The TV Industry Has Nowhere to Go But down
By: Kartick Vaddadi
Tags: Legacy, Streaming, Cord Cutting, Internet, TV

A friend told me that millennials don’t watch TV; they watch TV programs on Internet-connected devices like tablets. I remembered my own experience disconnecting Tata Sky a few years ago. I told him that by that standard, my mom is a millennial.

We’re still in the very early days of this trend: only 3 million Americans cut the cord in 2018. That’s only 1% of the population [1].

More important than the raw numbers are the demographics:

Every age group has more cord-cutters than the next older age group. Even people who’re 45–54 are more likely to discontinue pay TV than people who’re 55–64.

As old people die and younger people take their place, they won’t watch pay TV. Pay TV is on a slow trajectory downhill.

More important than the cord-cutters are the cord-nevers: people who never had a pay TV subscription. It’s interesting that in the 18–34 age group, these people outnumber those who had pay TV but discontinued it. This matters because habits are sticky, and it’s much harder to change an already-established habit than it is to form a new one. The pay TV industry has little chance of winning these users.

So what are the implications?

First, convenience: use whichever screen you prefer, whether a TV, an iMac with a big screen, a laptop, tablet or phone. Watch TV in places you couldn’t before, like a train. Watch when it’s convenient, not when a program happens to air [2]. You don’t have to have a technician come by to install your connection. It’s all on-demand and instant. Online services are meeting people where they are.

Second, content is de-coupled from the infrastructure over which it’s delivered. Legacy services like Tata Sky control the hardware (set-top box, remote, satellite dish), distribution (satellite transmission and its uplink), and the content. This makes it hard for competitors to enter the market, which makes incumbents not innovate or treat customers well. By contrast, with cord-cutting, content is provided by a different company like Netflix from the infrastructure. ISPs have to compete with each other, and so do content companies, and I can choose the best of each. For example, I might go with Jio Fiber as my ISP, and Netflix for my content.

Third, software is eating the world: we’ll get our content from tech companies like Netflix, not old-world companies like Tata Sky or Airtel. Which are run by old-fashioned businessmen who can’t build anything better, only extract as much profit for themselves as possible.

Fourth, simpler pricing: Tata Sky has different packs like Telugu and Kannada. On top of that, they have regional packs. But isn’t Telugu regional? And Add-on packs. And broadcaster packs. Or you can pick channels individually. And “services”. Oh, and there’s a Network Capacity Fee on top of all this.

Nobody has time for this bullshit. Online services like Netflix are simpler. I’d go with the ₹799 plan, since I want Ultra HD. If I didn’t, I’d go with the ₹649 plan, since I want HD.

Amazon Video is simpler: pay either ₹999 a year or ₹129 a month, and you get the same benefits either way. It does have ads, but it’s the cheapest, no costlier than Hotstar, but for that price, you also get the other benefits of Prime: free shipping on some items and music. On the other hand, you do have ads. If you don’t want ads, you can pay much more for Netflix. This is still simpler than the mess I’ve described above that legacy companies force on you.

Fifth, treating customers well: you don’t want idiots from Tata Sky to call you to offer things you said you don’t want. Or show ads for 15 minutes out of 1 hour. Things generally work so well that you don’t have to call customer service in the first place.

Sixth, TV delivered via the Internet can cater to a long tail of niche interests like cosmology or anime for which you can’t have a TV channel. You shouldn’t be forced to fit yourself into one of the predefined categories old-world TV channels provide. Pursue whatever interests you. The TV is there to serve you, not the other way around.

Seventh, TV delivered via the Internet is globalised, because the Internet is globalised. The regressive Indian government is also less likely to interfere with the content, such as censorship. Netflix can also afford to invest more in optimising their user experience, given their international scale, than Tata Sky.

Eighth, we can finally have smart TV programs of the kind dreamed about for decades. For example, imagine watching a panel discussion, and then posing a question to the panel using your webcam and microphone. Or getting a weather report for your city using geolocation. Or watching a match with the ability to see the feed from multiple cameras, including picture-in-picture, and with slo-mo replay whenever you want it.

Tenth, TVs will also change. They’ve already become smart, with apps for Netflix, Youtube and other services. Smart TVs were high-end some 6 years back, but now all TVs are smart, even a ₹10K one. It doesn’t make sense to buy a dumb TV anymore, now that it’s clear that you want to receive content over the Internet [3].

One US manufacturer even tried doing away with a TV tuner [4].

TVs should also come with AirPlay and Google Cast to receive content from other devices. After all, we all have multiple devices, and they should work together smoothly. As opposed to 20 years ago when TV was a silo onto itself [5].

Going a step beyond AirPlay and Google Cast, TVs should have a voice assistant. If you’re watching Netflix on your tablet and want to watch it on the TV, you should be able to say, “Okay, Google, continue playing on my TV” [6]. Or “Play Narcos”.

Eleventh, as traditional TV declines, industries surrounding it will also decline: set-top box manufacturers, whether satellite or IPTV. Companies that make operating systems for them. Satellite dish manufacturers. Companies that make satellites used for TV or the uplink equipment for them. And so on.

Twelfth, if the DTH and IPTV players [7] are smart enough, they can adapt to the new world instead of trying to fight it— a fight they will eventually lose.

For example, when my subscription lapsed, Tata Sky could’ve let me continue to watch free channels like DD. All 80 channels broadcast by DD. Either carry them on satellite or let the user connect a traditional antenna (not satellite dish) to receive them. Similarly, customers without an active subscription should be allowed to watch any private channel that agrees to let Tata sky carry them free. It doesn’t cost Tata Sky anything — unlike Internet bandwidth, the same program is being beamed down from the satellite whether or not my subscription is active. Besides I already paid for the set-top box, that too a big amount of ₹5,500, so it’s not as if they’re providing a free service to a person who has never given them any money.

Going one step further, why doesn’t the Tata Sky set-top box have apps for services like Amazon Video, Netflix, Youtube? Airtel’s does. It also supports gaming, and Chromecast. You can also say the name of the channel you want to switch to. Instead of looking to buy a service first, and looking at the set-top as an accessory, some people may want to buy the set-top box and view the service as an accessory, as with smartphones. Such a person may buy Airtel rather than Tata Sky.

But Airtel doesn’t go far enough — the set-top box stops working when your Airtel TV subscription expires. One of the first comments on their Amazon page says, “Consumer has to pay monthly rental even for using only Wifi Services. BIG NOPE AIRTEL.” This is the consequence of trying to defend a legacy business model.

Instead, these companies should think of themselves as running two businesses — hardware and content. Just as you can buy a Mac and use it without paying for iCloud, you should be able to buy and use a set-top box as a hardware device without any subscription. Many people don’t mind paying money; they just don’t want a subscription. If these legacy companies don’t cater to them, they won’t acquiesce to whatever they demand; they’ll opt out by cutting the cord. Or buy a Roku, Amazon Fire or Chromecast — devices that work the way customers expect. Roku, Chromecast/Android TV and Amazon Fire each have 20 million+ users. Even an also-ran like Apple TV has 10 million users.

So, legacy companies like Tata Sky should strive to build the best set-top box possible. As a business by itself, without crippling it to prop up their legacy subscription business model. Aim to beat Roku, Amazon and Google! Support Google Cast and Airplay. Support a smartphone as a remote. Support gaming on it [9]. Also make it work as a Wifi router, which any device with both an Ethernet port and Wifi can, with just software. That will also appeal to people looking for a Wifi router. And make it work as a Chromebox, since these set-top boxes already support HDMI output and USB input for a keyboard and mouse. Have a second HDMI port for a monitor, and add a browser, and we’re done [10].

If DTH companies like Airtel and Tata Sky make a great set-top box without hobbling it in any way to prop their existing business, some customers will buy their set-top box instead of a Roku or something else. And if I have an Airtel set-top box, and I want to buy a TV subscription, I’ll buy it from Airtel rather than Tata Sky, thus benefiting Airtel a second time (the first being buying their set-top box).

Going in the opposite direction, Tata Sky also lets you watch online, using your browser or an app. Why not open that up to people who don’t own a set-top box in the first place? After all, the TV is just one device to watch content on, so why tie everything to it? This is similar to how Apple lets me access iCloud from a Windows computer.

Companies that are greedy for two revenue streams will find themselves having neither.

In summary, the TV industry has nowhere to go but down, over the next few decades. People are going to watch TV shows but delivered via the Internet. This has implications for everyone.

[1] Countries like India will cut the cord later for multiple reasons: first, slow, unreliable Internet connections with low data caps. Second, as the country grows, people are able to buy a TV now who couldn’t buy one before.

[2] Without needing hacks like a DVR.

[3] Some people say to avoid buying a smart TV or, since that’s no longer possible, to disable Wifi on your Smart TV. That makes no sense. It’s like saying, “Disable Wifi on your laptop because you’ll be tracked.” People who disable Wifi on their smart TV may end up using apps on their other devices, which track them anyway. Privacy advocates would be helpful if they’re practical and list some brands of smart TVs to buy in preference to others, or some services to use in preference to others.

[4] Though they reintroduced it next year.

[5] Leaving aside streaming, TVs can also improve in other ways: they should have better speakers, even if that makes the TV thicker. The sound should be good that guides should stop recommending that you buy a soundbar. 99% of buyers should be happy with the sound. After all, a TV is a screen + speakers, not just a screen.

In fact, TVs can have four speakers, one on each side, for directional audio. If an object in a movie is dropped and it shatters, the sound should come from below. In a big screen like 55 inches, there’s enough separation between all four sides for this to work.

[6] A voice assistant opens up non-video use cases. For example, you can listen to music on your TV, without having to buy a separate device like an Amazon Echo.

[7] Like Tata Sky and Airtel TV respectively.

[9] No need to make the device more powerful to support gaming; just support whatever games the hardware is already capable of.

[10] If the hardware is not powerful enough to support working both as a set-top box and a Chromebox at once, it can work in only one mode at once. That’s still far more powerful than not having this capability at all. Switching between the two can be simple — click the mouse or press any key on the keyboard to switch to Chromebox mode, and press a button on the remote to switch to TV mode.