The Convergence Resurgence

The TV industry has been talking about “convergence” for well over two decades. And perhaps no concept has fueled more vaporware and bluster. But many of the pre-Internet concepts and technologies never went anywhere. While innovative, they were too early. And ultimately, they were selling to a market that didn’t yet exist. Talk of convergence eventually died. People moved on.

 

Fast forward to today, and convergence is back in a big way. Cable operators’ multi-year broadband buildout and the subsequent telco fiber push has created the kind of video-capable bandwidth once unimaginable. 100Mbps is rolling out this year in many areas. Meanwhile, we now have gaming consoles and third-party set tops that can access the Internet as well as TV signals piping into those screens via more traditional methods. There’s no doubt. This is the resurgence of convergence. But those who believe this forebodes the death of multichannel subscription TV are getting a rude awakening.

 

At SXSW in Austin on Sunday, HDNet chief Mark Cuban reportedly told an audience member who cut the cable cord because he didn’t want to be “screwed by the man” that, “the man will always screw you, dude.” People in cable would probably put it another way, but let’s face it: This industry isn’t about to lie down and watch its entire business model explode. Maybe someday, a smart TV exec will figure out how to combine advertising, product integrations, Twitter feeds, Facebook fan pages, geo-located retail tie-ins, e-commerce widgets and Black Magic conjured from the dark ages to survive without cable and satellite license fees. But we’re not there yet folks. Not even close.

 

So if we accept the idea that convergence has a price. What is it? And will it be worth it? The great irony not lost on cable execs is that the industry’s broadband success has made it possible for people to cut the cord if they so desire and—at least for now—get a whole lot of high-quality video content on the Internet. But the TV Everywhere concept brings a sort of forced convergence that, if successful, will create an umbilical bond between TV and Internet viewing of premium content. Consumers generally resent this attempt to reassert control. And to be sure, many content providers resent it as well. It just doesn’t feel right. It seems rude. It’s like this great party was reaching its apex, and then Big Cable (ie, The Man) came along and broke it up. This mandated convergence isn’t what anyone signed up for. But content owners, who depend on license fees, reluctantly understand that they need to support the business model or risk losing those fees over time. Convergence is the new boss. Same as the old boss. Sorry!

 

The reason for this is simple: High-quality shows require big crews, professional actors, skillful directors and cinematographers, excellent writers who construct intricate and engaging stories and wonderful post-production folks like editors and music supervisors/composers. Working together, these multitudes of people—who all would like to get paid so they can pay their mortgages and put kids through school—create what we generally consider “premium content.” That’s what most people watch most of the time. And even if the industry wrung all the waste out of these productions (and yes, there’s considerable waste), it still wouldn’t be enough to depend solely on advertising to pay for it. The audiences are too fragmented these days. That’s why duel revenue streams are the norm now. Even the broadcasters are demanding carriage fees. Why? Because they no longer corner the TV ad market, and this stuff is still expensive to make! Very expensive!

 

So here’s the bottom line. Convergence is real, but it’s not the Utopian existence that many mistakenly believed might materialize. It will be regulated and regimented. Yes, consumers will be able to watch millions of user-generated videos through their TVs, as well as an impressive collection of independently produced (and fabulous) low-budget content that will be free, free, free. But anyone who thinks convergence comes with no strings attached isn’t giving The Man enough credit. You’ll either wear shackles, live off of low-budget indie fare, or just go without. But hey… you can always read a book.