Everyone anticipates the next revolution in device which will bring us what we want in TV viewing along with integration of mobile devices. The old model of dumb TV with a set-top-box controlled by Pay TV service providers reminisces back to the mobile phone providers before the invention of the iPhone. Domination of an out dated STB market is dying a quicker death than anyone imagined. Since Apple, Inc. (NASDAQ: AAPL) revolutionized a walled-in music industry with the iPod, allowing music to flow freely and seamlessly through iTunes, at fractional prices, and to a larger audience, the industry has never been the same. That scenario will inevitably happen to Pay TV operators via the same route.
With the intense revolution of mobile integration taking place within all market segments, content, mobile, wireless, broadband and device, the duration of Pay TV business models will succumb to change suddenly and dramatically. It will only take one remarkable device from a company like Apple or Google Inc., (NASDAQ: GOOG) to initiate radical change in a short timeframe. The likely key to this change is a Smart TV, one that can be married to multiple devices where seamless functionality will make TV viewing something very different from what we have today. However, there is another important key to the puzzle which must change at the same time.
Content Distribution Models
Long held within the confines of Pay TV provider exclusivity, content distribution has been secluded in the broadband pipe or terrestrial satellite owned by those service providers. This exclusivity has provided remarkable profits which keep consumers bound to current access solutions. This content model is outdated and cannot hold the dam in consumer demand which will prompt a disruptive market innovation to break the bottle-neck. As the model begins to break via the revolutionary device, content owners will move however begrudgingly to fill the gap in consumer accessibility, ease of function and price sensitivity. The will game change and sooner than expected.
Marketing Dynamics will succumb to Mobilization
Current TV subscription models have been relegated to call-center intensive boiler-rooms. That is, high-pressure sales staffs are embedded to control price and content packaging unseen by the consumer through normal price comparison models available on most products. Consumers do not have the opportunity to view subscription packages with any relative ease or choice. The call-center CSR (customer service representative) holds the golden-key to a monthly pricing, promoting the higher-priced packages while penalizing lower priced models. In reality, the consumer is stuck with a high-priced package whether they should want it, or not.
Bundling, Lack of Competition Fuel Higher Prices
As we can clearly see, a lack of competitive forces in individual markets produces price inequities which cannot be overcome by the consumer. They must take the price/package or do without. This phenomenon occurs in both Cable TV and Satellite TV markets and only changes when three to more competitors enter the picture. While Cable service providers demand higher pricing without a contract commitment, Satellite service providers offer similar or somewhat lower pricing with a locked contract period. The lack of real choice in pricing and suitable packaging is astonishing in many markets, taken advantage of by a lack of competition.
As the current TV viewing model begins to disintegrate, pricing and packaging models will again become open and accessible with more competitive forces promoting content viewing deals on any device, mobile or fixed. All these devices will be connected, easily accessible, and seamlessly integrated for consumers.
Smart TV Innovation Key to Opening Competitive Forces
To recap, mobile markets will revolutionize TV viewing via the last integration piece of the content viewing puzzle. Once this device is created, possibly by Apple TV or Google TV the dynamics of content distribution will follow quickly, as referenced in the music industry market disruption. As long as consumers continue to demand price sensitivity, ease of function and accessibility to unlimited content; the market will move to adjust accordingly.