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What does the future hold for IPTV? (Lessons learned from Aereo)

Amir Aharonovich,  VP Marketing,  VBox Communications

Amir Aharonovich,
VP Marketing,
VBox Communications

Guest post by Amir Aharonovich, VP Marketing, VBox Communications

On June 25, the US Supreme Court reversed a lower court’s decision in favor of IPTV company Aereo, ruling it had infringed upon the rights of television networks, who held copyrights over broadcast content. Shortly thereafter, Aereo’s website posted a note announcing it would be suspending operations for the time being, while focusing its resources on continuing its legal battle.

For Aereo, the world fundamentally changed on June 25. But for the rest of the IPTV industry, life goes on. The question is what can we learn from the Aereo experience?

We all know what took place. In a high-tech world dominated by brash and bold companies like Google and Facebook, and with newcomers like Uber attempting to push aside long-standing paradigms for business, such as regulated taxi service, Aereo took that approach as well. The company aggravated TV service providers by redistributing television over the Internet through its own antennas.

Now, cable, antenna and satellite service providers understand how their money is made, and didn’t like, to say the least, that Aereo antagonized them and essentially took money out of their pockets. What’s remarkable here is that Aereo depended on the broadcaster’s content, which receives large revenues from cable television as the basis of its business. Aereo bit the hand that fed it, and understandably, the hand fought back.

Simply put, Aereo was right in predicting IPTV’s significance for broadcast television, but it was fundamentally wrong in the way it tried to bring about that sea-change.

Still, Aereo’s success showed that while many still want to watch live television, cable TV in its current form is not the answer. Three lessons can be learned from Aereo -

First, users want a simple, all-inclusive solution. The ability to use a single application, without purchasing and configuring multiple devices or set-top-boxes, was a critical part of Aereo’s promise.

Current set-top boxes are riddled with limitations: each must be connected by a physical cord to the screen on which it plays, consumers must buy an additional box for each screen on which they want to watch, and interactive viewing is next to impossible.

Second, while users can find most TV content online today, this requires piecing together many apps, solutions, and visiting the broadcasters’ individual websites.  What Aereo’s customers appreciated most was aggregation. Aereo brought all TV content together.

Third, consumers want to watch television on their own terms, on the devices that they choose, and with the flexibility that they deserve. “TV-anywhere,” or “multiscreen TV” was possibly the company’s greatest success factor.

Aereo taught us that content coming from public broadcasters is still needed, but TV viewers appreciate the ability to go to one place instead of switching between multiple channels; they don’t want to have to work hard for TV; and they want multi-screen flexibility.

Streaming live TV is becoming limiting as channels become more complex. The number of channels is constantly rising, along with the percentage of channels that are high-definition (HD). And with the introduction of Ultra HD, standard-definition (SD) will likely become soon obsolete. Traditional IPTV is going to require more and more bandwidth. Upgrading Internet infrastructure to handle ever-growing amounts of video is already challenging, let alone where things are headed (The recent battle over bandwidth between Netflix and Verizon is a sign of things to come.).

The transition to IP, multi-screen viewing and cord-cutting will continue.  But how can this be done while maintaining live video quality?

Broadcast television signals must be converted to IP for every consumer household. Just like most houses have Internet routers, each home could have its own TV gateway to convert these signals. Aereo used a cloud service with its own antennas, bypassing traditional infrastructure. But TV gateways receive TV content through satellite, cable and antenna infrastructure consumers already have (via free or paid subscriptions), convert the broadcast signals  to IP, and stream the aggregated TV content to any networked mobile and connected device in the home.

That already positions the industry light-years ahead of where it was with the Aereo experiment, as the broadcast networks would be all too happy to continue pushing out HD content, as long as they are able to maintain their existing role.

While it is important for the service providers to maintain their central role, any transformation that will take place must be focused primarily on consumers. So, what would consumers have to gain from this?

Consumers would be able to add as many viewing devices as they choose with none of the extra charges that set-top boxes require. They would be able to watch live TV content anywhere in their homes and conceivably anywhere in the world. As long as they pay for service, or have access to a free service, they rightfully should be able to have that access from anywhere.

What’s more, Sling and Dish’s court case wins against service providers prove that this solution is already legal. Service providers currently use encryption to keep the current set-top box paradigm in place, but this will likely change, for the sake of the consumer and for the sake of service providers’ own survival, given that over-the-top (OTT) content providers like Netflix and Hulu, are gaining more and more mindshare – and market share – through subscriptions.

These tens of millions of OTT subscribers want to abide by the law and pay for a service, but also want to watch on their own terms. If cable companies support IP conversion instead of fighting it, they can win these consumers back.

Services like Netflix play by different rules. Whereas ratings used to be the name of the game, and they are still relevant, they are no longer the only key. As NBC’s Alan Wurtzel said, “Ratings are a currency, so they’re just as important now as they were ten years ago. It’s how we get paid. But in this new media environment, do these numbers reflect accurately how many people are viewing this content? The answer is no.”

The message is clear. Service providers must convert to IPTV and bring viewers back to live TV. Then, they can once again use ratings to improve their position with advertisers. A stronger position with advertisers will increase revenue and, in turn, enable service providers to provide improved content.

What may be interesting is that cable companies actually have an opportunity to embrace IPTV by partnering with TV gateway providers and offering branded gateways to their subscribers for use in the home. This step will allow them to more accurately measure user numbers, feature appropriate advertising, and develop routes to increased revenue. And, most attractively for service providers, it enables them to tap into the advantages of IPTV immediately, with no infrastructure upgrade.

It’s a classic case of “If you can’t beat ‘em, join ‘em.”

Cable TV will not disappear as long as it coordinates with multiscreen and TV Everywhere solutions, and provided subscriptions adapt and allow consumers to choose the devices on which they want to watch.

Even as cand Netflix create original programming, cable TV still provides the most comprehensive strong content, and Aereo’s success proved that people still want to consume that content as it airs. The only issue that remains is the manner in which that content is packaged and offered for consumption.

Broadcasters weathered a storm by defeating Aereo in court, but consumers ultimately make their own buying decisions, so broadcasters would be wise by doing whatever is in their power to remain on the average consumer’s shopping list.

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