In the new Steve Jobs book, Mr. Jobs said he had “finally cracked” the TV interface problem.
Whether it is a new Apple TV or another version of Internet enabled TV sets, TV and how we get content is destined to change, dramatically.
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Winners will be content owners and pay-per-view [PPV] content companies -- and consumers.
Microsoft (NASDAQ:MSFT) originally commoditized hardware to sell software. Apple (NASDAQ:AAPL) then came along and commoditized content (99-cent songs) to sell hardware. Amazon (NASDAQ:AMZN) recently commoditized hardware again, selling its tablet Fire at an estimated $10 below cost as a way to control content.
Netflix (NASDAQ:NFLX) and the Internet are destroying the DVD distribution model of movies, making the DVD go the way of the eight-track and cassette tape for music. Apple destroyed the album as the means to get music.
Internet-enabled television means that unless cable companies change, they too risk becoming irrelevant in 10 to 20 years.
The first to change will be the PPV content providers of such events as boxing, pro wrestling and MMA.
PPV content companies split revenue with cable companies for the access to their distribution system. The bonanza of a dream fight that might or might not happen with Pacquiao and Mayweather in boxing, Wrestlmania in pro wrestling or George Saint Pierre and Anderson Silva in MMA could all do well over one million buys, and potentially two million to three million buys, at a price of around $49.
Revenue of $100-150 million is an incredible event, but it is split with the cable companies. Once fans get used to buying these over the Internet there is no longer a split -- a doubling of revenue with no extra cost.
Extrapolate this worldwide with a newly connected world and you could see PPV buys for big events that could be in the 5-10 million range. The Internet will enable PPV to a potential world bigger than several hundred million in North America, UK and Australia to a potential audience of several billion.
A major PPV event in a decade between two recognized global names could be the highest revenue event in history, dwarfing the World Cup, Olympics and Super Bowl for revenue produced.
Content companies already have the ability to distribute their networks via Hulu, Roku and directly over the Internet. It won’t be long before you will have the option of getting a network over your Internet-enabled TV directly. A true a la carte offering. The content providers will no longer have contracts to negotiate and revenue to split -- they will deal directly with the end user who up until now has been beholden to the distribution companies.
The ratings system will also be rendered obsolete with Internet television; a perfectly accurate measure will be done in real time. Live shows will start reacting to immediate downturns in ratings -- in real time.
The cable companies are profitable companies that will not go away easily, and in fact may adapt to package content in a new form. This is going to be a major distribution rights fight with huge money at stake.
However, the fight is just beginning. We have gone from a few channels to a network of 700-plus. The next 20 years will be just as dramatic, with the consumer winning.