The future of media – Is Netflix going to disrupt a linear TV?

This is the third part of our “The future of media” series. In the first post, we discussed trends in media consumption, continuing with newspapers,  and we also covered the future of radio. Today we want to discuss linear TV and how it will be affected with Netflix and many other on-demand players on the market.

Let’s define TV first

I think it is very important to define what TV actually is. In some languages, there’s a different word for a hardware device we buy and put in our living room and a TV programme. There is a difference between hardware and software (better called, the content we play on that piece of hardware).

For decades, the content we played on that hardware was brought to us by cable networks, which transmitted a signal from TV stations. We could select a TV station, but we had to follow the exact schedule they have. If you missed the first 10 minutes of a movie, that was it – you couldn’t go back and rewind. This was, what was later called, a linear TV programme. To be honest, you could play a different content on that hardware; you could attach VCR/DVD player to it, rent a movie and watch it whenever you want. But user experience of doing that was not fantastic, and that was not something you would do all the time. So you have been stuck with a TV channel. Media buying agencies knew which target group watches specific channels and shows, and it could fairly easy decide which commercial to use.

What is changing?

Two significant changes affect TV industries.

1. TVs as hardware devices are becoming smart TVs. It’s is becoming difficult even to buy a TV that is not smart. Let’s compare it with smartphones. Before iPhone, most of the phones were dumb phones: 90% of the time you used them for phone calls and text messages, 10% for other activities (who remembers Snake on Nokia phones?). But after iPhone and since the introduction of 3G, mobile phones became really smart, more user-friendly, and connected to a high-speed internet. Today we spend 90%+ time on other activities, maybe 10% on phone calls. We probably shouldn’t call them phones anymore :-). The same situation could happen with  TVs; when they become more user-friendly, we could use them to consume much more than a linear programme.
2. High-speed internet is becoming a norm in every home. Before the internet, you had no options. With a slow-speed internet, you couldn’t watch high-definition content. But with speeds that exceed 20+ Mbps, you can easily watch HD movies at home.

A second-screen problem – what happens when there is a commercial on a linear TV, and you have a mobile phone near you?

So, imagine having a smart TV with already installed applications like Netflix, Hulu or Disney. It is connected to the high-speed internet which means you can easily stream HD content from those networks. You pay for a subscription, but you don’t have to watch commercials. It is Friday evening. Will you watch some movie on some random  TV channel which you can’t stop, can’t rewind and you’ll be constantly interrupted with commercials, or are you gonna start one of the already installed applications and watch the content which you can stop, can rewind and there are no commercials?

Is Netflix a real threat to TV stations?

It’s not just Netflix, but many others. In 2018. Netflix will invest around 12 billion$ to produce its own content. Disney will follow. HBO will follow. Others will follow. The quality of that content is so good it wins Emmys. It is being banned from the Cannes film festival. And it will become better and better. Plus, to be honest, there’s so much pirate content around which should also be calculated.

Users are changing the way they consume content. We want to control what we watch and how we watch it. With advancements in technology, we now have to option to do that.

Traditional TV stations will struggle because they can’t (for the most part) compete with Netflix, Disney and others in content quality. The only thing left for them would be sports, because that’s something you have to watch linear. Still, what happens when there’s a commercial and you have your mobile phone near you?

There’s a huge fight with traditional agencies to keep budgets spent on a linear TV. But people are moving their eyeballs to other forms of content, which they still consume on a piece of hardware we still call TV. Plus, they move their eyeballs to their mobile phones as soon as there’s a commercial on a linear TV. Should companies still invest in TV ads?