The NAB and the CEA are backing a technology called TV-On-Net that will allow TV viewers in range of local broadcast towers to receive those stations over the Internet. It’s both a response to Ivi.tv and FilmOn.com but also a recognition that TV over the Internet is not only here to stay but will expand. That could be good news for Apple.
Steve Jobs has noted that it’s hard to break into the TV market. No one wants to buy a box when the cable and satellite companies subsidize one and loan it out for free.
Apple TV (2G)
Add to that the legacy protections in place to make sure cable and satellite companies can stay in business, and it’s easy to understand why the Apple TV remains a hobby for Apple. Apple TV makes money for Apple, but Apple has been unable to maneuver itself into a dominant position — as it did with music.
That said, there are signs that the TV market is changing in a way that will favor Apple.
First, two companies, Ivi.tv and FilmOn.com are offering local TV station feeds on the Internet. Ivi.tv features stations from Seattle and New York. FilmOn.com features the major L.A. stations, and they both charge US$5/month. They claim they have the right to do this under a provision that was created for the cable systems about 35 years ago. The networks are, of course suing.
Second, customers have been traditionally unhappy with the pricing of cable and satellite TV. Those companies have a business model that dictates ever increasing prices, to the dismay of customers while Internet pricing has historically been fixed for unlimited access. That may change in the future, but for now, it’s a compelling model.
This week, the National Association of Broadcasters (NAB) and the Consumer Electronics Association (CEA) have agreed to back a technology from Syncbak called TV-On-Net. Basically, it allows TV customers who are in range of their local TV station towers to become authorized to watch those stations on the Internet. The TV station can elect to charge a fee or not.
Whether this technology plays out and whether it becomes widely adopted, however, is secondary to the recognition that companies specializing in Internet technologies are working hard to achieve an end run around the cable and satellite providers. It may be just a question of time before all TV in the U.S. is delivered on the Internet.
Can you Spell Disintermediation?
One of the major hurdles for the small TV/Internet box makers is live sports. If one can watch local TV stations on the Internet with TV-On-Net, then one can (at least) watch the some tennis plus local baseball and NFL teams on local stations. Recognizing the financial problem that creates, those local stations may well have to charge a monthly fee for that access, but what it does it cut out the intermediary. The local stations deal directly with the customers and bypass the providers*. Needless to say, that’s going to cause a serious ruckus for the next few years.
No one can predict how this will turn out, but the TV-On-Net initiative bodes well for Apple, a company that has recognized the difficulties of the current TV market economics and strategies and has been patiently waiting for the Internet to work in its favor. TV-On-Net may be the breakthrough Apple and others who make those small Internet boxes need.
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* Of course, that leaves the true cable channels like USA Network amongst many others and the premium channels to remain on cable and satellite. That is, until they too start to make a move to the Internet in a broader fashion than, say, AT&T’s U-verse. It’s easy to see how it all can get very messy.