Monday, 11 August 2014

Unboxing broadband, part 4: Chromecast and the dumb broadband pipe

My latest toy is Chromecast. It gives me access to great new content, for the price of picture quality. I love it!

My latest TV toy is Chromecast. It’s the price of the bundle that convinced me to buy: £16 for a Chromecast with free season 1 of The Blacklist. Alternatively, £16 for season 1 of The Blacklist with a free Chromecast. Either way the proposition was too good to pass up.

We also have BT Broadband, so I can also watch BT Sport on the TV in HD. That’s one premiership game per week (if the family will leave me alone long enough to enjoy it) for free. Which is about as much as DW is willing to pay.

The way Chromecast works is different to our other set top boxes (Apple TV, Now TV, DTT). Google doesn’t attempt to curate content, it just provides the means to put content onto your TV. You need a Chromecast-compatible app (for example the Chrome browser from my MacBook, or the BT Sport app on my iPhone). You may need to pay the app provider for the content, or it may be free (such as from YouTube). Once selected (and paid for), you can then “Cast” the content to your TV.

Casting (a new web 3.0 verb to get used to) is different from the streaming that Apple allows to its Apple TV. When Casting, the content is streamed directly from the web to the Chromecast box. This means the quality can be better (the smartphone isn’t an unnecessary intermediary congesting the Wi-Fi) and you don’t eat up battery life.

Today we Casted Gummi Bears from YouTube (the DDs are on summer holiday). The whole process was very slick. Finding the content on the YouTube app on the iPad is very easy with the combination of text search and swipe select available. The app found the Chromecast and started Casting without me needing to delve into the settings menu.

This illustrates a few fundamental changes that the TV industry is going to need to navigate. Firstly price: the price for the content, and crucially now the hardware too, is either free or close to free. I’m guessing that Google made or even lost money on the bundle that I bought (Chromecast + season 1 + Gummi Bears on YouTube). So where’s the money to be made from the value delivered? I think it’s from the bundle. Even though Google probably lost money on the bundle, I’m guessing that NBC-Universal / Sony Pictures (the show distributors) didn’t, because £16 is still a healthy amount for a virtual box set. And let’s also consider that the full value chain is now different; let’s not feel sorry for Google since it served the ads that engirdled the Gummies.

Secondly, the bundle: The bundle that consumers want isn’t the bundle that Cable traditionally provides. It’s no longer about buying your entire digital world from one shop. The key to the kingdom is connectivity; bundling broadband, 3/4G, Wi-Fi is the utility of the future. Everything else is cheaper, and crucially better, from sources other than Cable. Telephone calls are better from a mobile. TV is better when Casted. The bundle is now about what I want to do (I want to watch TV so I want a bundle of content, hardware and assume Wi-Fi) rather than how I want to do it (line rental + broadband speed/usage/time allocation + hardware).

Thirdly, convenience rules: I weep at the quality of picture that we’re now watching. YouTube is pixelated, BT Sport HD is barely better than SD when Casted, Now TV is only 720p – none of these compare with the video (and audio) quality when we watch a Blu-ray. But we very rarely watch a Blu-ray nowadays, because it’s much more convenient to search and swipe our way to find something to watch, than to get up and go over to our wall of discs. The argument that better quality commands a premium is delusive, at least for the majority. And it’s by volume selling to the majority that the only real money is now made.

The signs and portents are for consumers to just want a dumb broadband pipe. And there is a lot of money to be made by Cable in connectivity just as a utility. However, there is also opportunity – by separating the concerns of connectivity and services that use the connectivity, the opportunity is to both compete and collaborate with web TV providers. Compete for service revenues through cheaper, better, more innovative services. Collaborate by generating demand for connectivity. Make revenue by doing both.

From the perspective of consumers, the burgeoning options for web TV is starting to bring the problem of too much choice. Each STB has its exclusive content, so to watch it, the consumer needs to understand and navigate all the packages to find their combination. This complexity is to the detriment of the proposition, and to the market as a whole. Each STB might be cheap at £16 a pop, but I now have 4 of them costing over £300, just to get all the content we want to watch. Suddenly it doesn’t seem so cheap.

More in this series: part 3, part 5.

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