Why Do I Pay for Advertising Supported TV

May 23, 2011
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Did you know that on average during an hour long television show you are subjected to 22-24 minutes of ads? Now of course many of us have DVRs and we rarely watch TV live, allowing us to skip the ads. Still TV used to be free and the ads supported the network costs. In 10 years we will look back and reflect on how archaic TV was.

I'm speaking next month in San Diego at the Internet Retailer conference on the subject of the future of TV. I plan to dive into depth on how internet-connected or Smart TVs combined with over-the-top-services are will soon provide a viable alternative to paying a cable or satellite company. In fact, for a growing number of consumers they have already made this leap, cutting the cable cord in favor of online TV.

This doesn't mean that the issue of ads will go away. Of that 22-24 minutes of ads per hour show you see, many of them are not relevant to you, which is why we skip them. Instead they will become more relevant and more personal.

Images of Minority Report come to mind.

My primary point is that there are a good deal of brands and consumer goods, electronics etc. that I am very interested in and I am willing to subject myself to marketing if it is indeed something I am interested in.

As I begin to consume more TV related content using the internet as a delivery mechanism, the personalization power of the web comes into affect. This will allow me to set my preferences or even have the service learn about my interests and deliver me more relevant ads.

Now, at the end of the day, we know nothing is truly free. The studio networks, your internet provider and more will all want a piece of this action. What I think will happen in the future as over-the-top services become more mainstream is that access to TV online will be bundled with your internet service costs.

This may mean internet service costs go up, but right now one would reasonably pay $110 dollars for TV and internet service from Comcast. In this model, perhaps the cost is $60 dollars a month and you get the internet with access to over-the-top TV services.

The reality, however, is right now TV on the internet is much like the internet itself in the early days. It's not mature and is in the infant stages of maturing. There are still a number of challenges to bringing TV in its entirety over the internet:

  • - The networks are still not sure how to monetize streaming vs. their revenue from cable companies
  • - The cable companies don't want to lose control of their broadcast pipe to your home
  • - There aren't enough internet-connected TV's or long form web streaming demand to justify the costs
  • - Legal issues between content rights holders, licensees and the networks need to be solved

That's why this isn't going to happen tomorrow or at the end of the year and not even next year. This is probably a five year journey at a minimum.

As a Microsoft executive once said to me, "Television is going to change in the next five years more than it has changed in the last fifty." The only problem is, that was four years ago.


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