More so than in any other time over the last 4 decades of my life have I seen technology moving at such a rapid pace. As head of our amazing IT team at BuildDirect, I get to sample and test some great cutting-edge technology. This technology is generally related to our ecommerce site, our supply chain and distribution technology, our order fulfillment systems, VoIP, mobile devices and applications, sales/marketing/finance advancements or improvements, and many more areas. With so many new and exciting things being developed and implemented, it’s often easy to get lost in such a diverse and rapidly changing technological landscape.
Part of my job is to ensure our executive team also remains up-to-date with the latest and greatest technology. To that extent, I try to provide them with tools that not only make them familiar with new technology but the technology needs to seamlessly integrate with their work flow and productivity. In many ways it often changes their work flow directly. More importantly, it allows them to readily understand the impact of changes to technology.
This will be particularly important as the mobile arena matures over the next several years. Many of you say it already has matured, after all, the Apple iOS app store has exceeded 250,000 apps that can run on their more than 100 million iOS devices that are currently in the wild. Sure, the smartphone market has increased since the launch of the iPhone in 2007. However, I fully believe this is just the tip of the iceberg.
Technology tends to happen in a series of major steps or advancements. Sometimes, it appears that a solution has been developed but not received the traction or scale its’ potential may have indicated. Take a look at steam powered automobiles. They didn’t catch on but when internal combustion engines were developed, the automobile expanded exponentially over a short period of time. Major advancements such as the radio, television, internet, telephone, cell phone and many others changed the way we consume information and the way we communicate with others.
Music is a great example which has progressed in portability beginning with the record player through media like the 8-track cartridges, compact discs and finally digital downloads. Video has progressed much in the same way. Now we are seeing the transformation of print media and magazines as the move to digital distribution.
Simply put, the catalyst for some of these transformations in the last decade are the responsibility of one company. Apple. The iPod changed music. The iPhone changed so many different things such as social media, video consumption, mobile gaming. All those things existed before but were the “steam engine of the automobile world”. They were executed poorly and with lack of foresight. The iPad is changing even more areas including magazines, comics, console games, and content creation. They are intuitive and interactive devices that become extensions of ourselves. They customize to each person’s needs and wants. They make life easier in many ways. From maps and directions to allowing me to view price comparisons on a new TV while in a store, the uses of these devices are countless and varied based on each individual user.
You can argue whether you like other similar devices more than Apple’s offering but no one can deny that Apple’s iPod, iPhone and iPad devices were the catalyst in their respective categories. Sure there were other MP3 players, smart phones and tablets first. The truth is, Apple came out with devices that are so usable and intuitive, the “steam engines” were left behind. Apple has driven innovation in other companies suddenly forced to play catchup.
This leads me to the title of this post “How TV Will Change the World.” Simply put, the TV will be a new medium for iOS 4. Heavy rumors state that Apple will offer either $0.99 TV rentals or $0.99-per-month series rentals. The latter would allow users to pay $0.99 for an entire series where they could watch any released (past) episodes during the month subscribed. This option is much more appealing than the $0.99 TV rentals.
However, there is another option that would send competitors back to the drawing boards. What if Apple released TV episodes for free but supported by iAd? Sure you could still pay to own the episode. The pay option would provide some additional revenue to pay for money the studios would lose to lost DVD and Blu-ray series sales. But let’s face it, optical discs have a rapidly deteriorating shelf life. Using iAd, Apple could still ensure that the studios would receive $0.60 per episode viewed with Apple retaining $0.40 for distribution. Insert 4 iAds at $0.15 charge to each iAd advertiser per episode and presto, the studios not only have a compelling option when compared to revenue from existing cable but they have a very lucrative option.
Let’s assume the average user watches 40 episodes per month. Using 1/3 of Apple’s iTunes subscribers (and remember, these 300 million subscribers have credit cards on account with Apple) we are left with 100 million users. At 40 episodes per month or 10 episodes per week we have $4 Billion per month in ad revenue. That’s $48 billion per year. $28.8 (60%) goes to the studios. Apple receives a cool $19 billion for distribution.
IBISWorld’s Aug 6, 2010 US industry report on Television Broadcasting pegs the current broadcasting revenue at $29 billion.
Bill Gurley reports for abovethecrowd.com that affiliate fees which flow from cable companies to networks to fund the production of TV shows is $32 billion.
Apple could dramatically change the landscape of the broadcasting industry and yet still provide the networks with the same level of revenue they currently enjoy. Granted the 100 million iTunes users come from all over the world but the last time I checked, shows produced in the US were distributed all over the world as well. Apply this model to 200 million iTunes users and you begin to see the real potential for TV studios.
Couple this model with the release of a $99 iOS 4 Apple iTV device and you have a new, lucrative, out-of-the-box successful competitor to cable broadcasters. You also have a built-in game console, information hub, music center, photo displayer, and countless untold other potential uses that come from over 250,000 apps currently in the iTunes market place. Better yet, Apple could include the ability to connect a webcam to the iTV and utilize their Facetime technology. Video conferencing now becomes as easy as turning on the TV. Grandma never had it so good.
Better yet, any apps, TV shows or music purchased through iTunes will work on any iOS devices (iPods, iPads, iPhones) or any Mac OSX devices (laptops, desktops) that are associated with the same iTunes account. Leverage is a beautiful thing sometimes, especially when the consumer wins.
Sure some barriers need to be overcome which would delay the September 1 announcement tomorrow by Apple but make no mistake, this is big. This is coming. This will change the world and the way we consume TV media. Brace yourself.