It’s not about “linear vs. on demand”; linear itself is about to change

I seem to repeat the same discussion with every media executive I meet – I argue that connected TV is going to fundamentally change the way we watch TV, but the response, usually from those with a few more grey hairs than me, is to argue that consumers want a “lean-back” experience and that’s exactly what they’ve got with linear broadcast TV. I don’t disagree with this argument – I think linear TV is a great product and will prevail long into the future – but to couch it in an argument of “linear vs. on demand” is too narrow in today’s market.

Here’s my rebuttal:  I agree that most people don’t want to be leaning forward to select the next programme as the last one finishes, like selecting individual tracks from a music library. My argument is that linear itself is going to change, and that is what’s going to drive our shift in viewing behaviour. Let me explain…

As an industry, we obsess over charts that divide up our viewing between linear, video on demand (VOD) and PVR, and every one of these charts I’ve ever seen predicts a slow but steady erosion of linear by time-shifted viewing (PVR and VOD). But I don’t like these charts because in my view it hides what’s really going on underneath. I completely agree that broadcasting as a distribution network (i.e. DTT, DTH and analogue cable) will be eroded by broadband delivery, whether streamed or (progressive) downloaded, and we’ll end up in a truly hybrid world of transmission technologies, but this is not truly synonymous with a shift from linear to time shift.

Today, connected TV devices separate the linear and on demand experiences into two different areas of the EPG. As a consumer, I have to consciously exit the linear environment before clicking the button to load the on demand player.

My strong supposition is that the next major development in connected TV will be to merge the linear and on demand worlds into a single seamless experience. Here’s why – the biggest disruption in the market is coming from global technology companies, including the CE manufacturers (e.g. Samsung, Sony, LG) and what I call the operating system companies (Apple, Google, Microsoft). These guys bring a wealth of technical innovation and prowess to television, combined with an economic model that requires amortisation of R&D and content expenditure across billions of devices worldwide. In the short term, linear broadcast television will remain an essential component of their offer if they are to achieve any real scale and be regarded by consumers as a primary television platform.

Linear and on demand come together

Over the medium term however, there will be two overwhelming commercial incentives that will force the Apples, Googles and Microsofts of this world to shift the model. Firstly, they will try to persuade consumers that the television experience requires a level of technical capability that only they can offer. They will most likely leverage their position of strength in mobile to drive a more intuitive and easy-to-use user interface onto the TV screen. This is essentially a “device play”, encouraging each of us to buy a cheap $99 box that plugs into our TV and replicates the iOS, Android and Windows OS across all 4 screens in the home. But this is unlikely to offer sufficient commercial compensation on its own – Richard Waters of the FT made a very interesting observation that even if Apple with all its brand power and chic design managed to ship a $99 Apple TV device with 1 in 4 TVs sold worldwide, it will only make $6bn in annual revenue which is less than the iPad generates in one quarter!

So this leads on to the second factor which will be to encourage consumers to shift away from local broadcast content in favour of global content delivered via broadband – a “content play”. Why? Apart from the fact that consumers spend the largest share of their media entertainment budget on TV content, the easiest way for these companies to deliver a compelling content proposition will be to offer professional, long form programming whose rights can be negotiated on a global or multi-territory basis. This runs contrary to the traditional TV model where content is tailored to the specific cultures and values of the local market. The economics of the big technology companies requires consistency of product across an installed base of billions of devices to justify their massive R&D innovation spend. In this way, I believe they will try what they can to find content brands that appeal across multiple territories. Could Apple buy local content territory-by-territory? Of course it could – it has the financial firepower to do so, but it would require them to set up content curation businesses in every major market worldwide which is an incredibly costly and high risk strategy that I don’t think they have the appetite for.

And the main way I can see these global platforms achieving both of these objectives will be to leverage their ability to collect and process vast amounts of data about who we are, driving a more personalised, recommendation-based viewing experience that seamlessly merges linear and on demand into a single interface.

Linear in a connected world

In my view, this is the driver that breaks down the separation of linear and on demand – global platforms incentivised to shift consumer viewing away from local broadcast content. So let’s have some fun… Hypothetically, what could “linear television” become in a connected TV world?

I regard linear today as a continuous play experience scheduled by a broadcaster. The premise being that the channel brings together an aggregation of content that speaks to its brand and the audience it targets, without the need for the viewer to select each piece of content as the previous one finishes (i.e. a leanback experience).

It’s important to note however that even today, the first behaviour when consumers turn on the television is increasingly to choose a specific programme title rather than to default to a recognised channel.

In a connected TV environment, the role of the scheduler can be performed by anyone, whether a brand, celebrity, the technical platform itself or even the consumer. Recommendation engines will become so intelligent that they will be able to curate a television experience tailored to my personal tastes far better than a broadcaster can. A consumer might choose the first programme they want to watch, effectively an “on demand” behaviour, before queuing up a playlist of content through a combination of behavioural, social and editorial curation, just like hitting the “Genius” button on iTunes. In fact, the playlist could be so well tailored to my interests that in theory I might never needs to change channel!

In this world, all content is effectively “on demand” in that I the consumer have full control over when I want to watch it, but it’s delivered in a format that feels like a continuous flow – i.e. linear.

The response from broadcasters will be to protect their advertising revenue by driving consumers back to “live” viewing. There are a number of ways they can do this – first, they might look to commission more live content, such as live sport and shows like the XFactor that carry an appointment to view with in-built triggers such as social engagement, play-along content or otherwise that mean they have to be watched live. Second, they might premiere far more originated programming on the broadcast channel, and potentially restrict on demand access to drive value in the live showing.

This will be the main battle – between broadcasters trying to protect their live advertising businesses and global content players looking to monetise content across a vast number of devices and platforms.

So, linear vs. on demand? It’s the wrong question. Inevitably time-shifted viewing will grow, but not nearly as dramatically as how far the linear product itself is likely to change We’re about to enter a world of personal recommendation, playlists and the seamless flow of content delivery over hybrid broadband-broadcast networks. As far as the viewer is concerned looks and feels like linear, but at the end of the day all they care about it having access to the content. The big question we should all be asking is, how long can the incumbent television broadcasters defend their live “first-run” broadcast advertising model and what requirements would they need to put in place to ensure they continue as thriving content businesses in a world where linear changes?


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