Mobilizing the TV Business Remains a Challenge

Mobile distribution, social TV, original online video will be key issues in 2013 1/07/2013 12:01:00 AM Eastern

While broadcasters, cable programmers and multichannel
operators have made significant progress in delivering more content to more
devices, this year's biggest tech trends indicate that the development and
delivery road ahead remains rocky and at times uncertain.

"It's all about mobile devices," said CNET editor-at-large
Brian Cooley, when asked to name the biggest tech trend broadcasters need to
watch at the 2013 International Consumer Electronics Show this week, and throughout
the year. "Smartphones and tablets are where the action is in terms of
innovation and in terms of finding new revenue streams for content."

Mobilizing Revenue

Growing mobile revenue into significant businesses remains
difficult, however. Even though mobile is now a mainstream technology, with
some 160 million smartphones in the U.S. and mobile traffic approaching or
exceeding traffic coming from computers, revenue has not kept pace. Magna
Global estimated U.S. mobile ad revenue grew 78% in 2012 to $2.8 billion. That
amounts to only 8% of U.S. digital ad revenue and 1% of the total, noted
Vincent Letang, executive VP and director of global forecasting at Magna

The best technologies for reaching mobile devices also
remain in flux. Broadcast station groups backing the Dyle TV effort have
launched mobile DTV broadcasts in 35 U.S. markets covering about 55% of the
population. Another consortium, the Mobile 500 Alliance, is testing a similar
service that uses broadcast spectrum to deliver live TV to mobile devices.

But only a small number of devices can receive those
signals, and many broadcasters are also starting to stream TV news and
programming over regular cell networks. That means 2013 will be a pivotal year
for determining which approach will attract more viewers and revenue.

The Great Social-TV Shakeout

Last year saw hefty investments in social-TV companies.
Yahoo's Viggle acquired GetGlue; Comcast NBCUniversal, Viacom and News Corp.'s
BSkyB took stakes in Zeebox; and many major broadcast groups linked up with
ConnecTV for second-screen apps tied to local newscasts.

As a growing number of social media companies battle to
attract users, a number of multichannel providers have or will be launching
second-screen apps. These apps eventually will use social media to recommend
programs, then allow viewers to use their mobile devices to watch a show that
might be trending high on Twitter or some other platform.

If this catches on and a significant number of people start
using social- TV apps to figure out what they should be watching, networks will
have to pay even more attention to social media and develop ways to get their
shows to trend into these rankings.

Originals, OTT & Finance

While the rise of online video has provoked a number of
proclamations about the end of TV, little evidence suggests over-the-top (OTT)
video is affecting TV viewing (which remains higher than it was in 2008) or
multichannel subscriptions, which are also larger than ever, said Jack
Wakshlag, chief research officer for Turner Broadcasting System, citing data
from Nielsen and SNL Kagan.

TV execs need to keep close tabs on a much quieter
revolution, however: the huge investments being made in online video, either
for original productions, or the fees being paid by OTT players for movies and
shows that might have once gone to TV. The financial clout of these OTT players
became apparent in December, when Netflix beat out Starz for exclusive rights
in the pay-TV window for Disney movies.

Less immediately threatening -- but possibly more interesting
in the long run -- is an explosion of original online content. Today, much of this
is less-expensive fare or niche programming that poses little threat to TV
programmers. But as online video advertising grows from about $3 billion in
2013 to $7.5 billion in 2016, according to PricewaterhouseCoopers, investments
by Amazon, Google YouTube, Hulu, Microsoft, Sony, Netflix and others could lay
the groundwork for more serious competition.

"I don't think the production of original online content has
gotten the attention it deserves," said Anthony Wood, founder and CEO of Roku.
"Amazon is producing original content. Netflix is producing original content.
The OTT brands [are] branching out from back-catalog to original content. It
isn't clear how this will impact TV incumbents....But it will certainly produce
more choice for consumers."

TV Everywhere 2.0

Big investments in original online content highlight the
importance of the TV Everywhere initiative to make content available on
computers, smartphones, tablets, smart TVs, gaming consoles and other devices
connected to the Internet. Most would agree this has gone slower than major
industry players would like. "TV everywhere is really not everywhere and the
shows I want to watch may not be necessarily there when I want to watch," says
Vivek Khemka, VP of product management at Dish.

Operators stress this is changing as more programmers jump
on board. But as they work to add more content, they are also working to
improve the user experience in a way that will ultimately change the way people
watch TV.

Matt Strauss, senior VP of digital and emerging platforms
for Comcast Cable stresses that they are looking to add more live TV channels
to the on-demand content they already offer; improve and personalize their
second-screen apps to make it easier to find content; streamline the
authentication process; and work with programmers to find ways to create new ad
revenue from the content being delivered to multiple platforms.

Broadcast Equipment
Vendor Bender

The fact that many of the biggest tech trends impacting TV
come from outside traditional broadcast technologies highlights some huge
challenges facing vendors of broadcast equipment in 2013 and beyond.

As more broadcasters move to IP- and IT-based
infrastructures that are less costly and better designed to distribute programs
to Internet-connected devices, traditional broadcast equipment vendors have
been working to expand their product range, touching off a wave of mergers and

Thanks to those changes, the investment firm Silverwood
Partners estimates that companies producing over half of the broadcast
equipment industry's revenue were involved in mergers or acquisitions in the
last 18 months. More deals are likely over the next year as bigger companies
buy out smaller players for their technologies and other money-losing
operations shed assets.

That means broadcasters will have to take an even closer
look at the future of their equipment suppliers. Do they have the financing to
weather this storm and continue to support the products they're selling at NAB
in the future? And equally important, are they developing technologies that
will help broadcasters make the difficult transition into this IP world?

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