On Friday I had a debate with Mark Cuban on the future of TV. We disagreed on most things. The main debate circled around whether the future living room will be driven by the Internet, or by the existing TV infrastructure delivered by Cable/Sat/IPTV operators. Mark followed up with a post titled “Don’t Waste the Internet on TV – Protect the Future of the Internet”.

In our opinion it is not a question of “if” the Internet represents the future of TV it is a question of “when” (answer below). Here is why Internet on TV is inevitable:

• Everything is connected – We consume video and entertainment in general on multiple devices (mobile, computer, tablet, etc.). We will want to access Internet content, apps and games on our TVs as well. It does not make sense that our biggest screen should remain disconnected.
• We are all passionate about something – One of the greatest things about the Internet is that you can dive as deep as you like into almost any subject whether it is cricket, anime, or music videos. Each one of us has a different set of interests and passions and for the first time we have a medium that’s personalized. The existing approach (and architecture) of a curated list of channels designed by a sole provider doesn’t address this basic human need.
• Less control = more innovation – There is a reason TV is lagging behind so many computers and mobile devices. TV is an oligopolistic environment with tight controls. Developers and entrepreneurs are attracted to open platforms with critical mass.  We’re not there, yet, but when you read that 27.5% of TVs sold in the US in January were connected to the Internet you know this day is getting closer.
• CE manufactures are already on it – They are watching consumer demand rise and are building Internet connectivity into their entire product line. TVs, BluRay players, and game consoles are now all being connected to the Internet. Even if the set-top box is not connected the users will use some other way to get their TVs connected.
• Content owners follow the audience – If you are a content owner you have two main concerns… a) getting your content in front of as many consumers as possible and b) getting paid for it. There is already a critical mass of users who are online and want to watch premium content (26% of online users watch TV shows online more than once a week), yet most mainstream TV content is still not available online. It is a huge missed opportunity.
• Broadband is the #1 priority for many – Younger generations see broadband as vital and PayTV as an accessory.  This generation is willing to pay for content, but likely to do so online. Making them pay for traditional TV, just so they can watch their shows online does not make sense.

People want Internet on their TVs, the CE companies want to address that need, the content owners see the opportunity and now the FCC’s plan indicates that the government also would like to see it happen. It is safe to assume that within the next 3-5 years Internet connected TVs will be a mainstream phenomenon and we will have more and better entertainment options on our TVs.

TV as we know it today offers a reliable and familiar experience for consumers, and a proven business model for content owners and distributors. There is great concern about the what TV content delivered over the Internet will mean for the industry (the fear of analog dollars turning into digital cents). There are the examples of the music industry (resisted the move towards digital and is now in search of a business model) and the newspapers industry (embraced the Internet and is now in search of a business model), which point to a damned if you do and damned if you don’t scenario.

But the talk and fear of cord-cutting is overzealous by both the media and the industry. Not only are their fears unnecessary, the focus on the negative impacts takes away the attention from the great opportunities that are opening up.  We believe the time for content owners to embrace the Internet is now, and that the parallels to the music and newspapers industries are not entriely appropriate, here is why:

• Unlike newspapers, video content is not easily commoditized –  You can read about last night’s political scandal from hundreds of sources, but there is only one company making American Idol, Lost, or Heroes.  When you have a unique product, it’s more likely people will pay for it.
• Unlike music, pirating video is still a hassle – Downloading a pirated version of a newly released movie is still a cumbersome experience. It can take a long time, the quality is sometimes terrible, it could be hard to find, you may catch a virus, etc.  However, this is not a long-term advantage because piracy will become much easier.  Right now, the industry has the time to make a pre-emptive strike by making content available online and making it easy to find and enjoy.
• Freemium is easier to offer for video than for news or music – Once a music album is out it is hard to create a premium offering around it.  In the case of video however, content owners can create premium value in multiple ways: HD quality, access to additional content, live broadcast, windowing of releases and more.
• Unlike music and newspapers there is a clear path for subscription revenues – There are already examples of successful online subscription services like Netflix and MLB, so it is not farfetched to imagine people subscribing to shows, channels or bundles based on their personal interests.

The users and the technology are ready, it is time for the industry to step up.