But just what is disrupted and how those disruptions play out in the marketplace may not be what many people expect. Sure, there’s no doubting that with the fast increase in the number of people using smart TVs and connected-TV devices, including the Xbox, to access OTT content, there’s a strong likelihood that programming developed exclusively for Microsoft’s Xbox Live, Netflix, Hulu, Amazon, Sony’s Crackle and various CE aggregation platforms, not to mention content available across multiple platforms from YouTube and myriad other sources, will be widely viewed, further fragmenting the traditional broadcast and cable TV audience and, with it, the ad revenue base.
Microsoft’s move was particularly striking, involving as it does full staffing of a new Los Angeles-based production studio under the leadership of Nancy Tellem, former president of CBS Television Entertainment Group. As Tellem describes her mandate in a recent interview with The Hollywood Reporter, Microsoft is getting into the TV production business with the intention of producing a full gamut of programming for the whole family, including live events, reality and game shows, scripted comedy and drama and documentaries – well beyond what we’ve seen so far with contracted productions of programs like House of Cards, Lillyhammer and Arrested Development at Netflix or Battleground, A Day in the Life and Up to Speed at Hulu.
Microsoft’s gambit, leveraging an installed base of some 70 million Xbox 360 consoles worldwide and an Xbox Live subscriber base reportedly topping 30 million, presently seems positioned as a way to drive more sales of its $200-$300 box now that the majority of time spent with Xbox Live goes to TV viewing rather than gaming. Seen in this light, the strategy looks like a quixotic quest to build an entire studio operation on a set-top foundation which, from a global perspective, has relatively low penetration.
But this is not likely to be a tail-wags-dog story. Microsoft could easily move to the low-end connected set-top market with a machine designed for TV viewing without the gaming bells and whistles, allowing it to compete with the likes of Roku and its $50 box. Even then, however, it’s hard to justify the Xbox exclusivity, since it doesn’t make sense for Microsoft to spend what Tellem seems primed to spend on developing top TV programming for controlled distribution to a hardware-defined subset of the marketplace, no matter how on-message Tellen has been with her touting of the strategy as “an opportunity to kind of brand the Xbox,” as she put it in her interview with THR.
From where we sit, what’s taking shape across the creative TV ecosystem is something much bigger, and this is where the true disruption comes into play. Programming development built on creative expectations that the expansive story-telling capabilities of Internet-based technology will produce a new TV experience has the potential to transform traditional TV. These new OTT ventures will only serve to drive the established programming giants to devote more of their energies to exploiting the same potential.
As we’ve been reporting over the past year or so (see, for example, October 2011, p. 1 and March 2012, p. 1), legacy TV programmers are no longer looking at OTT as just a way to repurpose shows to drive ancillary ad revenues through delayed access windows. They’re moving to augment the viewing experience as part of the initial broadcast, whether through Internet-based second screen apps such as Turner Broadcasting is doing with Conan, Big Bang Theory and other shows, through back-story expansions of the main theme that can be aired through Internet outlets as CSI creator Anthony Zeiker and others are championing or through compilation of new and archived content into new niche-oriented versions of their branded programming, which is now on the agendas of all the major networks.
Adding momentum to this trend are media companies of every description that have moved to video online as ways to transcend the limitations of traditional print outlets, such as Better Homes & Gardens, Time Magazine and Maxim, not to mention the OTT video programmers like Revision3, Metacafe, Machinama, My Damn Channel, etc. The video magazine version of TV is an especially notable advance in TV programming.
The buzz word in traditional TV circles is “transmedia,” meaning the augmentation of the TV program (and advertising) experience across online, TV and social outlets. Whatever it’s called, the new paradigm isn’t about traditional versus OTT TV. It’s about using everything at hand to deliver an augmented programming experience to viewers wherever they happen to be. The real disruption is in the foundation of the TV production business and the types of programs that will be pouring out of boutiques and major studios from now on.