I mean it. Everything. The media and entertainment industry as we have come to know it is being disrupted, and so is this blog, more on that later. Where to start? Because I did say everything is changing.
Broadcast is dead
Until I spent time this week wandering the exhibit hall and attending talks at INTX 2016 this week, broadcast’s obituary was going to be buried a little deeper in the post. I frontload so heavily because I know how long the average reader spends here. Although I am tempted to name my posts something like “20 things are changing in the media and you won’t flippin’ believe number 19” and then present it as a slide show, I respect your time enough to make but the important stuff first.
We’ve been declaring broadcasting has been braindead for years, but now it’s time to start harvesting the organs. Sports and regional news won’t cover the bill to keep the ventilator pumping indefinitely.
The spectrum currently used by digital television would be put to better use quenching consumers’ insatiable thirst for wireless bandwidth. To that end, the FCC has allowed broadcasters to opt into the Broadcast Incentive Auction. The idea here is simple. Give up spectrum so it can be licensed to wireless providers for 5G service and make some money. As a disincentive to hoarding and holding for a higher price, the first part of the auction is a reverse auction, so it pays to get in early.
As infuriating as it might be for a taxpayer to watch broadcasters profitably sell back to the public airwaves they lobbied so hard for and swore they could not live out, you have to feel a little bit sorry for the dinosaurs now that the asteroid is in sight. I’m partial to the EU’s approach of reallocating the spectrum over 700 MHz for wireless and simply assigning new VHF channels to broadcasters, but here in the US corporations are people too, so we just can’t act in the public’s interest for the sake of the public interest. We have to think of the lobbyists.
Variety had a great explainer on the auction in March. My favorite numbers gleaned are below.
The final act of this play will be streamed
Once the video over IP’s latency problem with live events is solved broadcast will have completely outlived its usefulness. We will have reached a point where even the Super Bowl can’t save it. Currently IP network latency delays live events up to thirty seconds. As an MLB.TV fanatic, I have to put the mobile down to enjoy a game otherwise I’ll witness the Twittersphere lighting up before I even see the batter step into the box to crush the game winning home run. For sports to remain a communal activity in the age of social media, latency has get down to about two seconds.
That date is very near. Using a combination 4G LTE bonding and some really nifty video file wrapping tricks, the Israeli startup Zixi has reached that bar with image quality that rivals today’s Xfinity and FiOS pictures. It’s just a matter of adoption. I put it at 24 months for Zixi or a rival technology to make broadcasting over the air obsolete.
The passing of traditional broadcast is interesting enough. In fact, I could stop here and call it a post except that I said everything was changing. And, dammit, everything really is.
Move over Viacom, Fox, and Disney
Amazon, Netflix, Google, Apple, Netflix, Facebook, and Microsoft all want to steal your lunch money. Wall Street believes they will, and these things become self-fulfilling prophecies in short order. They all already own or aspire to own a significant portions of the entertainment value chain. Microsoft and Facebook are longer shots but somewhat more interesting because they are not just looking at the traditional media value chain, but are approaching M&E through significant investment in gaming and VR. For them it comes down to whether VR technology will be ready for primetime soon enough. If one of them wins, just read Ready Player One to see how the story ends. Google’s gotten into VR as well, but it gets lumped it with the others due to its ownership of the world’s most successful online video platform. And how many OVPs does the world really need? Hint: The answer is not greater than two. One rare bit of investment advice from this publication… short OVPs and go long on CDNs.
It going to come down to who can afford to front the large sums of money to create tent pole content, who can store and protect it throughout its lifecycle without losing it to theft or in a theme park fire, who can monetize it effectively, and who can deliver it efficiently. That’s what will determine the winners. Amazon with Elemental and Apple with all its video expertise are positioned for an epic battle. Apple has the edge in video smarts while Amazon has the edge in distribution, pricing, and packaging smarts. How will Apple compete against free two-day shipping for underwear and great programming for $99 a year? Whatever the tech giants come up with will certainly beat a $300 a month cable bill.
Where’s Google in all this? I can’t help but feel that Google will mess it up. Media and entertainment is all about user experience. Google simply doesn’t value design and user experience enough. YouTube and Gmail are still ugly after all these years. While an email client can be ugly and a little clunky as long as it’s free and the user never loses anything, the presentation layer for the night’s entertainment should be inviting.
IaaS the big play
The real money in media then is infrastructure as a service. What Avid, Grass Valley, and the like have done in the past must now become exponentially bigger, more robust, and more open. Avid is right. The industry is crying for a platform. Unfortunately for Avid, it’s crying for a platform a mid-sized tech company doesn’t have the resources to provide. Amazon with Elemental is already closer to realizing Avid’s dream than Avid is. A lot of small players have the necessary pieces built to connect to a network, a larger company, not viewed as a direct competitor by potential partners is better positioned to roll them up into a unified platform offering.
Simplifying it a bit, whoever can provide the storage, rights management, and monetization tools will win. Dell-EMC is extremely well positioned to contend in that space with its hardware, virtualization expertise, and storage smarts. It makes the servers and intelligent storage. It owns VMware and Virtustream, so it will be able to provision data centers like no one else. Dell-EMC should be able to take a commanding early lead repurposing hardware in real time as audience usage patterns change. Add an acquisition like Telestream or Harmonic, and we have a new media and entertainment powerhouse.
IBM is the cicada in all this. Once every few years IBM shows interest in M&E only to shift focus shortly thereafter. With the right timing, IBM could get lucky.
Over the next few years, the remaining media-specific tech companies will have to become more focused on their core competencies. Their customer bases are buying less, forcing them to compete in a race to the bottom in a shrinking pool. While all are moving as nimbly as they can to make the transition from signal-based to IP video, they are faced with R&D resource limits and the drag of legacy customers such as large state broadcasters moving more slowly to the future. These legacy customers account for significant portions of media tech’s revenue stream and cannot be ignored until the business transformation is complete.
Acquisition and Post are about to be disrupted too
Camera evolution is the total wildcard that can change the whole production and post process dramatically. When light field cameras get high enough resolution and come down in cost, the cost of shooting will drop dramatically due to shorter set up time and the need for fewer cameras. Composition, focus, lighting, tracking and green screen will all be handled in post, much of it algorithmically. Editing becomes a smaller part of the post process with DPs, directors, and VFX taking on larger roles once shooting stops. As post production for the 2D display requires more 3D capabilities, look for the post solutions market to bifurcate with Adobe taking the lion’s share with a combination of Avid and Autodesk tools owning the extreme high end. Don’t be surprised to see Media Composer land at Autodesk, or Autodesk’s media and entertainment business go to Avid. A number of former (and extremely talented) Avid engineers are now in Autodesk’s media and entertainment development organization.
Adobe has a leg up in the light field world. These cameras have been in development for some time. Light field still image capture is already available to the market, and Adobe has tools under development to enable Photoshop, Lightroom, Premiere, and After Effects to thrive in this new world.
How media is created, distributed, and consumed is all changing. No career in media will be untouched. No company will be sheltered from the disruption. Be agile. Embrace the disruption.
Everything includes this little nook in the internet
I will follow my own advice by embracing disruption and becoming more agile. It will no longer be focused exclusively on media and entertainment technology. Instead I will draw upon my experience of the past fifteen years in technology design, development, and product management. I will adjust my gaze away from LA and put more focus closer to home in the technology hotbed of Boston.