The final vote on the FCC Proposal to unlock the Set-Top Box is coming up on September 29th. Issued in January of this year, the proposal would require cable and satellite TV operators to let subscribers choose their preferred device, commonly known as a set-top box (STB), to access paid-TV programming. Opening up the STB market would drive innovation in the space, creating opportunities for companies, existing and new, to reimagine how content is found, accessed and consumed. Beyond content consumption, this could also open up the possibility of reimaging the advertising and monetization models within the industry.
With the vote quickly approaching, the National Cable and Telecommunications Association (NCTA) has responded with an alternative proposal that modifies the FCC's original one materially. FCC chairman, Tom Wheeler, initially proposed open standards for set-top boxes, allowing companies to directly access video content and reimagine how that content is presented. The revised proposal grants device makers the ability to integrate cable companies' (commonly known as Multiple Video Programming Distributors or MVPDs) apps into their devices. These MVPD-provided apps could then be run on a device of the consumer's choice.
Passing the modified version going up for vote on the 29th is a mistake. It's a baby step. A small incremental change designed to hang on to an existing viewing experience and business model that consumers have already rejected. It's a lost opportunity for content creators, networks and advertisers and stops way short of driving the type of innovation the original proposal offers. We've already seen the future of TV in the eyes of cable companies: Apps that largely offer the same viewing experience we've had for the last 50 years. Putting these same apps on different hardware devices hardly constitutes innovation.
An open environment, as originally proposed, creates opportunities that change both what we watch and how we watch.
For example, most TV Everywhere (or TVE) apps are designed in what we call a "pull" model. The user has to hunt down and find what they want to watch. This is painful enough when you know what show you are looking for, let alone when you want to browse. TVE apps are frequently used for binge watching shows and sampling new content -- both of which the pull model completely ignores. A new entrant that can stitch together a show from season one through the current season, across all the networks it's been syndicated to, would be truly interesting. Providing curated "playlists" of shows to watch that might be based on a genre or a particular topic is another way to help viewers find new content they may have never found otherwise.
Beyond what to watch, there is ample opportunity to improve how we watch. Twitter's deal with the NFL to stream Thursday Night Football is a good example of how we can make the viewing experience better.
The recent introduction of Twitter's freestanding apps on Apple TV, Amazon Fire TV and Xbox One to support the live game stream have lots of potential. The integration of live TV and social media could be the first truly engaging social TV experience. Being able to watch the game, with a curated feed comprised of my friends and/or experts of my choosing, would be a serious advancement over just watching the game.
Networks and MVPDs need to remember that once you are delivering content through an app on a physical device, you are no longer just competing with other TV networks, you are now also competing with every other app in the ecosystem: Game developers, social media companies and native digital multimedia companies, like YouTube and Twitch, all of which already understand how to attract large audiences and monetize them.
Advertisers lose too. Open systems create opportunities to come up with new revenue models. In addition to buying rating points on the cost per 1000 impressions, new device platforms could offer advertisers the ability to track the results of their campaign across an entire ecosystem (TV, website, app, store, etc). Advertisers could run campaigns on a cost-per-transaction basis or even look to revenue-sharing models if a device maker could craft an experience that can transition seamlessly from ad to purchase.
The TV ecosystem of the future is built on data. The "Four Horsemen of Digital" -- Amazon, Apple, Google and Facebook -- all use this to great advantage. Netflix is no slacker here either. All have a direct relationship with their viewers and are able to mine the data to better understand their audience. Netflix is a good case study here. They have collected, mined and leveraged user behavior to make decisions on everything from what images to show in order to maximize click-through rates to making decisions on which original programming to green light. In Facebook's case, they have a wealth of very personal information on their users that allow them to tailor the content in a user's feed. This personal data is also put to use in connecting advertisers with consumers who have a need or interest in their products and services. Combine these two capabilities with TV audiences and we can serve an ad for a relevant product that is optimized with imagery and messaging individual viewers will respond well to on a massive scale. It's a win-win situation for everyone.
The compromise being put forward for a final vote on Friday is just that, compromised. A solution that simply allows MVPDs to put their apps on any device will help give consumers some choice in the device they use to access their paid-TV content. That said, it stops way short of accomplishing the objectives of the original proposal to drive real innovation in the space.
