Cable is Far from Dead; Smart Boxes to the Rescue!

Brian Roberts is the CEO of Comcast, the United States’ largest provider of pay-as-you-view television. As he said it, the television industry will evolve more over the course of the next five years than it did over the course of the last fifty years. However, today, one thing is certain: this evolution will not mark the end of cable or live television. These modes of communication are here to stay, and the major players in the new technology arena know it.

Smart or connected TV

Over the span of less than a decade, consumers have gained access to an increasing number of multimedia boxes connected to the Internet. These boxes enable them to view on their television screen a host of various contents such as films, music, images or other files. All major digital players the likes of Microsoft (Xbox 360), Apple (Apple TV), Google (Google TV) and Samsung (Smart TV) as well as smaller newcomers such as Roku have measured the potential of such devices and sought to implement their own boxes and video game ecosystems in Americans’ living rooms.

Beyond their capability of playing back multimedia content, these boxes also incorporate an operating system to store additional applications that give users access to additional content such as YouTube, Netflix, Tout.tv, HBO GO, HULU, etc. In the industry, this content is referred to as Over the Top Content (OTT).

Live television: still very alive

However, although the effect of these applications is to multiply the content offer tenfold, consumers are still hesitant to purchase these technologies. Why? Smart boxes get their content from the Internet and do not give access to television programs. As stated by Adrianne Jeffries in The Verge, broadcast television is far from obsolete—especially in a world that acclaims the merits of simplicity: “We watch TV because we don’t want to waste our time looking for something to watch.”

It would seem that the major digital players have come to accept this reality. Unveiled at the most recent E3 show in Los Angeles, the Xbox One—Microsoft’s newest gaming and multimedia platform—is the first to offer the possibility of watching live TV. It integrates an HDMI input that makes it possible to connect the console to the cable operator’s digital receiver. Microsoft promises an improved television experience; however, cable operators’ content browsing interfaces will need to be managed by providers.

Time Warner Cable: Cable in your box

In March, Time Warner Cable, America’s second largest cable operator, made its official arrival in the Roku box—an outsider in the smart multimedia box market. With the TWC TV application for Roku, cable subscribers now have access to over 300 live television channels through their box connected to the Internet rather than a cable or satellite receiver. At the end of June, Time Warner announced that it had made an agreement with Microsoft to bring TWC TV to the Xbox 360. The application gives access to live television channels and will eventually give access to TWC’s video-on-demand service.

For Mike Angus, TWC vice-president, the combination of the cable network and the Xbox 360 opens up a real business opportunity since the Xbox Live platform (used to access and play games online) is used daily by close to 46 million people in the world, three quarters of which are based in the United States. Mike Angus claims that TWC’s strategic direction meets the demand of consumers who are constantly in search of greater service flexibility and set the trends in terms of multimedia consumption. TWC’s strategy is clearly “Bottom-Up,” i.e., business solutions are determined by the users.

On July 2nd, American magazine The Verge announced that Apple and TWC were close to reaching an agreement which would be announced in the coming months. It is therefore highly probable that TWC’s 300 television channels will soon be available for Apple TV users in the United States. Following this announcement, Bloomberg reported that Apple had recruited the vice-president of marketing and distribution of Hulu (a video-on-demand platform based on Netflix) to help the company negotiate with media companies.

Comcast: We are the box

Does Time Warner Cable’s strategy announce the beginning of a new era for cable operators? Will cable operators gradually get rid of their hardware (cable boxes) and their interfaces and simply become access providers as is the case of wireless telephony providers? Whereas consumers have everything to gain in terms of experience (no longer having to juggle between multiple boxes), cable operators could gradually lose control over the interface and therefore the user experience.

And America’s most important cable operator, the giant Comcast, has every intention to keep this control. Indeed, the market leader has no intention of leaving a third party manage its interface. Even more so that the corporation has just unveiled the X3 (code name), which is a digital box inspired by Apple TV. It could also incorporate third-party applications as well as voice control.

Questioned by the Wall Street Journal on a possible partnership with industry giants like Apple and Google, Comcast’s chief accountant Michael Angelakis does not completely refute an eventual collaboration but states that his company has no intention of depending on anyone to offer consumers a high-quality experience. Although this statement has the benefit of being clear, it reflects a “Top-Down” strategy that is radically different from the one advocated by TWC, Comcast’s competitor. Comcast considers that it is up to business to present technological solutions to users.

For both manufacturers of new digital technologies and content broadcasters, the smart box seems to be taking up an increasingly large space in the battle for consumer dollars. However, in Canada, little information has circulated on the strategies that the main cable television actors intend to use. It will be very interesting to follow the alliances and partnerships that will be formed seeing as they have already become a key for long-term success.

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