Liberty Global Inc: Is TV Dead?

Liberty Global Inc, Europe's largest cable-TV company, presented at the Telco 2.0 event last month to answer the question of whether or not TV was dead ("Will Video Kill the Telecoms Star?"). Despite the slightly alarming information that TV viewing in the UK, for example has been static or declining since 2001, Liberty's Managing Director of Corporate Development, Andrea Salvato (i/c global M&A), concluded that there is life in it yet.

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Here's our take on it:

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There is clearly a specific demand for the "lean back" experience of ambient media as opposed to the Internet, which makes greater demands on the user. The sheer mass of major live TV events makes broadcast TV indispensable; from technical point of view the typical bandwidth requirement for a million concurrent streaming viewers at 400Kbits/s is, it seems, one-third greater than Akamai's peak throughput on an average day.

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Andrea drew five main conclusions for the future of TV, informed by a study from Bain & Co, to which we have added the Telco 2.0 slant.

LGI Conclusion 1:
Continuing strong demand for the "lean back" experience of TV (which is very different from "leaning forward" to surf the web)

Telco 2.0 Slant 1:
True there is real growth (both in eyes and amount watching) in emerging markets, especially in the Eastern European Markets where Liberty Global are expanding but in developed markets total viewing is probably peaking.

However, the "lean back" and "lean forward" terms are slowly losing meaning. What is SMS voting on a TV show? Or catching up on The Daily Show via YouTube?

"Will the lean-back consumer continue to be the ones that advertisers really want to target?"
Participant comment at the Telco 2.0 event via Mindshare.

Furthermore, valuable niches will increasingly be anchored into communities, interest groups or resources that already have an online component, so the idea of a pure stand-alone media distribution business has a "sell-by" date that's rapidly approaching. Two minutes of the grandkids romping in the garden are more compelling viewing than a whole evening of BBC1. Plus the demographics of TV are changing, with the young abandoning TV for other media.

LGI Conclusion 2:
Youth behaviour is shifting towards "lean forward": but the impact will be limited by 2012

"Although teenagers typically drive the consumption and development of new media platforms, teens age 12-17 viewed 3% more traditional television during the full day than in the 2004-2005 television year."
Nielsen Media Research, September 2006

Telco 2.0 Slant 2:
We think youths are driven to the "bedroom viewing" with buddy participation and interaction via online communication tools such as Instant Messaging and SMS rather than "family viewing" in a communal room - only "big" live events will get the family "leaning back" together.

The conclusion above also fails to capture the difference between volume and value: the TV may be on, but it's no longer such a focus of attention of the individual or their peer group. (More on this in our new 'Digital Youth' stream on this blog in the new year).

LGI Conclusion 3:
Public internet based alternatives will take time to catch up with the quality of the "lean back" experience provided by TV platforms

Telco 2.0 Slant 3:
Yes. We doubt whether internet streaming will ever catch up with broadcast quality. TV platforms will always try to improve quality to keep differentiation (eg supa-dupa-HD). Traditional TV broadcasters are also in control of the whole of the networking stack and standards bodies such as DVB should theoretically be able to innovate much quicker than the internet standards bodies.

Downloading offers more potential, but the old saying that "you can't beat the bandwidth of a station wagon loaded with hard drives" continues to hold, just as the NetFlix and Amazons of the world dish out content on physical media via the post at low cost.

The Internet's take-up of video distribution will be slow because the substitutes are so good. Plus as long as the uplinks remain so poor, much of the long tail -- dependent on prosumer content creation -- will be a docked stump waving feebly in the air.

But these arguments rather miss the point. The value will increasingly move towards how you interact with communities of interest, and how content is aggregated and recommended. This is an ideal use of the Internet.

Again, "lean back" and the other Marshall McLuhan metaphors aren't working in our new world. The medium is no longer the message because the Internet is a meta-medium capable of spawning new media. These application-specific media (e.g. YouTube for shared short-form video) are precisely tailored to both the message and the user. The fixed formats of the past no longer constrain and intrude into the message, and the medium becomes invisible. You talk about "watching TV", but you don't talk about "Youtubing", because it's the videos on YouTube that hold centre stage, not the medium.

LGI Conclusion 4:
Value chain players (particularly content owners) are unlikely to promote the internet above TV-based platforms until fully proven

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Telco 2.0 Slant 4:
The players will be willing to experiment and in particular will want to avoid iTunes-ification of distribution platforms, ie. single wholesaler dominance.

In addition, in order to have much chance of gaining value from new advertising, marketing and transactional capabilities, they are going to have to blend together the best of many media (broadcast, SMS, Web, IPTV, etc.). Viewing it as an "either-or" is wrong: the answer is "both".

LGI Conclusion 5:
Most traditional players will adapt successfully to changing consumer habits

Telco 2.0 Slant 5:
We might wonder how much LGI paid Bain for their report. This is a pretty bold statement given what's happening to the music and publishing industries. In the short term, yes; but generally technology revolutions do tend to sweep away a large proportion of the industry's incumbents. Organisations like the BBC face a demographic crisis as their viewers' age and a generation of youth switches to more social, creative and interactive media.

"Liberty says that change will be slow, and they may be right, but business models get set early and once the die is cast, they are incredibly difficult to change. So we need to treat IP video as a critical problem now, so we don't screw up the next decade!"
Particpant comment at the Telco 2.0 event via Mindshare.

Inevitably over time small number of "scaled" content owners will reach a mutually beneficial settlement with small number of "scaled" access networks and primary distribution platforms will emerge. Innovation within distribution will still occur especially with niche content owners and smaller access networks that have least to lose with experimentation.

"What is Liberty going to do as its customers start to disintermediate its premium content services using web-based services? A free or cheap download will appeal to some of Liberty's VoD customers for example."
Particpant comment at the Telco 2.0 event via Mindshare.

In summary, we would, of course, agree with LGI is that TV is not dead, but evolving. The Internet as a substitute won't happen, and it too is evolving. People will use more than one channel at a time to gain a more personalised and thus richer experience. The key challenge for cable incumbents, and anyone looking to make money from content, is to innovate with our business models to suit this change. And we need to start this process now with some fresh thinking. Here's some more analysis re perils of 'Triple Play'.