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Thursday, September 9, 2010

Apple, Google, The Elite, and the Future of TV

In the last week or so, both Apple and Google have introduced their new TV products. Briefly, they seem to be making the step we have all talked about for years—your TV and your computer will tend to merge. Both promise the ability to call up statistical data from your computer about a player or a team while you watch a football game on conventional TV, for example. There are hundreds of applications some of which are quite sophisticated. My only surprise is that Google has said that they currently have no plans to develop their own programming. Google TV is a new platform that appears to meld the Internet almost seamlessly with TV. You will be able to search by name for a specific movie or a TV show and you can watch it on cable or the web. You will be able to customize your own home screen for a specific web series, programs, or cable channel. Apple says that they will charge $99 for their version; Google has not gotten specific yet. It is hard to tell a clear difference between the two but early on it seems that Google has fewer restrictions and is more of an open source platform than Apple or other smaller players in that space.

Prior to these announcements, I was noticing a trend. Yes, fragmentation of audience was still continuing. Several writers talked about how young upscales often were not subscribing to cable or a satellite service. They got by with Hulu.com, streaming video online, and a heavily used Netflix subscription. I have pursued this and found that it is absolutely true but only for a VERY small number of people. They tend to be young urban dwellers who graduated from elite schools. They are very busy with their careers and social life and do not watch enough TV to justify a $100 monthly subscription fee. Last year, I joined them for a few months and found that 90% of my needs were covered with a similar approach. Students at the best schools are also often TV free but not video starved.

Within a larger group of young affluents, some of the young men said that ESPN (and Fox Sports) were the only thing that really kept them with cable or satellite. If they could buy select games a la carte, the subscription service would get the heave ho. Also, many say that they are buying plugs at Radio Shack that allow them to take Hulu and other on-line content and view it on their larger screen TV sets. A few people have approached me about a la carte purchases. They would gladly pay a few dollars an episode for a favorite show or a specific game but have zero interest in a subscription given their very low level of viewing.

My point here is that many of the young people writing these alternative viewing reports and those actually living that way are a VERY small group. Most people in their 20’s do not live in Manhattan or San Francisco, get very well paid, work long hours, and are socially hyperactive. Every person who chooses a virtual non-TV life hurts advertiser supported TV and cable but there are probably only a few hundred thousand of them at best. And, with the emergence of Apple and Google TV the press will focus on the dogfight between the two titans. What you need to keep your eye on how many people that Apple TV and Google TV pick off and how many cut their viewing of advertiser supported broadcast and cable sharply as a result.

As I said several weeks ago regarding the future of cable, there is a great deal of inertia out there among the mature. They want to kick back in their LA-Z-Boys with a cold beer and they want instant access. Young people are a lot more open. They will toggle back and forth from TV to computer and will wait a moment or two to call something up. To save a $100 a month they will do a lot more especially when they are not heavy users of TV as we know it.

The cable and broadcast people have to be careful. Newspaper people a generation ago said that young people would endorse their product once they owned a home. They would want the daily paper on the front porch just as their parents did. It did not happen. Then they said they would give away the paper for free online and once readers hit a certain age, they would want the hard copy delivered daily. That did not happen either and many newspapers are fighting for their lives.

So, here is how I see it playing out. Both Apple and Google TV will make inroads across the board but do especially well with the young and particularly among the well educated. Some of the elite will stay away as now but will likely flirt with the free aspects of the Google product for a while. And, if you have lived a life without TV, will you suddenly get cable or satellite when you turn 30 or get married? Become a parent? Maybe, but I am willing to bet that an annoying number will not which will make advertising media planning and advertising sales more difficult.

The fragmentation in TV viewing that started 30 years ago will continue relentlessly as we go forward. But it will not destroy the broadcast advertising model overnight. The Apple and Google entries will however, speed up the process. Going into fall, 2011 planning media strategists may need to shift more weight out of traditional TV options that they had planned even a few short months ago.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

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