Comcast shows us The Garden of Eden

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Lately we have seen announcements regarding new OTT (“over the top”) box launches, like Roku and Boxee. Netflix has done a masterful job of securing distribution agreements with these boxes. Netflix’s marketing strategy — perhaps a throwback to AOL’s CD-ROM mailing campaign — offers every new customer a free trial period.  Today the company has one million new subscribers trialing the streaming service.  


Since content is the driver that fuels the adoption rates of these new boxes; new upstarts are essentially in the same business as the cable companies.  For instance, Boxee has discussed building a payment platform for a la carte viewing of premium content.  

By challenging the incumbents at content delivery Boxee may morph into looking like a stand-alone “multichannel video provider”.  Perhaps Yahoo’s connected TV store — which will charge consumers for downloading TV widgets and content —  will end up partnering with many of these entrants through revenue-sharing agreements. 

All new HDTV sets have four to five HDMI ports.  Today you can plug Sezmi, Google TV, Apple TV, Roku, and Boxee into the back of your set and still have room for your cable box.  Early adopters (and I am in this group) will juggle the boxes, keep track of open HDMI ports, and buy boxes based on available content.  

Recently Hulu signed a content distribution agreement with Sony for the Dash.  The Sony Dash is an Internet device, with a 7 inch screen, that is primarily an alarm clock. So instead of cutting a deal with Google TV, Hulu announced a launch on an alarm clock. 

Google TV — which has positioned itself as platform agnostic — has made little headway.  Perhaps with Google TV Ads looming in the background the stakes are so high content owners are first dipping their toes by way of the independent boxes (and Sony Dash). 

Sezmi has the most to gain if they can strike a deal with Hulu. The over the air signal, program guide, and DVR, makes for a new distribution pipeline that broadcasters can exploit. Add Hulu into that Sezmi mix and broadcasters would have the complete package in order to further monetize their spectrum.

Comcast released an iPad application a few weeks ago that links the programming schedule to the set top box.  Today I can log onto Xfinity, on my iPad, and easily switch HDTV channels from the tablet’s program guide or the video on demand library.  From a technical standpoint the return path from the iPad to Comcast’s data center is through Internet-based software. The final leg to the set top box, however, is the interactive television standard, “EBIF”.  

The television industry has been on an integration bender since the passage of the Telecommunications Act of 1996.  Back then we saw major M & A activity around cable companies that gobbled up smaller systems so that they could build service areas around DMAs.  The thinking was that by having a large footprint the cabler would reap cost benefits and be able to roll out new products quicker.  

It is in the DNA of cable to think in terms of integrating technologies so that systematic improvements can be rolled out to subscribers. Content owners have benefited from this ideology as now retransmission consent (and carriage agreements) have tremendous influence, along with marketing synergies, over an entire DMA.  

Today because of multiscreen technologies (like Comcast’s iPad app) the pendulum may swing back, away from high stakes carriage negotiations. Instead the parties might find common ground through technology agreements.  Future carriage deals will probably include the licensing of interactive advertising services that can deliver a multiscreen experience.  These shared service agreements, in my opinion, could become the primary growth area for the media industry over the next several years. 

As I see it there are three multiscreen advertising zones that broadcasters and cable companies should be focused on:

Hyper-local:  Mobile telephones — tuned to video content — could insert clickable advertising near point of purchase, coupons, discounts, fire sales, and analytics.  Premium pricing per click. 

Regional: DMA-based traditional and interactive advertising. Today’s widely-published and available CPM pricing will make room for value-added multiscreen rate cards.

National:  Broadcasters could insert clickable advertising inside TV Everywhere avails.  Kind of like local advertising, except now with limited national reach.  
Many technology companies, like SeaChange International, are bundling solutions that can stream content to mobile, PC, and television by way of the cabler’s CDN.  As Mark Cuban has pointed out the bandwidth constraints of today’s Internet won’t support the entire video market anytime soon.  Cable’s hybrid approach is the technology to beat. 

Industry players that have been banging the drum for net neutrality don’t seem to be walking that straight line anymore. The marketplace is convoluted with many Internet folks trying to get in cable’s business. The ideals behind net neutrality seem weakened by the drive to compete and many have already begun positioning next generation services. 

Comcast’s iPad app, in my opinion, has shown us that the Garden of Eden will be found in interactive multiscreen technologies.  Rule-makers should be cautious before making anyone take a bite out of the net neutrality apple.  

When Comcast introduced the iPad app subscribers were finally given the tool they needed in order to search cable’s enormous library of premium video content.   Over time as subscribers become familiar with premium video search, and online DVR scheduling, they may become overwhelmed by content options.  Tablet navigation, I believe, will be the catalyst that causes the cable industry to rethink future subscription bundles.  

For certain a healthy OTT market will develop with millions of subscribers. But it probably will be much smaller than DBS since the building of that infrastructure would be tough for the OTT independents to shoulder. Especially since, as of late, the OTTs have announced no major differentiations from cable’s product.  The OTT sector, therefore, will probably have limited influence on cable.  Ironically, Internet programmers like “Funny or Die” and “Revision3” might find a home on Comcast’s iPad app since the definition of a carriage agreement is no longer set in stone. 

CableLabs has released the next interactive television EBIF specification called IO6.  IO6 may pave the way for one day numerous apps (widgets) will be able to share the TV screen simultaneously.  In other words, the cable industry seems to be integrating along the path so that one day TV may be a multiple choice clickable experience tied (bound) to content.  In the future advertising is definitely going to exponentially increase in units on the screen.  This development, in my opinion, will at some point push the cable industry to integrate all multiscreen devices so that consumers can share their clicked response data with friends; probably an experience similar to how we do it on Facebook.  

Michael Kokernak is the CEO and President of Across Platforms, Inc. Across Platforms, Inc. is a multiscreen technologies consulting firm. He’s written about EBIF and the opportunity it providers marketers. Michael is also the founder, and past CEO, of Backchannelmedia. He can be reached at [email protected]