What Will Replace Cable TV?

August/22/2013 5:47AM
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Here is the future of cable TV as seen by Netflix. Remember, Netflix put Blockbuster out of business. Then jumped on Smart TV as manufacturers’ offered the option of immediate movie downloads to your TV.

” Internet TV apps will improve just like the mobile phone.

Twenty years ago, the mobile phone was quite large, expensive, limited to voice communication, suffered static and was trivial to eavesdrop on. It was hard then to imagine that, by now, there would be 6 billion active mobile phones in the world, central to so many of our lives. We see a parallel in the rise and intertwined improvement of Internet TV apps, broadband, and devices over the next 20 years.

Internet-native new entrants

In addition to creating opportunity for linear networks, the emergence of Internet TV also enables new apps like Netflix, YouTube, MLB.tv, and iTunes to build large-scale direct-to-consumer services that are independent of the traditional MVPD bundle.

Netflix competes for entertainment time with traditional networks, but the scope of such time is quite large. Consumer time devoted to web browsing and video games, for instance, has expanded hugely over the last two decades without a corresponding diminution of TV viewing. Another example is that when AMC produces great shows, it does not noticeably shrink the audience for HBO. As our service has become very popular, there has been no discernible decline in domestic MVPD viewing, according to Nielsen.

Netflix singular focus

Simplicity is at our core.

We are commercial-free unlimited-viewing subscription TV. We don’t have pay-per-view and we don’t have advertisements. Those are fine business models that other brands do well. We choose to be the best at our model, and to have our brand stand for commercial-free, unlimited viewing, low flat monthly fee.

We don’t and can’t compete on breadth with Comcast, Sky, Amazon, Apple, Microsoft, Sony, or Google. For us to be hugely successful we have to be a focused passion brand. Starbucks, not 7-Eleven. Southwest, not United. HBO, not Dish.

We are not a generic “video” company that streams all types of video such as news, user-generated, sports, music video, or reality. We are movies and TV shows

Within TV shows, we are primarily long-lived TV shows that are enjoyable 5 years after they are produced (in contrast to great topical real-time shows like Jon Stewart or competitive reality shows like the Voice).

We are counter-positioned against the hassles, complexity, and frustration that embodies most MVPD relationships with their customers. We strive to be extremely straightforward and simple. 4

There is no better embodiment of this than our no-hassle online cancellation. Members can leave when they want and come back when they want.

We are about the freedom of on-demand and the fun of indulgent viewing. We are about the flexibility of any screen anywhere any time. We are about fantastic content that is increasingly only available on Netflix.

We spend over $450M per year on global marketing to attract people to try Netflix, and to reinforce with our members why Netflix is worthy. Our extensive content is key, as is the ability for members to have control over their viewing experience.”

So, Netflix sees the future as internet TV? They see their role as a content choice in that Internet TV delivery universe. They focus on customer service. You can get into and out of a Netflix agreement in 30 seconds with no hassle. Try that with the cable companies or AOL.

A lot of heavy hitters are doing big things in that Internet TV delivery future. Google in Kansas City, Apple, secretly in their labs, Microsoft in Redmond, Washington, and some Steve Jobs type in a garage somewhere. Notice I’ve mentioned none of the big cable companies here. It’s called marketing myopia as my Harvard Business professor, Ted Levitt labeled it years ago. As Ted said, “if the railroads had realized they were in the transportation business, not the railroad business, they would have pioneered the airline business in this country”. Today, the airlines, like the cable companies, have lost their way. Neither industry offers any customer service turning themselves into commodities. If Ted were still alive today he would say, once you become a commodity, you will find lot’s of new competition because you are vulnerable. The vultures are circling overhead knowing your days are numbered.

The consumer is still King, ask Blackberry. Consumers hate today’s cable and airline companies. Tomorrow they will be gone. It’s just a matter of time and talent.


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