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Apple TV Demolishing Telco and Broadcasting Business Models

The future of broadcasting has been under discussion for close to two decades and, while changes are certainly happening, they are rather slow and therefore new opportunities or threats (depending on where you sit) continue to arise.

On the one hand we are now starting to see the more widespread availability of digital TV and this has revealed a clear point of difference between the strategic directions being taken by the telecoms and the broadcasting industries. Less emphasis is being placed by the broadcasters on the Internet-based opportunities and more on adding TV-based entertainment to their offerings. They do have access to good quality entertainment, which is protected through rights and royalties, and this helps them to withstand the tsunami of technology that is undermining their business model.

So the effort of the broadcasting industry is now clearly focussed on digital TV.

However, at the same time the TV set is now turning itself into a multiple function screen. In the USA it is estimated that in 2010 more than a quarter of all TV sets will be Internet-enabled.

The focus of the broadcasters seems to have moved away from their fear that DVR was going to enable viewers to skip advertisements. However, their next worry will be that viewers will move away to Internet-based TV—in other words, they will lose them, not just for the ad breaks, but from traditional TV entirely.

The launch of Apple TV is going to further undermine, not only the traditional broadcasting model but now most certainly the pay TV (cable TV) business model and new telco models based on IPTV also. Through an unobtrusive and cheap box (US99), with a simply click on the screen, apps can be activated that will deliver TV Apple TV content on the normal TV screen.

Link this to the new Internet TV sets and think about the iPhone business model with the Apps and it is not too difficult to envisage that a myriad Apple TV apps will become available. Apple has not yet launched the business model for this service but the other IPTV and VoD models are certainly going to find it extremely difficult to compete with Apple TV. The exclusive content arrangements the broadcasters enjoy will save them for a while but in the end if Apple TV becomes commercially interesting allegiances will start to change.

Also important to realise is that soon there will, no doubt, also be an ‘AndroidTV’ model, this will further open up this market and even further threaten the traditional TV models.

Hopefully the broadcasters will not concentrate their activities on trying to stop this from happening. It is to be hoped that instead they will embrace the opportunities that these new developments offer by linking their content to the new technologies, become TV Apps providers over these new distribution models. They will need to look at broadband/Internet/apps as just another medium to deliver content to their viewers.

Cable and Pay TV operators in particular will be under pressure to drop their bundled packages and offer their content on an à la carte model.

In countries where broadband infrastructure is lagging behind broadcasters perhaps have an opportunity to become players in this market via the digital TV technology.

Obviously the broadcasting business models that based on geographic licences will need to be changed as well.

However, it looks as though Apple TV will demolish the IPTV and VoD models that telcos are now trying to establish in order to generate new revenue streams. It is again a case of too little too late. The telcos have been looking at these models since the 1990s (triple play) but, similar to the mobile portal models for mobile phone content, they have not been able to build the appropriate business models that would have propelled them to the forefront of these developments.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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