‘Cord Never-Havers’ Seen Hampering Digital Distribution

Teenagers watch more video on computers than on TVs, Harris said, and that trend won’t change. “You can’t fight it, so the best thing to do is innovate and adapt” by extending TV services to as many screens as possible, he said. “Portability is a big driver,” he said. Service providers need to be prepared for the changing environment and “be where the eyeballs are migrating,” he said.

Despite much talk about cord-cutters, the biggest threat to the industry is “cord never-havers” who have grown up with YouTube and “don’t feel the need for, and can’t afford,” subscription video packages, said Mike Kelley, senior vice president-business development at interactive TV platform company Ensequence. Despite the loss of 400,000 cable and satellite subscribers in Q2 of this year, according to moderator Bernard Gershon, president of Gershon Media, Kelley said, “Cord cutting is overblown.”

Ronen Mizrahi, CEO of TVersity, believes cord-cutting will be a “mainstream phenomenon” in the long run but said currently there are no compelling online service alternatives to prompt an exodus from cable or satellite TV. Such an alternative has to be “good enough” for mainstream customers and “significantly less expensive” than current options, he said. Netflix doesn’t offer the channel diversity, and Roku and Boxee are more for enthusiasts, he said. Providing the affordable alternative that potential cord-cutters want will be difficult, Mizrahi said, because of the high cost of acquiring content or use restrictions.

Mizrahi suggested Google has the financial muscle to become a viable alternative to traditional providers with Google TV. “If cable companies don’t change their model, somebody is going to change it for them,” he said. The question for the industry is to look at how content is produced and determine whether premium content can be produced using an over-the-top model that’s “much more affordable than what we have today,” he said. Google’s recently announced 100-channel offering for Google TV “is the first interesting attempt to change the rules of the game” by producing premium content that can be delivered over the top and generate a “mass following,” he said.

Meanwhile, TVersity is trying to leverage the threat of online content by offering its technology platform “that enables access to any content on any device” to cable operators who don’t want to change the feature sets of their set-top boxes to be more competitive with Roku, Boxee and others. Without an online content solution that’s available on smartphones, laptops and tablets, “you're running the risk of being displaced sooner rather than later,” Mizrahi said.

As the universe of connected devices expands, so does complexity of operation for consumers, said Ariel Fischer, director of business development for Logitech’s digital home group. With a single interface and recognizable set-top box to TV setup, consumers used to easily and predictably navigate through available content via a familiar interface. With content now available on tablets, computers, smartphones and TVs, the user experience changes from device to device, he said. Logitech’s goal is to simplify the interface between the consumer and the TV with “a one-touch experience” either on the company’s Harmony remote control or from an app on a tablet or smartphone, he said. Fischer echoed statements made by Guerrino De Luca, Logitech chairman, earlier this month when he announced that the company would not make another box for Google TV but would focus on the user interface instead (CED Nov 10 p5).

Complexity is a “key problem” as consumers turn to apps for their video content, said Verizon’s Harris. “If you ask a consumer to do assembly, good luck,” he said. Currently, Verizon subscribers who want to get Watch ESPN or HBO GO on a tablet or smartphone have to go through a two-step authentication process, he said, and some apps require home-based authentication depending on content rights. NFL Red Zone, for example, requires that users be on their own broadband at home, he said.

Removing the set-top box from the equation theoretically would allow content providers to offer programming to subscribers directly, but panelists were skeptical that scenario would evolve. “It’s an expensive proposition,” said Harris, regarding offering a multi-channel service outside of the Verizon footprint. “It’s not cheap to support streaming channels for the number of people you want to support,” he said. “Any provider has to be thinking that way, but how do you do that at the right price point for customers, and how do you make it simple,” he said. Netflix has done an effective job of “being on a lot of devices,” he said, but a provider has to determine whether it’s delivering on-demand or linear programming, he said. The economics of bundling all the channels together in a cable subscription “is much better than taking a few channels and providing them a la carte,” he said.

As consumers have access to a broader palette of content -- from the Internet, home servers, linear TV, and VOD -- it remains to be seen who will facilitate search and discovery of all the content, panelists said. “Will the CE guys have the upper hand because it’s their device that people are buying?” asked Kelley of Ensequence, “or will it be another box?"

At the heart of the search issue is having metadata that goes across all platforms, said Mizrahi of TVersity. A cable company or FiOS, “unless it opens up to other sources of content, will never be able to fill that role,” he said. “Who’s going to take responsibility for content from many different sources and organize it in a way that makes sense … and isn’t just your stuff?” he said.

Harris said limitations in current set-top box technology preclude the inclusion of such advanced features. Going to the cloud to enable that kind of search and discovery is technologically possible, but “sometimes there are barriers in content contracts” that could prevent a provider from putting information side by side, he said.

The emergence of apps has created new opportunities for interactive TV, which didn’t succeed in earlier generations but could find new life in a supporting role for big-screen content, said Gabe Sauerhoff, Discovery vice president of digital delivery. The network’s “Shark Week” live app earlier this year included quizzes and games tied to the TV programming, and it did a similar project with a Penn and Teller show, he said. The network has more than 30 apps and looks to do more in the future, he said. The strategy of creating content for mobile devices to supplement what’s on the TV screen is to increase time spent on the network. Discovery is trying to generate revenue from the apps through sponsorships and inventory as part of an app, Sauerhoff said.