The Opportunities and Threats from Next Generation Television

The combination of digitization, converging technologies and new business plans has diversified the terms, conditions and options available for consumer access to content. Access opportunities have migrated from producer- or intermediary-specified schedules, i.e., “appointment television,” to a largely consumer specified environment, i.e., “television anytime, anywhere.” As well the means by which consumers access content has shifted from one-way, downstream, to a two-way process whereby consumers can issue upstream commands for access via different receiving devices, subject to commercial constraints such as copyright digital rights management.This diversification of access opportunities makes it possible for consumers to access more content, and as well to consume the same content via different devices. Content originally available only via a television set - the first screen - now can be received via second and third screens, computer monitors and smartphones respectively. Consumers of content currently have three major types of access options: 1) a direct so-called peer-to-peer link for real time or file-based content; 2) an indirect link through an intermediary who establishes access rules and limitations, but does not intervene in each session; and 3) an indirect link through an intermediary that actively manages access every time.As content access opportunities have diversified, so too has the nature and type of available content. The proliferation of content and ways to access it present incumbent producers with both new opportunities and threats. Creators of expensive and compelling content may identify additional display windows and new ways to receive payment. Similarly intermediaries, such as cable television operators, can enhance the value proposition of their service and retain subscribers who now have technological opportunities to access identical or similarly expensive and compelling content outside traditional distribution channels. Content creators and distributors face new threats to their business models, because the proliferating options for consumer access provide more ways to pirate content and to “disintermediate” and eliminate intermediaries. Try as they may content creators and distributors cannot foreclose consumer “self-help” strategies, including using broadband connections to access content “over the top” of incumbent intermediaries such as cable television operators.This paper will examine the ways by which incumbent content producers and distributors have responded to new consumer access opportunities. This examination considers the incentives of incumbents to deny, restrict and prevent alternative access opportunities, or to embrace changed models. The paper also will consider the impact new access devices and options have on incentives to create and innovate.The paper concludes that content creators and incumbent distributors, such as cable television operators, face increasingly divergent incentives. The former incur the risk of greater piracy, but also new opportunities to profit from expanding distribution platforms. The latter face the risk of declining subscribership unless they accept the inevitability of expanded content access options that circumvent the traditionally locked-down, largely one-way distribution model. Most cable television operators recognize the need to relax content access restrictions, but these operators have not similarly responded by expanding their efforts to innovate and diversify their supply of content. The paper provides evidence that the growth of cable television networks has plateaud at the very time consumers can access an ever expanding inventory of new content alternatives. The paper concludes that cable television operators risk significant subscriber defections, or migration to cheaper service tiers absent an increase in the number of new networks and content access options.