Thoughts on the impact of wireless services on traditional media distribution

I talked about the changes in audio entertainment in a previous blog, Mobile Internet to Start Killing Satellite and Terrestrial Radio (and music downloads)? There, I made the observation that services like Pandora and TuneIn Radio are going to change the method of delivery (that is moving from radio broadcast to Internet services) and the type of delivery (that is moving from music downloads to on-demand music and radio selections).

Here, I am going to take a look at the trends in video services.  There is the obvious trend that a combination of video-on-demand cable and Internet-based video streaming (e.g., Hulu, Netflix) has almost completely killed the video rental business.  This trend continues with video streaming making a significant impact on traditional cable (and teleco)-based video-on-demand services.  In fact, there are two opposing efforts being made fight for consumer share.  The first has the traditional cable and telco video providers moving their material into web-based streaming services, and trying to differentiate their product by making exclusive content distribution deals.  The other has Netflix working with production studios to make exclusive content just for Netflix streaming.  In fact, this week it hit the news that Miramax is talking to Google, Hulu, and Amazon for distribution services.  These Internet-based companies may become like the great theater owning companies of the past.

There is a wild card for all of this, which is the distribution by streaming of content directly from the content producer.  This includes the traditional networks and studios, as well as sports leagues.  This material could be distributed directly through companies that specialize in streaming distribution.  The important distinction here is that at one time, independent distribution was a major hurdle, but now they can outsource the distribution just like Netflix to a combination of Cloud computing and Content distribution companies.

Of course, content is what people desire, and now there are two methods to get it.  The first is via traditional broadcast and cable methods (and satellite), and the second though the Internet.   The question is whether the trend for video is going to follow the same trend as telephone service and what impact this has on infrastructure investments.  It was only around a decade ago that nearly 100% of the households in America had wireline phone service.  Today, this is probably around 75% of phones, with many of these being provided via bundled “triple-play” services from telcos and cable companies.  Flat rate mobile phone service has helped reach near 100% penetration.  For video, only a few years ago, the combination of cable, broadcast, satellite, and video rental provided 100% of distribution.  Now, I would hazard a guess that this is well less than 100%, dropping rapidly, and accelerating due to streaming on laptops, pads, and directly to televisions with built-in streaming capabilities.
The reason that this is all possible is the dramatic increase in sustained bandwidth to Internet services.  With wireline downstream bandwidths of 10Mbps and more, streaming multiple HD-quality video sessions to the home is today’s reality.  This increase in Internet demand has fueled additional investment in wired infrastructure, and has partially offset the loss of phone service revenue and now a drop in cable TV video subscriptions.


Now there is a significant challenge to the wired model.  The emergence of high-performance wireless services, based on WiMAX or LTE, means there is now another access method that will directly compete for the video entertainment dollar.   With 4G service embedded in smartphones, laptops, and pads, being tethered to wireline derived Internet service (even over WiFi) may become the secondary access method.  With dramatic impacts that wireless and Internet has made on wireline phone services, what is going to be the impact on wireline video services?


Combining some of these and previous observations together we can ask some interesting questions (not exactly sure of the answers):

• How long will it take until the music, news, and even backseat video services in your car are provided predominately by 4G wireless services?  Andriod pad built into the dashboard?
• How long will it take until TVs are augmented with the 4G wireless provider of your choice?
• Will high-speed wireline infrastructure continue expand into new areas, or will rapid expansion of 4G availability put a damper on this growth?
• How are the pricing models for 4G and wireline-based Internet services going to change?  Bandwidth caps and tiered services, which provider flinches first to increase their subscriber base?

If the consumer budget for services becomes tight, what are they going to preferentially select to keep and what do they jettison?  My money is that people become addicted to information and entertainment on the go, so more money goes into wireless pot.  This means there would be significant downward pressure on the additional services that consumers buy today from their cable and telco provider.  Examples include getting rid of many traditional premium subscription services (they may be however be bought separately as streaming services directly from the provider), reduction or near elimination of pay-per-view (except what the cable and telco companies can lockup), and potentially getting rid of cable service completely.

In summary, the dynamic of having several Mbps wireless services combined with a much more flexible Internet-based audio and video streaming may have significant impact on the business models of radio, television, and the traditional video infrastructure providers.