October 18, 2010 – Google TV’s recent success at bringing major content providers Time Warner and NBC Universal on board along with Web aggregators like Netflix and Amazon is stirring anxiety across the cable industry, where the question has become, how do we get them on our side?
Sources report some MSOs who have been thinking seriously about adopting an over-the-top strategy to complement their walled-garden offerings are looking at Google TV as a ready means of delivering a compelling OTT experience to cable subscribers. With their TV Everywhere initiatives in various stages of implementation, operators are eyeing ways to combine on-demand access to that premium content with OTT fare from other sources in order to give subscribers a cable-optimized experience via connected TVs and set-tops.
“The question is, does aligning with Google TV end up working in the MSOs’ interests or does it invite a Trojan Horse full of nasty long-term consequences into their customers’ living rooms?” asks an executive close to some of these discussions.
From the advertising side, similar questions are being posed, notwithstanding Google TV officials’ claims that they have no immediate plans to pursue advertising on the service. The Wall Street Journal last month reported Google had told media buyers it would not put ads on the service for at least another year, even though Google has had a TV advertising placement initiative underway since 2008.
For cable operators and other content distributors the obvious question is whether these are really separate businesses over the long run when, on the one hand, Google is delivering a browsable, searchable TV-optimized content experience and, on the other, it’s trying to win business as an aggregator of placement opportunities in linear TV programming. For now, the focus is primarily on what to make of Google TV and OTT in general.
Speaking of Google TV at last month’s Media Innovations Summit in Hollywood, Canoe Ventures CTO Arthur OrduÒa said, “I would like to not see it be a threat, quite frankly. I’d like to see that as yet another channel.”
Canoe’s explorations of a Google connection go back to 2008 when the venture’s CEO
David Verklin acknowledged the firm was talking with the Web giant about its TV advertising strategy (see November 2008 issue, p. 16). Noting Canoe looked on Google’s automated auction-based placement strategy as a “good thing,” Verklin suggested a partnership was possible given that Canoe would eventually need an electronic marketplace and Google was drawn to cable’s ability to deliver addressability.
OrduÒa last month offered an updated vision as to how the relationship could evolve, where Canoe would play the role as “steward” to ad placements on Google TV. “From a Canoe perspective I would like to see [Google TV] as another channel that could be stewarded,” he said. “I would like to see the cable subscriber, or in the larger view, the MVPD [multi-video program distributor] subscriber, have many avenues to authorize authenticated sessions that would carry linear and non-linear inventory that I would be very happy to steward on behalf of the MSOs.”
Voicing a growing consensus in industry circles, OrduÒa said, “How should we view things like Google TV and over-the-top? We should embrace the hell out of them.”
Toward that end “behind the scenes there’s a lot of activity” focused on making such an agenda technically feasible across the legacy cable infrastructure, he noted. For Canoe to have an opportunity to extend its services in the national advertising domain across OTT as well as traditional cable TV depends on “how connected television and IPTV evolve at the local level,” he said.
Michael Collette, an industry entrepreneur and CEO of the consulting firm MediaTech Strategies, suggested the advantage cable has in opening the connected TV space to OTT-based advertising is the industry’s ability to support true addressability. “A service provider’s network and an over-the-top network are really different,” Collette said. “The service provider actually knows a lot about whose device that is. The IP network kind of knows what you’re watching.”
But cable has a long way to go to take advantage of the information pooled across various data fields, he added. “The packaging, availability of data from the Internet is far farther along than that same capability on the cable side,” he noted. “So I think there’s a little bit of a race for data. Can the cable industry combine traditional IP data with cable data to create a more meaningful and valuable insertion going forward? ”
To get there will likely require a move away from the Java-based interactive middleware infrastructure cable has built for tru2way, also known as OCAP (Open Cable Application Platform), OrduÒa said, noting that such thoughts are “probably blasphemy.”
“If you take a marketing view, why couldn’t we look at what Android and Chrome represent as that next evolution of what we want from a smart, intelligent and authenticatable device?” he asked. “Why couldn’t it be OCAP 2 or 3.0 from that perspective? The objective is essentially the same; it’s technology that’s continuing to evolve.”
While much remains uncertain as to how OTT will affect providers of traditional TV services, Google TV’s latest wins suggest the risks are rising for those who take a dismissive attitude. In early October the company said Time Warner properties HBO, CNN, TBS, TNT, Cartoon Network and Adult Swim were all optimizing their Web-based content for access through Google TV.
In a Web post the company also said NBC Universal had become a partner with plans for CNBC Real Time, an application that will allow users to track stocks and other financial information. Also on the list of new affiliations are the National Basketball Association with NBA Game Time, offering real-time score updates and highlights, and Twitter, with an application that will allow viewers to post messages while watching TV shows. Google said music sites Pandora, Napster and VEVO, Pandora and Napster as well as Amazon Video on Demand, The New York Times and USA Today were also building apps for the platform.
“This is just the beginning,” said Ambarish Kenghe, developer product manager for Google TV, in the Web post. “Over the next few weeks, you can expect to hear from more sites that are enhancing their Web content for the television.”
In an interview with the Wall Street Journal following that post, Time Warner CEO Jeffrey Bewkes depicted Google TV as a benign force for a better user experience that would help keep consumers focused on the TV set as their core source of entertainment. “When all of the content on the big screen works like the content on the little screen, what will happen? The programming will trump the interface,” he said.
Bewkes has repeatedly stressed Time Warner’s commitment to sustaining the subscription TV business over cable, telco and satellite networks, reinforcing the notion that, as Albert Cheng, executive vice president for digital media at Disney-ABC Television Group, put it in another session at Media Innovations Summit, the programmers’ use of OTT in conjunction with subscription TV is a “windows game.” In other words, the strategy remains to leverage OTT as an additive opportunity which in no way dilutes from the core business.
So far, Cheng said, this strategy has paid off well for Disney-ABC. “What we will eventually wind up with is figuring out what are the right windows, what’s the right pricing, what’s the right packaging and on what platforms it should be distributed to sort of grow the pie,” Cheng said.
Cheng stressed the importance of working with partners to get to the right balance. “Everything we do is to basically work under current partnerships with broadcast affiliates and cable affiliates, [which] allows us to invest in that content to provide the premier exhibition window,” he said. “And thereafter we have to figure out, if the consumer can get to us in that model, how do we create a product and service that can reach it further? Today we’ve seen pretty much an increase in TV consumption and not a cannibalization.”
Tabulating “how much money we make on broadcast, how much money we make on ABC.com, how much we make on Hulu on a per-episode per-view basis,” Disney-ABC always tries to “to make sure the economics are at least at parity or better than a certain rate so that we are somewhat protected against viewership shifts,” he said. For example, “at this time on ABC.com we actually make more money per episode per viewer than we do if someone had recorded on a DVR and time shifted it. So at this point I’d rather push with, ‘Go to ABC.com if you miss it,’ because we actually earn more money on that platform than we do on DVR.”
All of this works well for service providers, as long as they maintain the incentive for programmers to remain loyal to their roles in the subscription revenue business and in sustaining advertising on linear and on-demand TV. Given the interests of a growing legion of other players, including consumer electronics manufacturers and retail distributors like Walmart and Best Buy who want to be in the service distribution game (see p. 34), the question is whether a unifying force like Google TV will end up benefitting legacy providers or creating a powerful enough shift in the center of gravity to prompt programmers to rethink their windows strategies.
Intel, working closely with manufacturers as they prepare to roll out new connected TVs exploiting the semiconductor firm’s latest innovations, is keenly aware of the possibilities. “You look at the challenges the MSOs have,” noted Marcelino Ford-Livene, general manager for interactive content and advanced advertising development for Intel’s Digital Home Group, who also spoke at Media Innovations Summit. “We know that advertising and reach are the names of the game.”
Reach, in terms of effective support for next-gen advertising, is weak on both sides, Ford-Livene said. “You have X number of devices out there with computing capability and the performance headroom in the set-top box isn’t very robust.”
The question comes down to whether manufacturers can break through their current attempts to out-compete each other on different platforms so as to create a more universal alternative for advertising and applications, he added. “Let’s say you have the top five CE manufacturers running our chips, and they all banded together, could they do their own little mini-Canoe? Nobody knows how this is going to play out, but you might see CE manufacturers really try to understand the things the content guys need in order to try to monetize or deliver better experiences.”
This is where what’s on offer from Google TV could make the difference, he noted. “I think what you’re seeing with the advent of Google optimizing Android and the Chrome browser for the TV experience is that’s one way to integrate, and if you have enough manufacturers that take off one of their key product lines and actually integrate the Google stack in there and there’s an app store there and there’s a UI and a way to search and a way to find content in addition to being able to watch main television, that’s a start. That’s what the buzz is about. Everybody is waiting to see how this is going to play out.”
Clearly, the cable industry’s ability to maintain the balance in its favor as the pursuit of calculated self-interest unfolds on the programming side has a lot to do with whether the functionalities and benefits of advanced technologies on offer from OTT players make the viewing and advertising experience too compelling for programmers to ignore. Cheng hinted at the dangers for service providers as he described his group’s success at quickly building and implementing a new app for the iPad.
“This past week we actually created an iPad app that was program-synched to My Generation, which uses audio watermarks from the program to trigger content off of an iPad,” Cheng noted. “The hard part about it is we always wanted to do it through a television or a set-top box, and the argument always winds up becoming who owns the pipe, what are you doing with the pipe, who gets what for the pipe. So many times we’ve wanted to do interactive television in partnership with cable and satellite, and it’s always kind of wound up getting caught up in the deep business terms. So the technology exists. It’s just trying to get through that relationship.”