The Future of Internet TV (in America)
Podcast: Play in new window | Download
This column has a global audience so sometimes I have to defend my tendency to see things from an American perspective. But I’m not sure there even IS a defense for this particular item so I’ll just jump into it, because I think even readers from Kazahkstan and Kuwait (my two big K’s) may ultimately find it interesting. It’s about Apple and Hulu and the direction Internet TV is going in the United States.
It’s not headed where you think it is.
Hulu is the ad-supported video distribution site set up by NBC-Universal and Fox. It’s where, in addition to the TV network pages, viewers can go to watch thousands of television shows, old and new, supported by commercials. Of the four big broadcast (as opposed to cable) networks in the U.S., Hulu until recently had half of them with CBS hiding out at TV.com and ABC residing solely at ABC.com. But now ABC, which is owned by Disney, has decided to join Hulu and the pundits think that’s generally a big deal, not only because of the whole three-to-one thing but because Steve Jobs is the largest shareholder in Disney and on the Disney board and this would appear to be a kick in the face to Apple’s iTunes, where people rent or buy the same shows without commercials.
Is it or isn’t it a big deal? And what does this move mean for Apple?
There have always been two general methods of distributing Internet video — downloading or streaming — and three business models — buying, renting, or watching with commercials. Conventional wisdom — what THEY say — has it that streaming (YouTube) is better than downloading (iTunes) and watching with commercials (Hulu and TV.com) are better than renting or buying (iTunes again).
No, they aren’t, at least not as businesses, not yet.
Business Week, among others, made a grand effort this week to present Hulu as a masterstroke that will hurt or kill iTunes rather than what it is — an expensive streaming service that doesn’t make money.
My wife and I last night watched an episode of Chuck on Hulu. We started on nbc.com where I thought we might see the show in HD but that wasn’t the case. And even the standard definition version at nbc.com didn’t play well despite our dual-core 2.4-GHz system with four gigs of RAM and an eight megabit business broadband connection. So we switched to Hulu where the 480p version stuttered a bit so we dropped to 360p where it played fine except for having to rebuffer a couple of times during the show.
In contrast to this with iTunes you have to wait for downloading but then none of this performance stuff happens. If you want HD you get HD, but then again you are PAYING for HD.
We watched the episode (fun) and all but one commercial was for Rwandan relief. There is no way Hulu or NBC-Universal were making a profit on that stream, and this was a very popular show.
When you buy an episode on iTunes everyone in the production food chain makes a profit.
Hulu and its ilk are money-losing services that rely largely on concessions in various guild contracts that pretty much keep the writers and producers and actors from sharing in profits that aren’t there anyway, at least not yet.
How is this a threat to iTunes?
Fox owns a big chunk of Hulu, yet American Idol performances are exclusively available on iTunes, not Hulu. Why is that? Because American Idol performances on iTunes make a lot of MONEY, that’s why. Adam Lambert downloads alone make more money every week — a LOT more money — than do ALL the shows on Hulu put together.
So Apple is being criticized and seen as an Internet antique because it is making a profit? I don’t get it.
I’m not saying here, by the way, that there is no room for commercials on Internet TV. Nor am I saying that Apple won’t possibly move to commercials or streaming at some point. This is not gratuitous Apple ass-kissing. What I AM saying is that it is a lot easier to move from paid to free than it is to go from free to paid. Hulu can’t choose to emulate Apple and become profitable that way because viewers would flee.
As I’ve written over and over, Apple is moving slowly and steadily toward becoming primarily a content provider. Microsoft is trying to do the same but without Apple’s discipline. Apple is putting in place all the pieces it needs to make a run at dominating the future of TV, but they know it takes time to get all those bits where they need to be.
What’s needed are devices and services and bandwidth at a given price point where it all works smoothly not just from a technical but also from a commercial standpoint. Apple is there right now when it comes to downloading and selling or renting, but not for streaming or commercials — the numbers aren’t right yet, nor is the mix of devices. But the time is coming soon when it will be right, certainly in no more than two years and maybe less.
Now here’s the key for all the pundits who see Apple failing or faltering: you are looking in the wrong direction. It doesn’t matter how many networks are part of Hulu. In time they will probably all be there. But Hulu will remain an artifact of network labor agreements and will be vulnerable for that reason. Hulu can’t afford to PAY its way.
Follow the money.
Apple has at this moment just under $29 billion in cash and not many good ways to get a reasonable return on that money. Only Microsoft has more cash than Apple and Microsoft is being pulled in a lot more directions so Microsoft doesn’t have Apple’s flexibility.
What will Apple do with that money?
Most of it will remain unspent is my prediction, but I’m guessing we’ll shortly see $3 billion or so per year go into buying Internet rights for TV shows — not old TV shows but NEW TV shows, shows of all types.
TV production in the U.S. is approximately a $15 billion industry. An extra $3 billion thrown into that business would change its dynamics completely. Most production isn’t done by networks but by independent producers who are hungry for revenue and risk reduction. Three billion Apple dollars spread around that crowd every year would buy Internet rights for EVERY show — more than every show in fact. Whole new classes of shows would be invented, sapping talent from other parts of the industry. It would be invigorating and destabilizing at the same time. And because it is Apple — a company with real style — the new shows wouldn’t at all be crap programming. They’d be new and innovative.
And just as the artistic heart of TV shifted to cable with HBO in the 1980s, so it will shift to the Internet and Apple.
And where will be Hulu?
Nobody will care.
Hey bob, there is some kind of dinging sound a few seconds into the audio recording.
Inside or outside the US you might find this site to be simply mind blowing- am currently watching Heroes streams on my iPhone or desktop with unlimited access to more than 200 TV series – complete seasons (yup every episode!) using a site called http://3click.tv so far as long as my wifi signal is strong I have 25000 episodes in my pocket
eat that iTunes Hula and the rest of ya!
“Apple is moving slowly and steadily toward becoming primarily a content provider…”
You had me until this comment. Apple sells iTunes content strictly to push hardware: iPods, Macs, and to a lesser extent, AppleTV (not so much now, but it will be interesting to see where the go with this).
I’ll admit I’m a cable subscriber, but 95% of my household’s viewing is time-shifted (Tivo, MacMini+EyeTV), so ad-supported shows aren’t penetrating. For me, Hulu doesn’t cut it since the viewing options are so restricted and you need a fast pipe to stream. At least iTunes content can be viewed off-line.
I agree that Hulu and it’s ilk are no threat to Apple’s bottom line. More likely they’re a bargaining “straw” the desperate studios are grasping at to maintain the illusion that they are in total control of their precious content. Until they find a distribution and pricing mechanism that actually matches how people are watching content, I think they will continue to flounder with these half-baked ideas.
I’m someone who refuses to pay for downloads. I’ll gladly sit through commercials or deal with lower quality streams. But if I’m going to pay for content, I want to own the media on disks. I don’t want to have to deal with trying to replace my digital media if a Hard Drive dies. If I want to put movies/shows/music on a portable player I’ll rip em and encode them myself.
My issue with itunes and amazon on demand and such are their prices. To watch a seasons worth of episodes on my PC I’d need to pay more than the price I’d pay to buy the DVD box set. That’s just absurd to me.
Not sure why videos from NBC or Hulu didn’t play well on your system. I can watch HD videos just fine on both sites from my laptop with 1.83 GHz dual-coer CPU and 2 GB of RAM. I’m using my 11 Mbps Wi-Fi connections from Comcast.
Like Jon I’m not a fan of paying for video downloads, not to mention that I don’t prefer to have downloaded videos occupied my hard drive with limited disk space (< 100 GB), because, unlike songs, I find myself less likely to replay videos as often. Watching videos online via on-demand services like Hulu, TV.com, Fancast, and SlingTV etc. appears to be work better for me.
Viewers who insist on free content would flee if Hulu abruptly started charging for everything.
But Hulu could certainly transition to a mix of free and not-free content (which is what iTunes has). For example, Hulu could offer users the option to pay to watch this week’s episode of House, instead of waiting eight days to watch it free-with-commercials, as they can now. That wouldn’t drive anyone away.
By the way, Hulu already has links to “buy this episode” (from Amazon’s video box thing) so they already have one download option in place.
Pay-per-episode keeps the cost right in front of you (which also makes illegal copies that much more enticing). A subscription becomes just another monthly bill.
Plus, like you said, it’s hard to move from a free model to a paid one. Traditional TV /feels/ free (even if you pay for the pipe, i.e., cable or satellite… those have just become “utilities” bills like water and gas)
Nice trick the cable companies have pulled: most of their costs are licensing costs to the media owners, so your cable bill is actually paying for the content rather than the pipe. That trick will be harder to pull off with internet video unless the providers put together something like a combined Slingbox and Tivo so that their customers think they are paying for the hardware and service rather than the content.
Its indeed about the future. How will you prefer to get you content? Where are you watching your TV? What about reliable HD content viewing on your HDTV, you know that BIG screen TV you paid money for?
Apple may not have full HD Apple TV support yet and there are questions about Blu Ray and all of that but, iTunes can distribute anything, free or not. Its perfectly scalable not just in file size and amount of content but in pricing as well. Since Apple is a hardware and software company they can design and sell anything they want, once they have a good idea of where things are going. RIght now its about the ability to be nimble and scalable and have the money do go in any direction the market dictates. The iTunes “model” is perfect and the fact that its for sale along with all their other products guarantees they have a dog in the hunt all the time. As long as they at least break even, they are guaranteed to be around. As digital distribution of content becomes ubiquitous Apple plans on being right in the middle of it, preferably in the drivers seat.
Used to buy iTunes subscription for The Daily Show. It’s really the only tv I watch and I don’t have cable. I haven’t renewed the subscription on iTunes for 6 months and have watched The Daily Show exclusively on Hulu. Even with the occasional re-buffering pauses and the short ads, the lower resolution, etc., I’m still happy with it because it’s free. The other turn-off to iTunes was the poor posting record for this particular show. Sometimes the new show wouldn’t be available for upwards of 24 hours. Having paid for that content, it was annoying having to wait for it since this show in particular is linked to the news of the day. If I watched tv shows on my iPod Touch (I don’t) I might be more inclined to pay for downloads on iTunes but I’m just not in the habit of doing that. Would much rather sit on couch with laptop at end of day.
Internet viewing as a whole will never come close to replacing that familiar square or rectangular device we’ve been accustomed to staring at in our living rooms, kitchens, and bedrooms.
As a Independent Film Channel Short Film of the Month Winner, and independent producer who from time to time manages to land a paying gig, this article was of particular interest.
First off I’m not paying for cable at this time due to economics, unlike most of your readers I’m towards the bottom of the economic scale and as of late I do rely on streaming videos to keep me up to date on whats being discussed and distributed by the establishment via the Cable News Networks. How much time a week do I spend looking at new content via the internet? About 1 hour and most of it from Huffington Post. I rely on PBS in the evenings and still prefer my content served properly, via TV screen.
I truly don’t believe it’s whether the streaming video is HD or SD, the majority who are tuning in are purely interested in content; being able to watch a clean picture without break ups, makes most viewers happy, especially those who are solely relying on this medium. For example most people here are boasting of their hardware, while viewers on a budget are more concerned with just being able to watch the content.
In some instances content can be produced rather cheaply with a inexpensive video camera, basic video editing software program, and footage of a cat making strange faces, and then there are those who are committed to quality productions which are intended to widen the viewers horizons and is worthy of broadcast by any major broadcast or cable network.
It all breaks down to distribution, for example Apple is making a ton of money distributing media, way beyond what they are making in hardware sales as some believe.
Where Apple is making strong inroads in hardware sales is with their editing software Final Cut Pro, they have made a excellent tool and packaged it with add on’s the competition refuses to match, literally stripping it’s nearest rival Avid of any sales in the independent market, while at the same time making strong inroads into Avid’s niche market. Since FCP only runs on a Mac, they get added a boast of hardware sales. The reverse of Microsoft’s monopolistic practices.
The bottom line for studios and everyone who decides to make a living producing media is adapting to the changing channels of distribution, for example my genre is distributed usually via IFC, Sundance, and PBS, for which they do pay for solid content and they in turn have to adapt to reach more viewers, that’s where the internet really comes in to play, reaching and distribution, not viewing.
I didn’t bother to read the other comments, so apologies to myself if I’ve implanted a “Duh” moment forever into the internet ether.
Hulu is an attempt to divert audience away from YouTube “piracy” or other video sharing methods that might spring up without the instant online access to satisfy watercooler nostalgia. Don’t expect exclusive content to be anything more than a trickle at this point. When Hulu starts eroding the broadcast medium (which will always be about a “premiere event”), revist this issue. Whether it will is not certain. Really.
Should’ve mentioned Netflix/Amazon and Roku in this post, Mr. Cringley. I’d like to hear your take on their role in this predicament.
I would love it if Apple would buy DirecTV.
The future: You will be able to watch almost anything for free via streaming, with commercials, or you will be able to buy the rights to watch almost anything once, twice, any number of times, or forever, all at different price points depending on length of time (or number of views) purchased and quality of picture, sound and other add-on features. This future will not require you to download or store anything at your home or office. Your “ownership” will be to your right to access a location on the Net where your “property” is located. Despite much effort to prevent it, you will be able to store and make copies of your “property” if you wish, but the rather miniscule cost of ownership will be a disincentive to such activity. “Free” will always be very popular, but the computer and the TV are merging into one.
[...] 10. The Future of Internet TV (in America) [...]
Interesting. I get the feeling Veoh is doing better financially than Hulu. Their streams are preceded by at least one commercial for a real product and their streams are rock solid even at high res. They still suffer from a “sponsor of the week” syndrome a bit, so you get soap commercials for every video for 3 days running, then it switches to ads for a movie for another few days and so on.
Veoh still has some trouble with the content owners, though. There’s still a lot of “user-generated” content that gets taken down frequently.
It’s always exciting to think about internet on tv.
“And just as the artistic heart of TV shifted to cable with HBO in the 1980s, so it will shift to the Internet and Apple.”
Thinking about the “artistic heart” of television is in direct conflict with “following the money.” Nielsen champs are consistently sports, reality TV and the WWE.
The future is free streaming without ads, brought to you via the open source community empowering leechers. But the only content will be a sort of a pre-scripted battle of the bands with real weapons. The MPAA will be deputized as cops, to kick down the doors of anyone who skips any advertisements. The penalty for looking away from an ad will be a special contact lens that overlays advertisements on whatever you are looking at 24/7. The contact lens will be made by Microsoft, who will use it to miraculously make more money than Apple, who produces the aforementioned pop-tainment soap opera, even though the lens will be notorious for crashing at critical times, causing an unprecendented spike in roadway accidents.
The performance you experienced sounded pretty poor, my personal HD experience with Hulu was flawless, beautiful even.
Time will tell, if Hulu continues its current trend of controlling more and more eyes, and in the end more then iTunes, then I’d guess again.
I’d been pondering this very topic for some time now and appreciate (as always) the incredibly good insight.
In some ways I see the value of the Apple – iTunes model having the additional benefit of better control of their content distribution quality… I think you touch on this, but it’s worth highlighting that Apple, having their own proprietary delivery system, iTunes and much of the hardware the content is played on or through. So the only uncontrolled item is primarily the pipe from them (Apple/iTunes) to you… I see this as being a strong quality control point which Hulu and others do not have when they are depending primarily on a users Browser to do the delivery.
Just my 2 cents.
Bob,
I certainly think you have a point about streaming, but I’m not sure about the facts. Hulu’s business model may carry a significantly lower profit margin than both traditional TV and downloadable media models, but don’t be so quick to assume that it’s revenues are non-existent, or that there’s no way to convert from free to paid.
Quite the contrary – if you consider that similar arguments were made against cable TV, and pay-tv in particular. Today, content is ubiquitous, and there is no reason or restriction placed on the viewer to watch it on the station where it originates, and pretty soon, will we even need the cable companies to provide the content? The value isn’t the content itself as downloadable media proposes, but the distribution of that content.
Who would PAY for the opportunity to watch ALL their favorite shows all the time, anytime, without commercial interruption, and how much would they pay. Is it worth $10, $20, $30? How about with commercials?
The internet isn’t all “free” – we’re already paying our cable or telco $20/month to get decent access, and $40/month to get the broadband quality we require for streaming HD. Hulu’s competition isn’t Apple or Microsoft, it’s the cable/sat companies themselves. When the advertising dollars and the eyeballs move away from traditional television, the internet will provide a new revenue stream with unique content to compensate. Everyone wants a piece of that.
My advice to the studios, is to utilize the best and most available resources to provide what the audience wants (and will pay to get), which is to provide the means for users to watch television quality content where and whenever they desire, streamed, downloaded or otherwise beamed directly into our brains at a moment’s notice. It’s called multi-platform entertainment, and it’s the future.
Best TV, 2 ways:
1. analog cable + vcr, or
2. digital cable + TiVo with cable cards
Both methods eliminate commercials via fast-forward, use no cable boxes and no extra charges for content beyond cable subscription (no VOD, no premium channels, no DVDs, no downloading or streeming). It helps to use the internet + notepad and save research about programming you plan to record and refer to it while watching the program.
I am opposed to pay per episode downloads 1. I hate downloading when I can stream and 2. hate paying per episode cause i watch alot of tv or try new series I may or may not like. I checked out the 3click.tv link- it is cool, I wouldnt go out and pay for 200 boxed sets of tv series, but I have my choice to watch any of them. I also use it on my my mobile. 3click turned me on to a new browser called skyfire for windows mobile operating systems and it works fine on 3click.
If only they made a settop box for 3click, life would be perfect
good site
[...] May 13, 2009 Robert X. Cringley has written a fascinating article called “The Future of Internet TV (in America).” You can find it in its entirety on his blog. [...]
Apple has no interest in being a content producer. This is a provocative idea, but Apple’s success has thus far been firmly based in Jobs’ understanding that production and distribution are inherently different businesses. Jobs recognizes that combining the two is a recipe for disaster.
Ultimately, that’s why Hulu will fail. It will not be an open distribution channel that is accessible to everyone. The networks will eventually force good stuff out in favor of the crap they produce. And, this is exactly why network TV is such total garbage: distribution and production have been combined and there is no incentive to innovate.
iTunes is positioned well to be an open distribution channel that producers NEED. A good distribution channel has its own inherent value. Apple recognizes that. In as much, they won’t need to spend $3 billion to produce stuff. The producers will come to Apple.
[...] I, Cringely » Blog Archive » The Future of Internet TV (in America … [...]
[...] I, Cringely » Blog Archive » The Future of Internet TV (in America … [...]
What an insightful and eloquent crystal-ball reading on the future of TV! Great post. I think you may be on to something.
I just wish that at least one of them would work outside the US! ex-pats need their TV fix too and neither service allows for that. I understand why Hulu isn’t, yet, I would think to combat piracy and other issues, at least itunes, as a pay site would allow for out of US purchase.
Overall, it sounds like the internet is gradually going to replace television. No matter what, we’re going to have to pay, we just have to accept that fact. We choose to pay for cable television because the alternative would be boring, and no matter what, we still have to watch commercials. Even if iTunes were to outlive Hulu, I wouldn’t be surprised if we’re forced to watch commercials down the road.
Beyond all that, how does any of this matter to the vast majority of people who steal the content anyway? Right now, in this economy, I’m sure a lot of people feel more at ease (and honest) watching shows and movies on Hulu rather than ripping a torrent.
[...] semplice e immediata dei video in formato Flash (come Hulu e YouTube). C’è chi però sostiene che, nonostante l’elevata audience, nemmeno Hulu se la stia passando molto bene. Nulla, al [...]
[...] semplice e immediata dei video in formato Flash (come Hulu e YouTube). C’è chi però sostiene che, nonostante l’elevata audience, nemmeno Hulu se la stia passando molto bene. Nulla, al [...]
[...] the brilliant tech (and now mortgage) writer I read as soon as he posts, recently said that Apple is moving slowly and steadily toward becoming primarily a content provider with Apple TV as Jobs’s Trojan Horse. Preposterous though it sounds, Cringely may be right: [...]
Apple has better marketing over the world. The one with better marketing wins, no matter how powerful the technology is
Great post. I found fabulous knowledge over here. I like to read informative blog’s and I found it here.
I am new to this site. I have just learned about this site. I am going to read on and it’s very interesting to know.
Wow, discovered your blog on Yahoo!.Happy I finally tried it out. Not sure if its my Safari browser,but sometimes when I visit your site, the fonts are really small? However, love your site and will check back.See Ya
Great comments and good post!
[...] 7. Speculation that Hulu could kill the iTunes video store http://www.cringely.com/2009/05/the-future-of-internet-tv-in-america/ [...]
Frasier is my favorite Television indicate of all time. Now I can see reruns anytime I desire to thanks towards the Internet. I Watch FlashForward Online. for the way to function, about the way residence, while eating dinner and even even though working. My loved ones thinks I’m crazy and actually wants me to see somebody. They believe I am addicted to the Internet and particularly this display. I don’t feel it’s that much of a issue, but my wife certainly does. She got so mad the other night she threw anything at my laptop. Maybe I do demand help as I don’t wish to lose my wife and kids. Tonight I’m going to ask her to make an appointment with somebody for that two of us.
Our teenage daughter is thirteen proceeding on thirty. She is mad now that we censor everything she watches. There is very little on Tv today that we find appropriate to get a teenager. A few months ago, we discovered that you can Watch FlashForward Online. along with a lot of other shows. This is wonderful as we can watch a demonstrate and determine whether or not it truly is suitable for any child of her age. She is extremely mature for the thirteen year old, but there are issues we even now do not feel she needs to know about. It’s a fine line we continuously walk, but it’s part of our employment as parents.
I love my new laptop. Not just can I play games and telecommute from residence, but I can also Watch Missed Episodes.. With my perform schedule it’s regularly tough to watch shoes which might be currently popular so I often go back to my tried-and-true favorites. Frasier is 1 of those. I don’t remember how I first learned that you simply can watch these exhibits online, but however I did I would like to say thank you. Watching Television is one of my favorite ways to relax following a rough day from the ER and Frasier is continually excellent to get a laugh. I demand that a lot more frequently than I should.
I love watching heroes, it started from boring into a fine tv series now. The first few episodes, Thought, its another xmen . Now its really thrilling, I hope the new season will be released sooner.
If the story on Google TV is real, the future of Internet TV will really, really change, my post on this subject: http://ashujoshi.posterous.com/the-future-of-tv-google-tv
This web site is excellent! Most from the time when i check out blogs, I run into terrible advertisements that give me absolutely nothing but this time I ran into your web site and I had been surprised. You’re providing out some amazing details. Please preserve it up!
Many of them point out your prized blackra1n valuable tool can not work velocity younger 3gs mobile phone motorbike engines.
dispenses use a good website decent Gives many thanks for the hard work to help out me
Thank you so much for writing all of the awesome info! Looking forward to seeintg more blogs!
I hope you have a nice day! Very good article, well written and very thought out. I am looking forward to reading more of your posts in the future.
I remember reading that national unemployment may actually go up 1% as a result of the spill itself and then the layoff of relief workers when its over. This would include the fisherman who were contracted to help out who will now be let go.Guess we’ll see.
cheap VPS