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The TV industry is facing a crisis and needs to immediately embrace new business models

Content rights are still the biggest barrier to really giving consumers what they want.

Hulu CEO Mike Hopkins recently announced that CBS joined 21st Century Fox, The Walt Disney Company and Turner Networks on Hulu’s new multichannel live-TV streaming service. 
Craig Barritt / Getty Images

A version of this essay was originally published at Tech.pinions, a website dedicated to informed opinions, insight and perspective on the tech industry.

Along with much of the Tech.pinions team, I’m at CES this week, and, as usual, TVs and TV-connected devices are a big theme. Streaming video providers are also present and making announcements of various kinds. Yet I’m struck again this week, as I have been before, by the fact that technology isn’t really the biggest challenge in disrupting the traditional TV and video industry. Yes, there are advances being made that are improving the user experience of watching video, but content rights are still the biggest barrier to really giving consumers what they want.

Working with — and around — the current system

A lot of the TV-related technology on display at CES either works with or around the current system. An increasing number of connected TV devices are incorporating some kind of over-the-air element. I saw boxes and other hardware from Mohu, Sling and others designed to capture OTA broadcast signals and incorporate them into a next-generation user interface. This is hardly dramatic new technology — broadcast has been around for decades — but it’s often still the easiest way for cord cutters to access sports and local content.

It’s ironic that we’re falling back on older technology to supplant newer co-ax, fiber and satellite-based delivery, but this is the state of the TV industry today. Some of the best options simply have to work with what they’ve got — that’s an admirable reality, but it often means disjointed experiences that combine OTA signals with internet-delivered streams, multiple user interfaces and local or cloud-based storage.

The new devices on offer at CES attempt to bring some harmony to all this, including the Mohu and Sling hardware devices I mentioned. But in many cases, these solutions merely cobble back together bundles that end up looking very similar to what they’re replacing. And of course, OTA solutions don’t work for some people (I have a big mountain sitting between my house and the local broadcasters, meaning I get no signal at all).

Rights remain the biggest barrier

I’ve been using AT&T’s DirecTV Now since it launched late last year, and I’ve largely been enjoying it, though I’ve seen a few technical hiccups here and there. But there are several non-technical things that detract from the experience — TV Everywhere authentication as offered by traditional pay TV services is a bit lacking, and commercial breaks often display a “commercial break in progress” placeholder rather than actual commercials. The latter doesn’t bother me too much, but both of these are entirely down to rights issues. Contracts signed years ago haven’t yet been renewed, so AT&T doesn’t have the rights in some cases to do its own ad insertion or to authenticate users on this service for TV Everywhere apps.

Hulu made some news at CES because it has apparently signed CBS as part of its pay TV replacement service. The fact that a single broadcaster signing on is news is more evidence of how fragmented this whole space is, and how important rights negotiations are. The reality is that, even if people balk at the high prices of traditional pay TV services, they still want a lot of the content, and that means paying directly or indirectly to access it. CBS has its own digital streaming service — CBS All Access — and has been a holdout from several of the other streaming services, including DirecTV Now. Hulu getting CBS on board is therefore something of a coup, but we’ve yet to see what other content it has secured and what its reported $40-per-month price will include.

The reality is that some of this is merely a matter of contract renegotiations and will get worked out in the coming years, while other elements are down to content owners deliberately resisting or blocking some of the changes to the traditional business models. The major traditional pay TV providers are part of this picture, too, though of course Sling and DirecTV Now come from two of the biggest. Cable operators have been the slowest to embrace this change, largely because they dominate the historical market.

User interfaces and video quality can still help

Having said all that, we’re still seeing innovation around user interfaces and video quality, and they are making a difference even as the rights issues get worked out. Some of the new streaming pay TV services have much better UIs than the services they’re replacing. Interactive programming guides still often make an appearance, but search, recommendations and on-demand options make these interfaces more compelling. In addition, we’re seeing innovation around content formats like 4K and HDR, from both TV manufacturers and content providers. Here, too, the newer over-the-top services are taking the lead, with Netflix and Amazon offering some of the first mass-market 4K content. But some of the pay TV providers are dabbling with 4K too, and even Samsung is now going to be selling 4K TV through its smart TVs.

A tipping point is coming

At some point in the next year or two, I predict we’ll see a tipping point when it will become apparent to everyone, including the current holdouts, that digital delivery is the future and that it’s coming far faster than many of them thought. We’re already seeing the mainstreaming of streamed pay TV services, with the DirecTV Now launch just the first of a new raft of services, to be joined by Hulu, Amazon and YouTube in the near future. But we’re also seeing accelerated cord cutting (with the pay TV industry losing well over a million subscribers per year at this point) and many individual cable networks losing subscribers at a much faster rate due to skinnier bundles and rising rights costs. All of this, taken together, will cause a crisis in the TV industry which will finally drive it to embrace new business models and broader distribution. And then the rights side of the equation will finally catch up with the advances in TV technology.

Jan Dawson is founder and chief analyst at Jackdaw, a technology research and consulting firm focused on the confluence of consumer devices, software, services and connectivity. During his 13 years as a technology analyst, Dawson has covered everything from DSL to LTE, and from policy and regulation to smartphones and tablets. Prior to founding Jackdaw, Dawson worked at Ovum for a number of years, most recently as chief telecoms analyst, responsible for Ovum’s telecoms research agenda globally. Reach him @jandawson.

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