So Netflix is paying $1 billion to Epix for the rights to stream titles from Paramount Pictures, Lions Gate and MGM. This could have been a big deal, but it preserves the cable networks’ 18 month exclusivity window. At the end of the day the Roku box remains a gateway to sometimes good, but somewhat stale Hollywood fare.
HBO and friends live on for a few more years as they evolve their businesses. Cable companies can continue to force customers into bundles that lump four or five “movie” channels showing pretty much the same stuff. Do cable companies see their reign coming to an end, and are just cash cowing their existing business models? It’s clear the “movie” channels are weaning themselves from studio fare. They continue to expand their original programming efforts — and doing it quite well. But what about the cable companies? Beyond caller ID on my TV for the phone line no one in my family uses, we’re not seeing a lot of innovation from Comcast, Charter, and company.
A more disruptive deal from Netflix would have forced big cable’s hand. We’ll just have to wait until the next round of studio deals with distributors to expire.
Before the Christmas holiday, rumors of Apple’s overtures to the networks abounded like so many visions of sugar plums. Journalists and bloggers posited about the effect of Apple’s entrance into the subscription television market. Most of the analysis was solid. The Seeking Alpha blog featured this succinct write up. Most expect a successful Apple offering would threaten cable and satellite subscription models. Others note that an invigorated Apple TV could put the pinch on the Netflix Roku service. Light Reading’s Cable Digital News noted the following.
While cable operators likely won’t face an immediate threat from the subscription service Apple Inc. (Nasdaq: AAPL) is purportedly pitching to major content suppliers, the offering may instead put the hurt on over-the-top video service providers like Boxee and Roku Inc.
It should be noted that Apple TV employs a hard disk. Content is downloaded before it’s played. Roku receives streams, so it’s a lower cost, lower footprint device. Most importantly streaming allows more delivery flexibility. Netflix doesn’t care whether I watch my content on a PC or a TV. Apple TV is anchored to a television. While an iTunes account can be managed from multiple devices, content needs to be downloaded to each to play it. Even with improved progressive download performance, this model has its limitations. One blog noted that a full season of an HD network television series can take up to 50 GB of hard disk space. So there’s a limit to how much content can be delivered to an Apple TV.
For Apple to leverage the strong iTunes brand it has to unhitch content from the device – a fundamental change in business model for a device manufacturer. But if any company has shown the ability to adapt to the digital media marketplace of the early 21st century, it’s Apple. If Apple succeeds at getting content deals in place, I expect a next-generation Apple TV to emerge shortly thereafter.
Political revolution’s have their defining moment – a statue is toppled in a public square, a wall comes down, somebody’s head is removed. Technology revolutions are (thankfully) a different breed. The revolution is declared, nothing happens for a long time, and then the trickle of change begins. That’s been the case with IPTV. For all the hype, a lot of nothing has been going down. Maybe the ground is beginning to shift.
Saturday my Roku arrived. Roku is a Netflix-enabled set top box, capable of streaming directly from your Netflix to queue to your TV. Only a relative few Netflix DVD titles are available for streaming, but at $99, the box was worth a try. Set up took more than the three minutes the launch screen promised due to a flash update, but still easy enough. Using your existing Internet connection, the box accesses the Netflix queue. Unlike Blu-ray disks, Netflix has yet to charge additional for this functionality. (Of course Blu-ray began at no extra charge, then cost $1/mo., and now runs $4/mo. per standard account.)
Netflix did what I wanted Apple TV to do, bring IPTV to my living room. After a year and a half of Apple TV, I’ve bought less than a handful of titles and rented none. Apple TV in my house is nothing more than an expensive iPod with a nifty screen saver for my HDTV. The family already watched more titles on Roku than Apple TV. Until Apple changes the Apple TV business model, Apple TV will remain moribund.
Though initial reviews and customer testimonials have been overwhelmingly positive, it’s too early to declare victory for Roku. There are still rough patches ahead for Roku – or any potentially successful IPTV platform.
- Pricing model Netflix will have to begin charging for the service. It’s too easy to spend the day streaming titles. Serving up scores of titles per account may become more costly than maintaining DVD stock and using the USPS to act as a governor.
- Network performance As these services gain in popularity, large areas of the country will suffer network performance issues. I can already tell when school’s out every afternoon in my neighbor based on increased network latency. It can only get worse.
- Cable providers will want a piece of the action Roku’s using all that bandwidth to compete against cable’s on-demand offerings. Cable is going to want a piece of the action or things might get ugly.
The larger point is that my family is already hooked on IPTV. There’s no turning back.