The transformation of television


On 9 September, Tim Cook (CEO Apple) says: ‘the future of television is Apps‘ (Apple, 2015). Not everyone will agree, but it is almost certain that this industry is on the brink of a huge transformation. The only challenge left for television is the input problem, where people primarily pay for traditional, linear, pay-television services and besides that own a secondary device (e.g. DVD player, Apple TV) for additional content (Yarow, 2015). However, it is unclear if or when the ‘secondary’ service can be a substitute for the conservative primary services. Some predictions state that these new devices (e.g. Apple TV) could turn the television into a dumb piece of glass (Yarow, 2015), since many companies are making a bet that the largest screen in our homes is going to become an operating system like the ones that power our computers and phones (Hempel, 2011).

Apple

Many things have changed since devices are connected to the Internet. Millions of independent developers have got the chance to create great applications for multiple devices. The television is next and many start-ups will look for opportunities to offer video experience via applications on products such as the Apple TV (Yarow, 2015). Besides that big companies are forced to adjust their content as well. For example, Jeff Bewkes (CEO of Time Warner) spoke about the company’s plan to move its vast catalogue of movies and TV shows onto the Web (Lyon, 2011). Besides that, products like the Apple TV provide opportunities for all kinds of businesses (e.g. Netflix, HBO) to broadcast their content in a new way on the biggest screen in the house.

To convince the consumer, the only way to win it digital is to keep it simple (Lyon, 2011). Then if the new platform works, the prediction is that the traditional, linear, pay-television services will become secondary, because people will start to wonder why they are wasting money on this conservative service (Yarow, 2015). To make this transformation from traditional television to the Internet happen, some things need to be taken into consideration. Especially content expectancy, social influence, facilitating conditions, hedonic motivation and habit have significant effects on behavioral intention on (mobile) television (Wong et al., 2014). Additionally, Wong et al. (2014) claims that gender and other demographics tend to have a moderating effect on this television behavior. The question remains if online television is better in serving the needs of users than the traditional television service. And will suppliers be able to adapt new technologies to capture value? AppleResearch implies that this adaption is needed. For example, the viewer engagement actually is greater when social media is involved (Pynta et al., 2014), and new social possibilities come along with Internet on television.

From the supplier side, the web has the power to make media distribution cheaper and more efficient (Hempel, 2011). On the other hand, the current business model heavily relies on the revenue they earn from licensing. In each country there are able to capture value since it is legally possible to capture value in each geographic region. The web is breaking this business model. Ad rates are much lower on the Internet. Networks cannot collect their fees. Cable companies fear losing our business. Someone has to pay for all that bandwidth we are using to stream our shows (Hempel, 2011). This means that the suppliers must look for new opportunities to generate their revenue. The Internet on television not only brings opportunities, but also big challenges for the current participants, if they want to stay alive.

Vincent Laduc (417658vl)

References

Apple, 2015. Apple Special Events. [Online] Available at: http://www.apple.com/apple-events/ [Accessed 1 October 2015].
Hempel, J., 2011. What the hell is going on with TV?. [Online] Available at: http://fortune.com/2011/01/03/what-the-hell-is-going-on-with-tv/ [Accessed 1 October 2015].
Lyon, D.W., 2011. JEFF BEWKES AND THE APPLE TRAP. B-School Connection.
Pynta, P. et al., 2014. The power of social television: Can social media build viewer engagement? A new approach to brain imaging of viewer immersion. Journal of Advertising Research, pp.71-80.
Wong, C.H., Tan, G.W.H., Loke, S.P. & Ooi, K.B., 2014. Mobile TV: A new form of entertainment? Industrial Management and Data Systems, 5 August. pp.1050-67.
Yarow, J., 2015. The new Apple TV will blow up the TV industry. [Online] Available at: http://uk.businessinsider.com/the-new-apple-tv-is-going-to-blow-up-the-tv-industry-2015-9?r=US&IR=T [Accessed 1 October 2015].

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2 responses to “The transformation of television”

  1. blouwman says :

    Hi Vincent,

    Thanks for your contribution. I would like to ask you a question regarding a statement that you make in your final paragraph. “This means that the suppliers must look for new opportunities to generate their revenue.” – I personally believe that you have already mentioned a new revenue generator in an earlier paragraph of your article. E.g. Netflix recently announced 65.6 million of profit in their 2nd quarter of 2015 (http://www.latimes.com/business/la-fi-netflix-earnings-20150715-story.html), even exceeding the initial forecasts. Besides this ‘subscription’ model there are various providers offering the possibility to purchase on-demand and thus pay-per-view. So instead of looking for new opportunities, I believe that it is more finding out what works best and optimizing it.

    Furthermore, what do you think will be the role of traditional linear tv providers in this ecosystem? They already have the ‘in’ with their current customer base, including a device attached to the TV (often sold in combination with an internet connection). It also offers them the opportunity to adres those less tech-savy people, still a major part of the market, whom may not move to the Apple TV, but will tag along if it feels ‘natural’.

    Best,
    Bas

  2. 439505lz says :

    Let me introduce a possible future of Television to you – Super TV by LeTV. As LeTV is the largest online video company in China, it has 90,000 TV series, more than 5,000 films, 60% hit TV drama exclusive broadcast rights in the last 3 years, and top events broadcasting. Before the launch of the smart TV Super TV, LeTV has developed related software, such as LeTV UI, a customized operating system for big TV screen and LeTV Store, an Smart TV app collection which has over 2000 apps. Therefore, Super TV is solely developed and owned by LeTV and relies on the affluent online resources of LeTV. Users only need to pay 490 Yuan (77 dollars) annual subscription fee to enjoy all the TV experience on Super TV. As for the traditional linear TV services, users could still pay the broadcasting fee as before; however, it may not matter because in China, TV series today are usually provided both on linear TV channels and online video website (e.g. LeTV) at the same time.

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