Case Study–Legacy Television Outlet Faces Down Disruption

For contemporary Americans, it can seem like television has always existed.  Likely few living adults even remember when homes didn’t have a television set.  The medium has been commercially available since the 1920’s, so this perception is not off-base. But if one considers that it has only been just under 100 years since television’s invention and release into the marketplace, its evolution and societal adoption as a medium has been remarkable.

Best practices at how to program and capitalize the medium of television have evolved as much as the technology that makes it work. From solely utilizing broadcast wavelengths and facing the imminent governmental intervention involved with the limited broadcast spectrum to lighter restrictions and the almost-anything-goes programming of cable outlets, consumers have as much prerogative with their television programming choices today as the current market offers in technological advancement.

While consumers enjoy a cavalcade of news and entertainment offerings and new technologies in the market, the challenges for television studio and service provider management to best engage audiences and capitalize on the medium have been pervasive since the medium’s invention.  Television has been and continues to be a lucrative industry. But because disruption occurs in every business, television profitability and audience stability is coming under fire.  Where this medium is concerned, disruption is rooted in the advent of the Internet. This disruption has been documented clearly in print journalism and the music industry, where the functionalities and availabilities of information and music online have changed the way these two industries do business—in some cases, in that they no longer do business . But television has been largely more immune and slower to be affected by online disruption.

While as much as 99% of in-home news and entertainment viewing has been done via television, this trend is changing. Internet use has changed the way consumers access their entertainment needs. Streaming sources online such as Netflix and Hulu have changed the ways consumers are viewing television programming, putting control of when programming is viewed in the hands of the viewer. But live programming is an arena that online utilities have yet to significantly disrupt.

Programming accessed via Internet Protocol Television (IPTV) has long been a source of concern for traditional television providers. Without getting into too much engineering jargon, this technology basically allows transmission of radio and television signals over the Internet. Broadcast networks such as ABC attempted to adapt into this developing technology as early as 1994.  The network’s World News Now was aired using what was then basically videoconferencing software. Advances in IPTV since then have allowed television providers to open a new market for themselves.  But providing services online has been a proprietary function where the programming has only been available from networks and cable providers themselves and as they see fit. The rise in available streaming programming via the internet has nonetheless provided a new entertainment viewing option for consumers that many are quickly utilizing. The increased use of mobile devices and mobile apps has furthered this trend.

The availability of television programming online has prompted a new consumer habit known as “cord-cutting.” With the rising costs of television programming and the program packaging limitations put in place by service providers such as cable systems and satellite service providers, many Americans have opted to eliminate these programming services altogether.  While business relationships with these companies must often remain intact to secure home Internet services, to some extent Americans are turning away from their televisions—as many as 3.58 million by the end of 2012. American culture is evolving away from live-television-watching in front of their television sets because on-demand online services and DVR’s make it easier to tailor television watching around one’s life instead of the opposite. Indeed, this is the ultimate disruption for the television industry.

Add brand new startup technology to the equation, and the situation worsens for programming providers and networks.  A new over-the-air (OTA) antenna-based service just surfaced in 2012 that solves the equation for consumers who prefer to cut the cord but who still want to watch programming offered by networks in live mode. The service, called Aereo, uses IPTV-based technology to supply live broadcast television programming to customers—via tiny, dime-sized antennae—directly to a computer or mobile device.  Aereo effectively allows consumers to curtail their purchase of programming from networks, cable providers and other outlets and still be able to watch live streaming of television programming online.  This has the network television industry in an uproar and in the courtroom.

Traditional television network ABC, on the air since 1948 and long-considered a flagship television outlet, has now become the first network to take steps to circumvent Aereo’s disruption (in addition to filing a formal lawsuit against the company) by introducing its own version of online live streaming access.  The network has already been an innovator with online programming, becoming the first network to air new original programming episodes the day after they air on television on its own website.

Already a player in the online/mobile programming field with apps available for iPhones and iPads, as of 2013 ABC revolutionized these apps to allow live streaming of the network’s programs in two major television markets—a direct attack on what Aereo’s services provide.  Called “Watch ABC”, the development initially was rolled out in New York and Philadelphia markets. But within just a few months the upgraded app was made available to consumers in Los Angeles, San Francisco, Chicago and Raleigh-Durham—with more markets targeted.  The network indicated plans to negotiate with the organizations that own its more than 200 affiliates to make the Watch ABC app functional in all the markets where it provides programming.

Functionally, the redesigned Watch ABC app provides an array of services to subscribers.  In addition to on-demand service, the app allows customers to watch programming as it emanates live from the network viewable via an iOS device, Kindle and even some Android tablets. “The move is a win for TV Everywhere,” wrote Troy Dreier, “as only authenticated cable or satellite subscribers will be able to access the stream.” This victory for the industry is characterized outright against the Aereo startup.  Aereo’s use of antennae is seen by members of the industry as a sort of pirating, because programming is attained from the broadcast signal and the startup receives income for providing it to households. With its locked access to programming, ABC will retain control of a subscriber base and, as it hopes, counteract the services of Aereo and other possible startups using antennae to grab signals. On the advertising front, ABC inserts different ads into its digital feed so as to enable audience measurement and metrics for its advertisers.

What, then, are the implications for ABC and industry-wide of this disruption-defying, ground-breaking move by ABC? Industry insiders expect other networks to follow suit.  Utilizing an app to bring television programming into the online market for live streaming has likely been an inevitable progression.  But with the appearance of OTA providers like Aereo, it is probable that the industry as a whole will have to advance its technological offerings.  Speculation is that the new momentum in the industry might effectively stamp out Aereo’s business model, in spite of the court proceedings that already are underway to that end.  The potential for an entirely new advertising market presents itself, wherein mobile service providers have proprietary information about usage with their media and therefore will be able to market the programming offerings to their own advertisers. Also, changes in online on-demand services like Hulu and ABC’s own website will occur, as ABC will embargo current episodes of original programming to limit access to paying customers.

To pursue direct company input into the Watch ABC app development and any other disruption-reaction policies by ABC or its affiliates and because I knew that to secure an interview with anyone on the network level would be highly unlikely, I contacted the Memphis ABC television affiliate for comment. In a phone interview, Local 24 Executive Producer Eric Helvie commented, “these are policies that are set at the network level. Nothing is ‘off-the-record’ even with social media use in general.  These policies are not even managed in this building and I don’t have the authority to comment.”  Repeated attempts to secure comment from ABC on the network level were unsuccessful.  However, in an interview with New York Times reporter Brian Stelter about the new service, Disney-ABC Television group president Anne Sweeney said, “We keep a very close eye on consumer demand.  We watch how people are behaving with their devices, and we really felt that we needed to move faster.”

COMING UP IN NEXT CASE STUDY: A look at Aereo, the startup OTA television programming provider that has prompted ABC to advance its offerings and ended up in court in the process.



3 thoughts on “Case Study–Legacy Television Outlet Faces Down Disruption

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s