Battle brewing over tablet viewing
Video-on-demand has for years fallen short of the industry’s expectations, disappointing Hollywood and the cable biz alike. But that may be about to change.
Cable operators say a new gadget has landed in their laps — and literally in the laps of their subscribers — that can have multiple benefits: Tablet computers, including Apple’s iPad. Such devices, many believe, can not only supercharge the VOD biz, but also stanch so-called “cord-cutting.”
That’s because tablets can function as portable program-selection devices in lieu of clunky onscreen program guides, and also extend the pleasures of cable TV viewing into every nook and cranny of the home.
Searching for and selecting from VOD menus with an iPad is a far more user-friendly experience than using the set-top boxes provided by the cable operators.
For example, tablets can provide pictures that aid in navigation.
“People would rather shop for VOD on iTunes because the key art is showing,” says Tom Adams, principal U.S. media analyst at IHS Screen Digest. “It’s a lot more compelling seeing Brooklyn Decker coming out of the water in a bikini than simply seeing text of the movie title ‘Just Go With It’ on a cable program guide.”
That’s a far cry from cumbersome menu-driven onscreen guides and cable remotes that lack full keyboards — two factors that get blamed for VOD underperforming for years on cable TV, satellite and IPTV platforms. In a sign that Hollywood may soon get the lift it has been hoping for, Comcast Cable says it has experienced a 12.5% increase in buy rates for a la carte VOD for subscribers using its Xfinity TV app, since the app was released in November. The app — which works with Apple’s iPad and similar devices powered by Google’s Android operating system — has been downloaded by more than 2 million Comcast subscribers (though not all content providers are happy about that fact; see story, page 25). They select shows for the TV set, control recordings on DVRs and enable the viewing of 6,000 hours of on-demand content directly on tablets.
“I want to emphasize that our iPad app is not a one-off prod-uct,” Time Warner Cable topper Glenn Britt told an investor conference call in April. “Rather, we are investing in a development process and a development team that will introduce new capabilities to our customers in rapid succession.
“Over time, this may lead to a world without set-tops, which we think could enable a much better customer experience.”
The ramifications of such a leap ahead are staggering. Cable TV’s $80-$300 settop boxes can be superseded by more powerful $500-plus iPads. For cable operators, the magic in this equation is that consumers picks up the entire tab for the new hardware.
If more consumers use their iPads to control their programming, cablers will reap a kind of tech windfall and feel less pressure to constantly update the software of their set-top boxes, which is a nerve-racking exercise, because millions of boxes need to be reconfigured en masse. By contrast, iPad users can upgrade apps at their leisure.
Tablets allow for a more comfortable two-screen arrangement for selecting programs. The viewer has a program playing on the TV set across the room while flipping through VOD options on his or her lap. Since TV viewing is often communal, one or several people watching the same screen together can use their iPads to cue up the next program without interrupting what’s playing on the shared screen.
Another wrinkle is easy integration of third-party information onto an iPad’s screen while selecting TV options. This can include friends on Facebook critiquing video content or reviews from movie critics.
“With a tablet you can see all the jacket art and tap into IP applications (like Facebook comments) that can be hung off a video experience, so it’s graphically rich and easy to use,” says Ian Olgeirson, senior analyst at SNL Kagan. “Eventually, it can be a real game-changer” because it allows the multichannel operators to catch up to the superior navigation capability of personal computers.
But the symbiosis between tablets and cable extends well beyond navigation and program selection. Using the iPad as an ersatz TV allows consumers to watch programming in places where they don’t have a TV set.
“All jokes aside, one of the popular usages is viewing TV while in the bathroom,” says Craig Moffett, senior analyst at investment researcher Sanford C. Bernstein. This is “turning out to be a big deal.”
Other technologies are also coming into play. One is cloud computing, with cable operators offering access to powerful and rich cloud-centralized channel interfaces — which represents a big improvement over today’s puny set-tops. There’s also a new generation of smart TV sets that incorporate Web links.
But the tablets seem to be everyone’s darling. “The iPad is what we were waiting for in terms of a cool, portable device for viewing video that mobile phones (due to size of the screen, among other factors) aren’t,” says Erik Brannon, analyst at IHS Screen Digest.
But for cable companies, bumps on the path to TV-navigation nirvana should be expected. Olgeirson notes that the cable infrastructure that creates a gateway to Web services also opens the door for subscribers to flee to content from rivals such as video-streaming services, like Netflix.
“It can be a two-edge sword,” he points out.
Nevertheless, there’s general agreement that tablets’ benefits outweigh their drawbacks. Wider and improved content navigation is expected to raise subscriber satisfaction and thus blunt cable’s biggest fear: cord-cutting — the idea that empowered consumers will get comfortable looking for their video content elsewhere.
This can only be good for the bottom line. “The more engaging television becomes,” BTIG Research analyst Richard Greenfield wrote in April, “the less concerned investors will be with so-called cord-cutting or cord-shaving, which benefits the valuations of both content creators and distributors.”