The changing TV market shows why engineers need to understand business

The changing TV market shows why engineers need to understand business
Courtesy Jens Kreuter

The Boston Consulting Group recently published an article titled “The Future of Television: Where the US Industry Is Heading”. It’s an in-depth look at the forces disrupting television as we know it. If you’re interested in TV as a business, you’ll like the article.

One big lesson from the TV market is that innovation doesn’t always center on technology. In the TV space, the technology has been around for some time (high speed internet plus the hardware for viewing digital video on a television). The technology enables the real disruptive innovation, which you find in the business models around content creation and distribution.

In other words, to understand why the television market is evolving so radically, you need to understand how the respective businesses each make money. Only then can you understand the barriers and opportunities for new entrants in these markets.

For example, take the case of Twitter and the NFL. Twitter paid $10 million for the right to broadcast 10 Thursday night football games this upcoming season. In the grand scheme of things, the $10 million is nothing. It’s less than 0.1% of the NFL’s $13 billion annual revenue.

The interesting part isn’t the money. The interesting part is that an organization as old school as the NFL is experimenting with new methods of content delivery. That’s a very big deal.

The technology isn’t that interesting. Twitter has been around. High speed internet has been around. Streaming video has been around. Scientists and engineers have probably been pitching this kind of application for years, given the availability of the required technology.

What hasn’t been around is the NFL’s willingness to threaten its existing distribution partners by experimenting with new options. The market is evolving. Traditional content distributors are under attack. The NFL is trying to be proactive with low risk experimentation.

Here’s one area technology is playing an interesting role: the user interface (UI). As I’ve mentioned, we’ve had high-speed Internet and set-top boxes for some time now. What we haven’t had is an easy way to integrate this technology into our traditional television-watching routine. Amazon, Google, and Apple are making tremendous headway here, with iterative improvements on their existing UIs, along with introduction of voice-driven interfaces.

Getting digital video to play on a television isn’t a huge technical challenge. What is a big challenge is making it easy enough for a lot of people to do. If you’re relying on tech nerds with an appetite for tinkering, you’re not going to make a bunch of money. If mom and pop can comfortably switch from cable TV to digital video…now we’re talking about a large enough market to get the big players thinking.

When it comes to television, we’re talking about disruption across all kinds of dimensions. The best known example is streaming shows and movies from Netflix or Amazon. You also have video hosting sites like YouTube and Vimeo. We already covered the NFL/Twitter partnership. Another example is stand-up comedians like Louis C.K. releasing shows and stand-up specials directly to consumers. The changes are coming in all directions from seemingly limitless sources.

Again, what’s happening to the television market today shows why it’s so important for scientists and engineers to know about business. The technology is an interesting piece, but it’s only the beginning. The broader disruption is one where old business models are going bust, and new players are vying for a finite amount of consumer attention.

New technology will help us drive disruptive change throughout our economy. But it’s important that the change is valuable, literally, in the sense that people will pay for it. Television is a particularly complex case. Following the money can be hard, given how many entities are taking cuts. The commercial terms are complex, with different partners being rewarded in different ways. It’s nasty, which makes the potential disruption that much harder to untangle and forecast.

As scientists and engineers, we want to offer step change performance improvements for our companies. Technology is an obvious focal point. Coupling new technologies with new business models or commercial agreements is critical. The better versed we are in how new technologies will intersect with real markets, the better positioned we are to ask and answer the most meaningful questions.

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