MSOs Very Concerned about Competition from Joost, Hulu, etc.

Implications: 1.      Joost claims to have 20,000 programs.   2.      It is also offering the same programs on demand that had been exclusively available from national broadcasters. 3.      Who should be shaking in their boots – the local ABC affiliate or the cable company?  Probably both.

Analysis:  There will be a much different situation with companies, such as Joost and Hulu, offering an over-the-top service than was the case with VoIP.  The MSOs, including Comcast and Time Warner, are going to need to think hard about how to beat that kind of competitor.  

Fortunately for the cable TV companies, the shift away from the normal fare of programming will be a gradual process.  While people that are in their 20s and 30s will be slowly making the transition, the older generation has adapted their lives to their old habits of watching television.  

One challenge for the MSOs will be in having the ability to stream video at the resolution that customers would want on big-screen TVs.  In fact, within ten years, there might be a significant change in how video is delivered – the home may start to have one big IP spigot.  There will probably be a convergence of linear video programming and the web.  It will be one time that the term, convergence, will have real meaning because it will not be dependent on the choices made by suppliers – it will just occur naturally in the market.  

Looking at some of the prognostications on the evolution of MPEG, the latest iterations have become much more object oriented.  So, in watching a linear program, such as a baseball game, the subscriber can pull up a window and see the stats of a particular player.  

The idea is to eventually move towards a truly interactive, application-based platform in the home – MSOs are probably at least a couple of years from providing those capabilities.  And instead of having $30 or $40 RGUs, there could be $3 and $4 ones – and then trying to aggregate them on a customer basis.   

Perhaps the biggest hurdle in moving to this environment is that the cable companies are way behind the curve in allowing customers to actually understand the hundreds of channels provided to them.  The current electronic program guides are still right out of the 1970s.   

The MSOs will have to make the necessary investment in soft capital instead of hard capital to be successful – not just to offer video programming, but integrated programming.  There will be a suite of things the subscriber can do with the cable network and there will be a suite of products that interact with the network.  Customer service, product innovation, and ease of use will all be critical to making it work.  

It would not be surprising if by 2020, much of what the MSOs will deliver will be on-demand, high-resolution, IP-based programming.  The linear stuff will likely continue to erode within that timeframe.