Judge The Success Of This Industry On Real Business, Not Hype Like “Cord Cutting”
There are far too many people associated with the online video industry that want to imply that cord cutting is real. Too often, their motives are to present an inflated value of online video with the intention, in my mind, to justify that this industry is more successful or cooler than it really is. Make no mistake, I want to see this industry grow. But myself and many others want to see content owners offer services that consumers are willing to pay for so that sustainable business models evolve, which is the only true way to judge the success of the industry.
For all the talk about cord cutting, TV everywhere, broadband enabled devices or 3D TVs, you'll notice there is almost never any talk of the companies that are supposedly benefiting from these trends. If cord cutting is in fact real, where are the companies who are making money from it? Why are so few companies in this space profitable? If TV Everywhere is in fact such a big deal like so many say, where are all the case studies from content owners making money from the service? There are lots of arguments on blogs and amongst industry folks on what these services should cost or look like yet no on seems to disagree that today, almost no content owners are making money from their online video offering.
I don't disagree that these services are exciting, have potential for growth or could be the future of the industry, but when they are talked about, many folks don't describe them based on the reality in today's market. When Apple announced the Apple TV in 2006, analyst after analyst said things like, "there's no question that Apple TV will be a success" or "Apple TV will forever change how consumers watch video." Now three years after the Apple TV was released for sale, one would have a hard time arguing that it has had any real impact on the market in any measurable way. Yet that has not stopped far too many people who write about this industry to once again talk about how big of a disruptor the next version of Apple TV will be, before it has even been confirmed or announced. We have example after example like this from our industry over many years that shows the danger in inflating the true success of these products and services.
Cord cutting is no different. Yes, the latest numbers from SNL Kagan do show that subscriptions to TV services declined in the second quarter, but one bad quarter is not a trend. Nor is it a business. In fact, even the analyst who wrote it suggested that the bad economy had more to do with the poor numbers as opposed online video offerings. When cable TV subscriptions grow in a quarter, no one writes about it or seems to take notice. But the moment the numbers go down, far too many in this industry want to use it as proof that cord cutting is real, almost as if to say look how well this industry is doing. Trends in this industry don't happen over night, they happen over many quarters or usually, many years. As fast as the technology moves, the adoption of video based applications is slow. Don't be fooled by thinking that all of a sudden we can judge the success of the online video industry based on some negative numbers from the broadcast industry.
Remember a few years back when far too many people wanted to imply that the online video advertising industry was doing so well simply because the advertising market on TV was doing poorly? Just take a look at the wild predictions that many analysts made in 2008 on what the size of the market for online video advertising would be in 2012. Those numbers don't have a chance. Yet, still to this day, far too many people judge the success of the online video advertising market by the supposed failure of the TV ad market. Far too many people seem to think that one service has to replace another when most of the times these services are simply a complement to one another.
People rant and rave about broadband enabled TVs, yet even the boldest predictions by analysts say that maybe 25M sets will be sold in the U.S. by 2013. To put that in perspective, there are already more than 25M Xbox 360 consoles in North America today. Granted the Xbox 360 has a big install base, but it has taken nearly four years to get to that number. And in that time, how many content owners or content business have grown or become profitable simply due to the Xbox console? It takes a lot more than just one device, be is a game console, broadband enabled TV or video platform like TV Everywhere to actually change an entire industry. And that's why when you see people talk about these devices or platforms, they almost never talk about how many have actually been sold to date, what the adoption rate is or the size of the market today. It always seems to be about the "future" because that makes the industry look better than it is.
The online video industry is not new. In fact, 2010 marks the 15th or 16th year the industry has been around, depending on how you measure when it started. The success or failure of every kind of product offering in this market can be soley judged based on revenue. Sure, things can take place in the industry that are exciting and services can come to the market that look great, but without a business model behind it, they can't last. It is not enough to simply talk about how cool all of this technology
is. We're not in the Internet bubble of 2000 anymore. The only way this
industry can measure success is with services that are deployed to a
mass market that generate enough revenue to help companies or services to become profitable.
I know some folks are going to say why am I so negative, but it's not negativity, it's reality. Notice almost no analyst talks about what's taking place today? It's almost always about the future and three or four years down the road, yet there are plenty of opportunities right now. This industry survived the crash in 2000 because expectations were re-set and consumers, vendors, VCs and others all came back down to reality of what was real and what was hype. Many of us don't want to see the industry go through another correction like that, even though in the long run, it was the best thing that could of happened at the time. It will sound odd to some, but for those in the industry at that time, they will most certainly agree with me that our industry needed to go through that in order to survive and be where it is today.
Don't let the hype in this industry become the metrics for how we judge true success in the market.