When the Wireless Technology Forum (WTF) cosponsored its recent
“Future of TV: Disruptive Changes in Video Services” panel discussion
at Emory University's Goizueta Business School,
it opened with a showing of a Hulu.com commercial starring Alec
Baldwin. In the spot, Baldwin describes Hulu as “An evil plot to
destroy the world.” The commercial is meant to be tongue in cheek, but
Hulu’s catch phrase emphasizes the stakes involved not only for cable
and satellite service providers, but for an industry in transition.

This is why: Hulu.com offers streaming video of TV shows and movies
in Flash Video format, including many available in high-definition
(HD); Hulu also provides web syndication services for sites like AOL,
MSN, Facebook, and Yahoo!—all via the Internet and at no charge to the
viewer. The only catch, besides requiring a high speed Internet
connection, is that viewers sit through brief ads before accessing

In the same way that Web 2.0 and social networking led to profound
changes in user behavior online, TV viewing habits are morphing, and at
a rapid pace. Video is being treated as a collection of digital
artifacts, and artifacts, notes Benn Konsynski,
a chaired professor of Business Administration at Goizueta Business
School, can be unbundled, bundled and remixed. Content sources, content
production, post-production, viewing, exhibition, processes, decision
models, and who has legal rights to content—it’s all in flux and the
changes will transform the industry.

And the video industry is taking note of recent history—in
particular, the fracturing of the music industry in the aftermath of
Napster, file sharing, and MP3 players.

Konsynski, who moderated the Goizueta panel discussion, is
encouraged to see the video industry’s major players moves to be
proactive. “[The movie industry] is being much more intelligent about
it. It’s getting control of very expensive assets early in the
process,” notes Konsynski. “It’s rethinking the sourcing, distribution
and exhibition of its content.”

Hulu is an attempt by network television to remain relevant. So far,
so good. In March 2009, a mere two years after its inception, Hulu
scored 41.6 million video viewers. While YouTube maintains a tight grip
on the number one spot (it totaled 100.3 million unique visitors in
March 2009), Hulu is gaining momentum.

Hulu boasts nearly 150 content providers and added a significant
provider this past spring when ABC, Inc. (Disney) announced it would
join Hulu’s joint venture partners, NBC Universal (GE) and Fox
Entertainment Group (News Corp) by taking a 27 percent stake in the
venture. Gartner Inc. research vice president Allen Weiner dubbed the
deal “An extremely big blow to YouTube,” and described the amped-up
Hulu on his Blog as resembling “your low-end cable system, with only
CBS absent.” (CBS acquired TV.com last year, but Hulu’s trifecta of
ABC, NBC and Fox gives it the apparent edge).

If Hulu.com—an “over-the-top” video distribution model owned by
broadcast networks—keeps getting bigger and better and continues to
give away premium content, what will that mean for cable and satellite
operators who charge consumers to provide the same content?

Michael Quigley, executive director of business development, Turner
Broadcasting, admits the new business model for video delivery “isn’t
quite there yet,” he says, adding that the winners and losers in a new
pattern of video creation and distribution have yet to be identified.
But it’s clear that recent developments are causing tension. To take
advantage of changes in the industry without “killing our existing
business” is “a huge challenge,” admits Quigley. “We’re seeing
encroachment from other folks who could take audiences from us.”

Time Warner Cable Inc. pays a significant amount of money to content
providers to carry their programming. As more and more viewers bypass
cable companies and satellite providers and access content for free,
these companies will need new ways to grow their business. “We have to
offer some complementary experience to TV,” says Quigley. “Enhance and
complement the TV experience as opposed to putting you off TV and
putting you somewhere else.” While sites like Hulu and YouTube generate
a lot of interest, reminds Quigley, “Most video content is still taking
place on TV.” But if Turner waits until new platforms emerge to get
involved, Quigley admits it’ll be “too late.”

One platform that has shown promise is Internet Protocol Television
(IPTV)—a system where digital television is delivered using Internet
Protocol and a network infrastructure such as broadband. (Hulu.com is
considered Internet Video or Internet TV, which travels over an open,
public Internet. IPTV uses a private, managed network.)

In the recent past, IPTV was limited in scope due to a lack of
broadband penetration. And the cost of upgrading fiber networks to
accommodate IPTV isn’t cheap. AT&T and Verizon, the biggest IPTV
players in the U.S., are busy signing up customers (AT&T recently
surpassed the one million subscriber mark for its U-verse IP-based
offering and Verizon’s FiOS bundled communications service—Internet,
telephone and TV—boasts slightly over 2 million subscribers to FiOS TV).

But having a residence wired for broadband—eMarketer estimates the
total number of broadband households worldwide will top 422 million by
2010—doesn’t mean that a household can (or will) tune in to IPTV. Only
139 million of the 422 million broadband-equipped homes will be capable
of receiving IPTV. Telecommunications research consultancy BuddeComm
estimates there will be between 20 and 25 million IPTV subscribers
worldwide by 2010, up from the current total of approximately five

One of the biggest hurdles to IPTV’s quality experience is the
inability to deliver large amounts of HD content via IP. While Cisco
and Motorola are working hard to drive down compression rates and
companies like AT&T and Verizon are getting more efficient at
utilizing their networks, the ability to deliver HD content is “not
there” says Mary Francia, managing director, Serowires, a consulting
firm for technology marketing. “It’s something we need to get better

While AT&T and Verizon continue to invest millions in IPTV, not
all broadband providers are gung-ho about the platform. This past
January, Qwest CEO Ed Mueller told DSLReports.com, “We’re not on the
IPTV mission, but we do think there will be potentially ad-based video
with QoS (quality of service) and high def signals and you won’t care
if it comes via cable or DirecTV or the Internet.”

Qwest’s prime demographic group (teenagers) doesn’t use TVs to watch
TV—and if they do, they’re most likely not watching when the shows
originally air.  Additionally, with higher speed broadband packages and
newer devices that share content—devices with possible hard drives
inside—there’ll be greater opportunity for them to share that content.

Kevin Grant, VP Sales, MobiTV, Inc. says that calling sites such as
Hulu or advances in IPTV disruptive may be “short-sighted,” adding,
“It’s an evolution of experience.” While MobiTV has been on the scene a
while, its service appears to be coming into its own. It currently
claims over six million subscribers and offers content from popular TV
channels like CNN, ABC News Now, Fox News, Fox Sports, ESPN Mobile TV,
MSNBC, TLC and The Weather Channel. MobiTV also offers, via
subscription, AT&T Broadband TV, a TV product for broadband users
that gives them access to nearly three-dozen channels over the

Going forward, Grant agrees that content providers’ biggest fear is
consumers paying less (or nothing) to receive content, but he thinks
content providers will continue to net a fair price for their content
as long as it’s of higher quality. Although it’s yet to be determined
what consumers will spend to get great content, he points to HD as an
example. “Everybody wants it. I’m amazed at the amount of money people
are willing to spend for quality. I have friends who don’t watch shows
because they’re not in HD,” Grant says. “Is over-the-top and free where
this is going? No. [Consumers] are going to pay more for quality.”

It’s projected that consumers will pay more for increased
connectivity as well. “People expect to be able to consume their
assets—entertainment video, news video, home video—on a device that
makes sense to them at any given time,” explains Peter Hill, vice
president, Video and Converged Services, AT&T Labs. “Whether it’s
on their cell phone in their living room or on a big plasma TV in their
bedroom. They want to be able to move that content.” The ability to
have devices communicate with each other is the point of The Digital
Living Network Alliance (DNLA), a standard created by certain makers of
consumer electronics, PCs and mobile companies to enable connectivity.

Connectivity is about more than TV and video content. Consumers,
explains Francia, expect their entertainment and communication services
to be bundled, and they increasingly expect connectivity to include
access to their home’s security and energy systems as well. “IP video
is just one of the subsets,” she says.

But connectivity raises an important question: If a consumer views a
video on his laptop, sends it to his TV and forwards it to his cell
phone, who gets paid? “Whose asset is it?” asks Konsynski. “What rights
do I have to leverage that asset?” Beyond that, what should content
providers charge for usage of an asset? Should it cost more to watch
the Super Bowl than to view the NHL All Star Game? Will advertising,
armed with widgets on set top boxes, become more intelligent as
advertisers learn, in real time, what viewers are watching and send
them relevant advertising based on their viewing habits? Would it be
possible to charge viewers not to receive advertising? “Who makes money there?” Morton wonders.

And some consumers like commercials. “My kids have forced
me to watch commercials,” notes Grant. “It’s amazing. They’ll go back
and watch again.” While there may be a place for niche advertisers,
Grant expects that advertisers, in general, “will follow big content,”
he says.

As consumers have more options in terms of what to watch and when,
the audience becomes fragmented and advertisers will need to rethink
the process of reaching their target audiences. “Rather than 15 million
people watching a program at once,” he says, advertisers might have to
go through a dozen programs to reach the same 15 million consumers.

Given that the digital space itself is global, who, if anyone or
anything, should regulate the IP space? “What tends to happen is that
users want what they want and if they can’t get it conventionally
through fair, legitimate means, they’ll seek alternatives,” says Hill,
and Francia points out “there’s a lot that’s not regulated over IP when
it comes to video.” While technology tends to advance more quickly than
the rules and regulations designed to guide industries that rely on it,
Hill believes “a lot of basic principles of fair use are still very

As these issues begin to work themselves out, the bundling of
entertainment and communication continues. While Hulu gains momentum
and the tension between the site’s network owners and the cable and
satellite service providers grows, Quigley believes the two sides will
come together to figure things out. “It’s in both our interests to
solve this,” he says.

Other sponsors of the “Future of TV: Disruptive Changes in Video
Services” event include The Claus M. Halle Institute for Global
Learning and the Information Systems and Operations Management
department at Goizueta.