FCC Chairman Tom Wheeler opened NAB this week by warning attendees that the legacy TV industry has reached an “inflection point” where online providers “can move from being the disrupted to the disruptor.” According to a new report from TDG – 2020 Vision – Video Viewing Forecasts by Age and Service, 2013-2020 – this is indeed what will happen in the next six years, with legacy TV declining from 90% of all video viewed in 2013 to approximately two-thirds in 2020, with online video sources making up the difference.
“By 2020, Legacy TV viewing will decline by more than 25% from current viewing levels,” according to Joel Espelien, TDG senior advisor and author of the new report.
“This decline is being driven less by a flood of new online content and the availability of more screens, and more by evolution of the ‘Big 4’ and the impact they will have on consumer video viewing.”
The Big 4 in this case includes Amazon, Apple, Google, and Microsoft. As Espelien first noted in December 2013, “Each of these companies are building global ecosystems to support quantum video viewing – the multi-screen, multi-context, highly-personalized video viewing experiences that TDG long ago predicted. Subsequently, they constitute the most significant challenge to legacy TV viewing and will account for a growing portion of daily video viewing in the next several years.”
Uniquely, in addition to building complete delivery ecosystems, each company has a larger business (a “cash cow”) to help subsidize the distribution of their platforms, both physical (hardware) and virtual (operating systems and apps), making them capable of impacting the video market in ways that a traditional TV operator cannot.
Evidence supporting this hypothesis is found throughout today’s headlines. Comcast recently told regulators that its competition is no longer other TV companies, but online giants like the Big 4. Not only do these companies already deliver video to millions of consumers, but they are now producing original content delivered increasingly via proprietary hardware.
Amazon’s new Fire TV, for example, is a high-end Internet set-top box in the same mold as Apple TV and will closely bond to Amazon’s video service and retail sales on the TV. As well, Google introduced the Chromecast Internet stick and is re-launching its Android TV platform. As Espelien notes, “Both Google and Amazon, in particular, could afford to give away their hardware if necessary in order to disrupt the industry. This fact is not lost on forward-thinking legacy operators.”