Podcast, Interview
a16z Podcast | The Future Of Television
- The US TV market structure is described as "very brittle" with the communal viewing experience under attack, leading to anticipated shifts in purchasing and commissioning decisions as viewers watch less in detail.
- Future industry dynamics may involve a puzzle regarding content that is not chosen, with a potential shift toward "all ad supported" and free options that alter traditional consumption patterns.
- Tech companies like Google, Yahoo, and Apple are expected to acquire content businesses primarily for data purposes or to make devices more appealing relative to competitors like the PS3 or Amazon Fire, rather than to build traditional content operations.
- Amazon is predicted to use TV as a "loss leader" to drive sales of non-entertainment goods such as groceries, diapers, and headphones, while Facebook is speculated to potentially pursue a "$10 billion deal" to acquire Netflix.
- Regulatory uncertainty surrounds an imminent "monumental Supreme Court case" regarding Aereo, with concerns that business models relying on "fake pricing structures" or marketing exploits may be vulnerable to being cut off.
- Viewing trends in the UK indicate that while iPlayer usage grows, peak TV viewing remains high and does not follow a "hockey stick" decline, suggesting a consumer demand or device experience problem rather than a lack of content.
- Netflix is forecasted to rely heavily on original content to drive subscriber retention, with "streaming hours" identified as the most highly correlated variable for retention, exemplified by the investment of "$100 million" for 26 episodes of House of Cards.
- Over 60% of streaming hours on Netflix are expected to originate from major game consoles, reflecting a shift where the company moved from a movie streaming service to a TV streaming company in recent years.
- Competition for content will require significant capital injection, with large companies needing to "burn an enormous pile of kerosene" or spend amounts equivalent to the cost of becoming NBCUniversal to enter the TV industry's orbit.
- Production costs for shows are analyzed with a potential reduction from "$5 to $6 million an episode" to "$700,000 an episode" for well-produced content, raising questions about the resulting quality for the viewer.
- The TV ecosystem is viewed as a battleground similar to the music industry, where the business model may evolve into a "checkbox commodity feature" within broader ecosystems of Apple, Google, or Amazon.
- In the UK, Amazon is described as fighting a "battle to the death with Netflix" using "super aggressive pricing" to potentially squeeze Netflix out of the market, a strategy noted as distinct from the US environment.
- Open source protocols like DIAL may enable users to port content to any screen, though current usage remains "really low" relative to traditional TV despite the necessary infrastructure being in place.
- Specific viewing behaviors include a preference for watching "short-form content" back-to-back anytime and anywhere, as well as the introduction of features like "continue watching mode" to maintain momentum for users resuming content at specific times.
- A "virtuous circle" in the TV business is defined by the cycle of audience, revenue, and content investment, requiring companies to decide how much capital to inject into this system to maintain growth.
- Device experiences are currently awaited by the industry, with the prediction that the future of television will resemble the present and past until a superior device experience is achieved.
- If companies fail to secure the "right place in the algorithm" or provide the necessary device experience, consumer dissatisfaction may arise, characterized by sentiments that platforms are "screwing" the user.