Google And The Battle For The TV Set

The Future of TV Coalition, a coalition of US Pay-TV companies whose 47 members include Comcast, Time Warner Cable, Charter Communications and Dish Network has reacted strongly to Google’s latest attempt to enter the premium video content market (or Pay-TV market as it has largely been up until this point in time.) They have voiced their strong displeasure to the FCC (US Federal Communications Commission) about Google’s invitation to congressional staffers to view its latest device at its Washington DC office to help unlock TV the potential of IP Television sets to become smart TVs rather than remaining dumb TVs.

The new Google AllVid-style TV set-top has been designed according to the new FCC set-top proposals currently being considered  for unlocking pay-TV set-tops. As FCC chairman Tom Wheeler states in his recent op-ed published in Re/Code ““You can pretty much watch what you want, where you want, when you want. But there’s one glaring exception in the competitive video marketplace: The ‘set-top box.'”

In the FCC proposal they highlight both the costs and the advantages unlocking set-top boxes for the US consumer. The FCC says Americans spend $20 billion per year leasing set top boxes (an average of $231 per household per year) a figure that had increased 185% since 1994, while the cost of TV sets, Computers and mobile devices have declined by an estimated 90% over the same period. The FFC suggests that by mandating the unlocking of set-tops they will open up the market to competition and innovation, which can only benefit the US TV consumer.

The FCC proposal means that set top providers would have to share scheduling info (Channels, listings, video catalogues etc) with other video providers both in and outsided of cable and satellite. Naturally this has caused real fear among the bastions of the Pay-TV industry, as they see the existing threat of video subscription streaming services such as Netflix and Amazon poised to become an existential threat if they gain equal access to TV viewers via their TV sets.

Alfred Liggins, co-chair of The Future of TV Coalition described the push for the proposal as a “brazen money grab by Big Tech companies that would do severe damage to the programming ecosystem, and in particular, niche and minority-focused networks.”

Why the TV set matters to the tech giants

It may seem bizarre to the outsider that not only does a long–established and hugely profitable industry suddenly find itself under threat of companies that have no historical expertise in their sector. Two key factors help to explain why this is the case.

Firstly the US Pay-TV industry has benefited hugely from a rent-seeking landscape where lack of regional choice means that there are no alternatives to to paying escalating annual or biannual subscription fees. This has bred complacency and hubris among the industry only recently shaken by the cord-cutting hype fed by Netflix’s inexorable rise in the US domestic market.

Secondly the big four tech giants of our time; Google (or Alphabet as its holding company is now known), Apple, Facebook, and Amazon are built around content. Google and Facebook sells ads through searching for content, Apple sells devices through distributing content, and Amazon sells content itself. As their separate areas of expertise start to overlap, they turn to finding further growth in new content markets. The TV industry with over $250 billion in annual revenues represents this opportunity. For some entry into this market is easier than for others. Apple already has Apple TV, Amazon its Prime Video Service and its Firestick, and Google has Android TV and Chromecast. Only Facebook lacks direct expertise in this area, but as its rapid acceleration of its native video player over the previous two years has demonstrated it is making rapid progress towards monetizing video content and understands the centrality of video to the digital consumer.

An unlocked TV-set box represents a huge opportunity

The FCC will vote on the 18th of February on the proposal to open up standards the standards and unlock the protected status of set-top boxes. If they decide in favour of the move it will represent a watershed in the US TV landscape. Suddenly the doors will be open to disruption on a level as yet unrealized by the Pay-TV industry. Fears of losing customers to streaming services will suddenly become eclipsed by the reality of finding the battle to retain audience revenues breaking out in their own customer’s living rooms. Indeed as everyone involved in TV is all too aware, the TV set is where the overwhelming majority of TV/video consumption still takes place. For the tech disruptors flush with spare cash from their high margin businesses the opportunity is surely going to be too large to resist. For the first time the tech companies can effectively move offline and into the (traditionally perceived) non-internet lives of their consumers. The revenue implications for this will be extraordinary and are likely to exponentially grow the overall TV content landscape because words of Tom Wheeler : “The proposal is about one thing: Consumer choice.”

And consumer choice means competition - lots of it.