Complex TV Industry Today Means Trouble Tomorrow

In the last year or two there has been an increasing sense that the TV industry is about to experience significant change (Examples: here, here, here, here, and here). But as of late, there appears to be growing skepticism that the End of TV and the Cable Bundle, as predicted by Derek Thompson in July 2012, is imminent.  Brian Barrett recently suggested The Future of TV May Not Be Worth It, stating that should any change happen, not only is it a long way off, but it’s not likely to be the change people were hoping for. In fact, there is little overt evidence that a 70 billion dollar industry (North America alone) is on the ropes. To the contrary, David Carr points out that for many media companies, 2012 was a tremendous year.

In what may have been a response to Thompson, Alan Wolk of KIT Digital offers a prediction that falls somewhere between Thompson’s and Barrett’s. But his assertion that The TV Industry is Alive and Well is hardly a Goldilocks scenario.  If Barrett and Wolk are right, we can expect to see very little change in the near future.

Six months ago: “Viva La Revolucion!” Today: “Submit to your media overlords.” And so go the utopian visions of a la carte content. However, for those who dislike channel bundling and want more options and greater control for consumers, then it’s actually a good sign that television networks have shown no signs of eliminating those bundles – or adapting to a changing media environment.  Hear me out.

Barrett and Wolk highlight the growing realization that the complex vertical integration (or entanglements) created by bundling, have made the industry more insulated and resilient to change than anticipated. But before TV is declared immune to the general mayhem and upheaval affecting most forms of media (see music and publishing), there is a flip side to all of the interwoven complexity between MVPDs, networks and other industry players. While tightly woven and complex industries are initially insulated from change, they are very difficult to decouple as well.  As Clay Shirky notes, when complex business models are faced with significant changes that fundamentally shift the assumptions and underpinnings of an in industry, they are “too inflexible to respond,” and the

whole edifice becomes a huge, interlocking system not readily amenable to change. [W]hen the value of complexity turns negative, a society plagued by an inability to react remains as complex as ever, right up to the moment where it becomes suddenly and dramatically simpler, which is to say right up to the moment of collapse. Collapse is simply the last remaining method of simplification.

Not surprisingly, networks want to keep bundles intact because it means more money for them and more bargaining power with MVPDs.  In the short term, maintaining this complexity may serve them well, but bundles and licensing agreements that mean resiliency and more money for NBC Universal, et al. right now, are the shackles that will restrict their ability to meet significant change in the future. Were there any chance of industry stasis that might be fine, but unfortunately for them, the Internet is dramatically reducing the cost and complexity of content distribution, making broadband a viable alternative to broadcast. Innovators from all sides are trying to share the TV revenue pie and Wolk predicts that sooner or later, “someone will toss a bomb into the crowd and blow things up… once it happens, change will come quickly.”

Until such inevitable “bomb” detonates, there are two factors that determine the extent of the disruption it creates. The first is the willingness of networks to accept that industry change is imminent.  The longer they preserve existing business models and partners, the less and less likely it becomes that they will be able to quickly facilitate systemic changes and the more likely it becomes that the “bomb” creates significant industry disruption. As they resist change, Netflix, Hulu, YouTube, and Amazon continue experimentation and innovation, and the user experience and technology gap between broadcast networks and their broadband counterparts continues to grow.

The second, and more significant threat, is that past a certain threshold of inaction, there may not be any path for networks’ continued existence. The recipe for systemic collapse is rigid, complex systems plus explosive, fundamental change to the basic assumptions of an industry.  The assumption that is changing is that 20th century television networks are necessary to distribute content. Aggregating and distributing content is not a problem that needs solving, and certainly not with broadcast solutions.

Networks themselves are bundles formed out of sixty-year-old technological constraints, when distribution was complex and costly, when one-time, one-place consumption was the only option, when aggregating and packaging television content was a real commodity, and where it made sense to have all of these components under one roof. This is not necessary for content distribution in the 21st century.

So for anyone who has ever been frustrated by cable companies, television networks, or navigating 700 channels with 4 buttons, take heart that no one will give you what you want. Resolutely resisting change and maintaining complexity is the surest formula for significant and fundamental industry change. Eventually. There’s no promise that it will be cheaper or better, but it will be different.

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