For the last few years, everybody has been talking about the changes to come in the broadcast and distribution industry. Well there are even more changes on the horizon that could easily form the perfect storm for the industry, destroying business models in its path. Think about Internet delivery, 3D and 4K and changing business models. Here is my 10,000 foot view of things to come.

After decades of a solid business model the established infrastructure has managed to move from analog standard resolution to digital high definition with some helpful push from governments around the world. Of course the government’s interest in this matter was driven by the potential sale of very valuable spectrum to mobile providers. Politicians were the ambassadors of the HD transition, ultimately setting a deadline that forced this transition. If we talk about push and pull, this was almost all push, as most consumers did not even understand the consequences of this move long after it had happened.

At that time the CE industry struggled to develop and manufacture TV sets that could benefit from the high resolution content. After the right sets were on the market, the question became: where can I get high resolution content from. The obvious answer was recorded media – movies on VHS tape followed by DVDs. Of course, you also had the option to subscribe to premium channels and if you did not want to pay there were movies on the basic channels that sprinkled a good amount of advertising into the broadcast to pay for it.

STRIKE 1:

The next big step was 3D. Here, there was no government pushing the industry, as there was nothing to gain from this transition. CE manufacturers saw the 3D wave as an opportunity to raise the average sale price of a TV set. What was the upside potential for the content providers? Nothing! This is exactly the issue with this transition. Broadcasters blame the low demand for 3D content; however, there is not enough original 3D content to entice even the 3D enthusiast to watch the same movie more than three times. In all honesty, the networks just invested a boatload of money into all new HD equipment and would now be required to extend this investment period to upgrade to 3D studios. The equipment companies loved the idea: the studios – not so much.

STRIKE 2:

At around the same time, the advent of the Smart TV pushes the Internet connectivity of the TV into the living room. With a high-speed Internet connection, streaming of video content seemed possible and many companies see this as the future of home entertainment. Watch ‘WHAT YOU WANT, WHEN YOU WANT IT’ is becoming the new paradigm. Of course this means a drastic change of business models as pay TV is not as predictable as a monthly bill. Good content will return more than poor content and advertisers will chose very carefully on where to advertise and where not. This is frightening for the top executives that have come to rely on a steady stream of income in their business planning.  This is the first hurdle we have to overcome in this new age. Every decision to change a business model will meet internal resistance and thus prevent or at least delaying the change. This opens the door for newcomers to take a part of the market share pie. This in turn takes revenue from the established networks and broadcasters and limits their ability and willingness to invest into new technology and features.

STRIKE 3:

CE manufacturers have continued to develop their display technology to the point of where we can produce a 4K TV display at reasonable yields and therefore cost.  LG has now started to take orders for its 84-inch 3D-4K LCD TV. As reported by the Cambodia Herald, Techradar.com and others, the new TV is a clear answer to Samsung and its 75-inch TV announced earlier in the week. The 4K TV allows full HD resolution per eye using LG’s FPR technology and passive glasses. The new TV will ship in limited quantities in Korea and will set you back a whopping US$21,925, depending on the exchange rate.

Here is the issue with this approach: What will you watching on this TV?  Where do you get 4K content and how do you get it in your house? Maybe a Netflix post distribution of hard disk drives may work for the beginning but how do you get 4K streamed to your living room? This is a real issue for the industry in the coming years. This implementation requires four times the bandwidth of a full HD TV to show us those stunning pictures as we have seen on the CE shows. Of course this is a great display for watching those high resolution pics taken with the high resolution camera of your choice but it seems a little overkill, price-wise.

This is what I believe could become the perfect storm for the home entertainment industry. If people really want this experience in their homes and the established industry is slow to implement, it will bring up new players to provide such a service. We are certainly looking at many new options in home entertainment and we will have to see who will be the leader and who will follow.