The rise of Generation "I" and the evolving landscape of TV today
Somewhere between 2005 and 2010 (the experts argue), TV's major trends reversed. In mature markets like the US, the ratings for top shows started declining and at the same time, the number of paying subscribers started dwindling.
So what changed? By most accounts the culprit was the Internet. If before, video killed the radio star, than today the Internet has its hands at TV's throat. Supposedly, ratings have been declining because consumers can now access a plethora of content by other means; the audience, while still growing, is highly fragmented, however.
At the same time, the Internet has brought with it a culture of 'free' content, and given access to free content, consumers are reluctant to pay high subscription fees for TV. So on the surface, the end result has been that both of TV's business models have come under pressure simultaneously.
Perhaps there is an easy fix, some think -- for example, moving to programmatic advertising models (that can aggregate consumers across sites and shows) or reducing subscription fees. But a deeper look suggests more fundamental changes are taking place.
Behind these scary numbers hides a story of a new generation of consumers, often referred to as Millennials, or Gen Y. These are the kids who grew up with the Internet as second nature, just like most adults living today grew up with electricity. Only they are not kids anymore. They are now a massive economic force, which we can call Generation "I", both for the lowercase 'i' of iPhones and iPads, and for the capital "I" of Individuals.
For these consumers, technology in general and media particularly needs to fade into the background. What remains, or should remain, is a user experience that is centered on the individual and follows that individual across space and time. Generation "I" demands a new model for television, that varies from the old model in several key dimensions -- including location, device support, social interaction, programming, interactivity, and business model.
There will be winners and there will be losers, and those who won't adapt just won't survive.
Here's what won't happen in 2017
1) Linear TV won't die in the next 12 months.
At least in the US, most households still consume TV on a big screen and pay a monthly bill for cable. While cord cutting trends are undeniable, it will still take at least three to five years (some say seven to 10) for live/linear TV to really die. There is simply too much investment in infrastructure and too many long-term content deals in place for this to happen overnight.
2) VR/AR/MR/360 won't replace regular 2D experiences.
While these technologies are the ultimate media for Generation I -- that is, experiences fully centered on the individual -- they are still not mainstream, and the transition will take several more years. I predict it will take three to four years (that is two or three cycles of Moore's law) for the devices to reach an affordable price point (today, a high end VR headset with the computer needed to run it can cost about $1000). It will take a few more years after that for quality content to emerge. There are very interesting early use cases for the technology, but they won't go mainstream in 2017.
3) Consumers won't (yet) have full control or become independent of existing incumbents.
Regulation, long term content contracts, and industry inertia all get in the way of innovation. Why does Netflix or Apple not launch a live TV service as has been rumored for so many years? The short answer - it's not that easy. Whether consumers like it or not, there is actually not an affordable, easy to use replacement for Monday Night Football on the big screen. At least not yet. It's coming but it's not yet here at scale, as it requires a level of technological sophistication and availability of broadband that is not yet ready for main street.
Here's what will happen in 2017
1) Content owners will move from defense to offense.
It is the year of experimentation in over-the-top (OTT) technologies. There is not a single large content provider that has not either already launched or is in the process of launching a direct-to-consumer OTT service. We can expect a plethora of these services to launch in 2017. From Studio's back catalog film-buff offerings, to expat-focused oversees services, to live dedicated sports channels for surfing or motor-sports, or faith-based live and on demand channels -- 2017 is the year of OTT.
2) Continued consolidation across the industry.
In the face of challenges by the big tech behemoths, the existing service providers are in a frenzy of consolidation. We're seeing a global trend of mobile operators buying fixed line operators, fixed line operators buying satellite companies, and operators buying content. The incumbents believe in strength in numbers, and for good reason. Owning lots of content or lots of users gives an edge in the ability to negotiate further content and distribution deals as well as economic rationale for the massive investment in new infrastructure necessary to launch next-gen services.
3) Software will continue to replaces hardware as TV moves to the cloud.
This is a macro trend that continues to accelerate. At CES this year, there were just TVs, not smart TVs, for the simple reason that now every TV is smart. Nobody is buying non-smart TVs anymore. What this means is that over time we'll see the STB disappear into the TV. For this to fully happen, recording functions of the STB need to move to the cloud, and we can expect to see first large scale commercial services with Cloud-DVR launch in 2017. And then, not in 2017 but perhaps beginning in 2019, with the launch of 5G mobile networks, the networking functions themselves will come from outside the home, replacing the one last remaining box, the home router. The future of TV is in the cloud.