdraw money, watching a single digit number of tv channels, using a phone with a really long wire if we wanted to take the phone to another room or at least restricting it to use at home. Or that our primary source of information was the newspaper, radio and TV, in differing orders of priority.

No matter, to come back to the issue at hand, we’ve all gotten more than used to mobile phones, the Internet, multichannel TV and more. Some of us are quite comfortable placing bets or ordering a brochure for a car through the remote control and TV. I’ve gotten used to accessing dictionary.com on my mobile phone through WAP to check word meanings. (the last word I checked for was febrile).

WAP in fact is good evidence of the fact that though some ideas may not work the first time round, once they align with the trends and standards, they can easily come back stronger. The first time round, nobody understood WAP, it required a completely distinct set of technologies and was clunky. In its new avatar, WAP is a useful extension to existing websites. Its painless to set up and painless to access.

So the point of all this is really to highlight a key trend in how we access content and information. We’re slowly and surely moving to an ON-Demand world. This means that those technologies which don’t support on-demand content, or services, will face extinction or the dreaded downward sloping curve in analyst reports.

Whats new? You may well say. And you would be right in context of the web. But so far, only about the web. Soon, though we’re seeing a number of extensions to the on-demand scenarios.

Television is the most significant one among them. Because television is one of the older technologies which the world uses so universally. But on-demand television is not only imminent, its compelling. One of the routes to on-demand television is the PVR/ DVR, for which TiVo is the best known brand. TiVo itself has recently announced it will allow users to watch trailers off the web, but using their TV sets. Yet another example of the convergence of broadcast and data networks, this allows users to download sample shows to their set top box from a broadband connection.

Another route to on-demand television is the resurgent VOD movement – championed largely by cable companies. You can see where this trend is heading – the old video rental business which was short circuited in many markets with the Netflix model, is now taking another jump to a point where you don’t have to rent videos at a store or DVDs by post, you simply select it and it comes straight into your computer or set top box or your spanking new “Home Entertainment Centre” where it stays for a fixed period of time before wiping itself out. Right now you can simply watch a movie on demand – but this is early days yet. The move from on-demand movies to on-demand news or sports isn’t such a big one either.

Yet another really big technology wave which will push us firmly into the on-demand universe is IPTV. As it becomes technologically feasible for a mass market and commercially viable, it has the power to “change everything” again. But one of the key impacts of the technology will be to create a very strong on-demand model for all kinds of programming.

So what are the impacts of on-demand entertainment?

First, it will sharply segregate the market – a sort of digital divide to those who do and those who don’t. Habits die hard and it may be a while before couch potatoes want to do anything more than aimlessly flip channels. This segment, while diminishing, will certainly be around for a while unless IPTV proves to be a killer application. At the other end of the user spectrum, will be savvy, informed users for whom TV watching will largely mean carefully selecting shows and probably choosing their time, place and device. Watch the bulletin on media stocks on the phone while waiting for the train. Watch the week’s sports summary and goals on Sunday morning on TV and the new King Kong, by Peter Jackson on the laptop while traveling on work to New York. Of course younger people will take to this model better and adapt lifestyles faster so in 10 years the old way of watching Television will seem as strange as not having mobile phones or an Internet connection at home.

Second for the latter category – the on-demand users, “Channels” will become a thing of the past. People will make their own clusters of programs they want to watch. Content owners will need to respond to the market and to competition, by unbundling programs from channels. Users will no longer subscribe for months to a Sky Movies or a bouquet of channels, but will select and pay for specific programs. This will allow some users to lower their spends, but by and large, it will simply mean a different rationalization of the same spend. Channels may still continue but as recommendation engines and “categories” rather than transactional entities. This may not be a bad thing. For one a lot of bandwidth may get conserved (remember, currently all channels sky broadcasts come to your dish/ set top box. Second, content providers will clearly be able to charge differentiated rates for better content. The cream will rise to the top. If users are paying 40 pounds a month for a package essentially to watch Premiership matches, the same users may end up spending over 50% of that simply to watch the specific matches and not worry about all the other things that come alongside it. Over time, this will eliminate any content that doesn’t have it’s own market. Filler programming will vanish. The pressure to fill 24 hours of channel time will go away.

The face of adverting will also change significantly. If the channel model is dismantled, so is the 30 second spot as a fixture. Entirely new and creative advertising models will need to be found. The ability to make this work, of course, will define the price users have to pay. All advertising may become interactive, simply to ensure that users work their way through the ads in order to access the free content that is sponsored by the ads, or indeed, make the choice to pay for the program and watch it free of sponsorship messages.

As Television device technology improves and with adoption of HDTV for example, the television industry will cut into the DVD market further. The two may morph – what exactly is the difference between streaming a movie from Blockbuster.com or from Channel 4? Service delivery will become key to this.

Individual consumer date gathering and managing will probably be the holy grail of marketing content. The ability to add context engines and recommendation engines, with permission based marketing and revealed preferences from consumers about the types of content or services they want, will help to delivery very sharp and individualized service bundles.

None of the players will die or go extinct of course. News Corp didn’t become Newscorp without being keenly in tune with the market. Satellite TV may get marginalized if the technology to make truly mass market on-demand doesn’t come along in time, but expect Sky to morph as required. News Corp has recently been in the news for investments of some 2 billion pounds in web related businesses and some of these may well find their way into your TV set sometime – may be as searchable video blogs you can disseminate and view on your tv set?

As with the internet, storage devices and data volumes will dramatically surge as more and more digital content is stored at peoples houses and on local storage. Cyber crime will go up and so will cyber policing. Interoperatability between formats and between devices will (hopefully) improve. Regulation will continuously struggle to stay abreast of technology and its impact.

But most of all, as consumers it will be exhilarating and enfranchising while for businesses it will provide greater rewards for excellence, while punishing the mediocre and the truly bad. Here’s to progress then, for progress it shall be.

5 Comments:

Blogger j said...

hey Ved,

nice to see you continue to churn ideas out of the media morass. i think your vision is something that is becoming increasingly shared, however, as you point out in a few other articles, the service delivery aspect remains wanting.

so far, our expectations continue to soar far beyond the reality. maybe that's what makes it so exciting, and worthy of the column inches. (and maybe, some day, microsoft will make a secure, stable and usable operating system).

the one element to this crazy media puzzle that still remains somewhat stuck in the olde ways is licensing and rights. while there are promising models emerging all the time, the truly on-demand world will need to be back-ended by systems that transparently manage rights and billing across multiple networks and providers in a way that convinces the big players to get seriously involved.

the news that p2p 'pirates' spend more on music than your average punter suggests that maybe there is real corporate value in the renegade networks, however, apple and the bbc aside, none of the big players seem much inclined to make any daring advances into new models.

so it looks like we'll still have to hack our tivo's and blag access to illicit bit torrent sites if we really want on demand telly, and that probably for some time to come.....

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Blogger BJ said...

Ved

A question for you...how do you figure broadcasters will adapt to the demands of successful retailing. Merchandising is a core skill in selling through any storefront, on or offline. How do you see broadcasters applying these skills to VOD channels rather than linear TV channeels?

Bill

11:31 AM  

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