What If Your Next TV Is a Tablet?

It is a dark time for the TV rebellion. Although legions of cord-cutters have abandoned their cable subscriptions, Hollywood troops have driven the early TV-technology startups from their hidden Silicon Valley bases and pursued them across the Internet. Evading the dreaded cable and satellite companies, a group of freedom fighters led by Boxee, Netflix, and Roku have established a new secret base inside their set-top boxes. The evil lords Comcast and Time Warner Cable, obsessed with choking off à la carte Internet TV, have dispatched thousands of TV Everywhere testers into the far reaches of the suburbs …

Okay, maybe ripping off the opening crawl from The Empire Strikes Back is a cheap way to sum up the current situation in the Internet TV galaxy. But you have to admit there are some nice parallels.

Just take a look back at Bloomberg BusinessWeek’s cover article, “Revenge of the Cable Guys.” As the piece explains, the gatekeepers of the television business, namely the cable and satellite companies who aggregate and distribute TV content, have decided not to sit around waiting for tech entrepreneurs to destroy their precious Death Star (oops, I mean their $60 billion revenue stream), the way their music-industry brethren did a decade ago. Instead they’ve leaned heavily on their suppliers, the Hollywood studios and TV networks who create content, to stop giving away their stuff for free on the Internet. And they’ve cobbled together their own technologies, like TV Everywhere and Comcast’s just-announced Streampix, to appease cable subscribers who want to watch TV shows on their laptops and smartphones.

In fact, if you read commentaries from people like Bill Gurley, a partner at Benchmark Capital, it sounds like the rebels in this scenario—the Silicon Valley upstarts who thought they could disrupt the cable industry by offering consumers cheaper “over-the-top” or Internet-based subscription services—have been mistaken, about a great many things. Talk all you want, Gurley says, about the freedom and convenience of being able to buy one TV show or movie at a time—or about how it’s “just so obvious” that people should be able to “watch what they want, when they want, on whatever device they want,” to quote TechCrunch’s Erick Schonfeld. None of that matters, because nothing, absolutely nothing, is going to come between the content owners and the $32 billion they earn every year in affiliate fees—that is, their cut of cable and satellite subscription revenues.

The prospect that these fees might be cut off or reduced is exactly what caused Hulu, a joint venture of Fox, NBC Universal, and Disney, to cancel its deal with over-the-top provider Boxee. And it’s why digital distributors like Netflix are having to shell out a lot more cash than they used to for content licensing deals. “As a result of these maneuvers, the current trend in the market is for less rather than more prime-time content to be openly available” over the Internet, Gurley observes.

It’s not that innovation in TV-content delivery has screeched to a standstill. It’s just that the disruption is happening a lot more slowly this time around, with the incumbents in the industry retaining a huge, probably decisive amount of firepower. As much as cord-cutters like M.G. Siegler and myself would like to live in a world where we could get HBO Go on our iPhones without having to pay for an actual cable subscription, it’s not going to happen. As Dijit Media’s Jeremy Toeman has pointed out, most content creators are perfectly happy with their lucrative cable distribution deals, and are clueless in any case about direct-to-consumer marketing, billing, and all the other tasks that go along with Internet distribution.

But while Hollywood and the cable industry may have beaten back the over-the-top rebellion, a second disruption is now underway—and in this case, I don’t think everything is proceeding as the incumbents have foreseen. I’m speaking, of course, of the tablet revolution. Which, let’s be frank, is really the iPad revolution. (Only 39 percent of all tablets shipped in the fourth quarter of 2011—and, likely, a far lower percentage of tablets actually sold—were Android devices.) If Roku, Netflix, and their ilk made us rethink access to television, the iPad is making us rethink the experience of television, and the consequences could ultimately be more far-reaching.

You’ve probably heard gadget industry pundits talking about the “second screen.” Usually this refers to the smartphone, tablet, or laptop that’s at hand while viewers are watching a scheduled TV program. Increasingly, people are using these devices to do things like tweet or browse celebrity profiles on IMDB. With apps from companies like Dijit, where Toeman is chief product officer, viewers can also use the second screen to navigate TV listings and even control their televisions.

But I think today’s second-screen apps are only scratching the surface. In reality, the iPad is the first second-screen device that’s actually good enough to be the first screen.

“Smart TVs” and “connected TVs” may be all the rage at the Consumer Electronics Show, but I think TVs are about to get dumber, not smarter. I’m laying a bet, right here and now, that the days of the television as we know it—a standalone appliance with a built-in tuner, a goofy software interface, and an incomprehensible remote control—are numbered. Five or 10 years from now, if you have a TV in your house at all, it will simply be … Next Page »

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Wade Roush is a contributing editor at Xconomy. Follow @wroush

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