New Devices Create New ‘Golden Age’ for TV, Time Warner CEO Tells CES

LAS VEGAS -- Rather than killing TV, new technology is creating its second “golden age,” Time Warner CEO Jeff Bewkes said at a CES keynote also featuring Verizon Chairman Ivan Seidenberg. Partly because of new ways of watching TV, he said, viewing, subscriptions, advertising and programming budgets are up, Bewkes said. “This is a very healthy business. … Its role in our lives has never been bigger."

Technology is “creating new industries and revolutionizing old ones,” Seidenberg agreed. He predicted that wireless broadband and other technologies will mean “even more disruptive social models in our future.” Video already accounts for half of all Internet traffic, he said, and it could exceed 90 percent in the near future.

But TV broadcasters are “squatting on our innovation future” by limiting access to broadcast spectrum, CEA President Gary Shapiro said. He called the spectrum “borrowed” and said demand for its continued use is declining with the size of over-the-air audiences.

But being No. 1 in consumer-demanded video is “hardly squatting,” NAB President Gordon Smith told us on the sidelines of CES about broadcasters, after listening to Shapiro speak. “Gary’s been writing a book and apparently he’s missed all of the cord-cutting phenomenon,” he said of The Comeback by Shapiro. “I suppose he sees a world of just Wi-Fi and broadband,” Smith said. “But if that’s true, there’s not enough spectrum in the universe to accommodate his plan."

Verizon’s decision to move early to LTE “sent a message to the entire consumer electronics industry” that the wireless broadband market would “develop quickly,” said Lowell McAdam, Verizon chief operating officer. “People will be surprised at how quickly the ecosystem for LTE develops. … We are only at the beginning."

The key to TV’s future is making devices work simply and seamlessly, Bewkes said. Consumers “shouldn’t have to have a Ph.D.” to use the devices, he said. Bewkes said TV programming “ought to be on demand, on every device,” and consumers “should not have to pay extra” to watch it on multiple devices.

Meanwhile, figuring out how to pay content owners when programming is distributed on “TV Anywhere"-type platforms is becoming difficult, speakers said at Broadband Unlimited sessions at the CES. Content owners shouldn’t be able to charge twice, said Terry Denson, Verizon’s vice president for content strategy and acquisition. “This is all about content rights,” agreed Dan York, AT&T’s president for content. He said many devices, such as video-capable iPads, didn’t exist when a cable channel, for example, acquired the rights to sell a program to conventional cable or even telco video systems. Now many of the channels see emerging delivery platforms as a way to ensure continuing double-digit revenue growth, he said.

In many cases, the content owners may not clearly own the rights for distribution on nontraditional media, Denson told us. “There are a lot of grey areas,” he said. “And when there are gray areas, each side naturally interprets it in the way that benefits them. Very few providers have truly 100 percent rights to sell to us.” ESPN is probably furthest along in getting full rights to its programming, Denson said. “ESPN has acquired the right for almost all of its programming on all platforms.” For others, he said, “it’s about each content provider thinking prospectively” about new ways of distributing programming.

"We think the consumers should have access to content whenever they want, wherever they want,” York said. “And it is not our intention to charge them more for it. But there are hundreds of different approaches [by content owners] to this. Right now, the industry is just trying to sort it out.” The process has involved only ongoing negotiations, Denson said. He said he’s not aware of any lawsuits resulting from disputes over content rights. “So far, it’s not contentious.”

Industry officials continue to debate the effect of over-the-top (OTT) content on traditional video delivery systems. Rob Riordan, executive vice president of Cellcom, said OTT, which mainly involves using the Internet to deliver video, usually from traditional networks but bypassing traditional channels, will “kill traditional TV unless they embrace” it. He said traditional providers are “in denial” about its impact. Traditional cable and telco TV networks can “embrace” OTT by “taking advantage of the transition to cloud-based” video delivery, Riordan said. Their advantage is that their model for aggregating programming, helping consumers sort through what they would really want to see, still works, he said.

The trend toward OTT is clear, said Brian Sathianathan, Smith Micro director-video. He cited big cable subscriber losses in the third quarter, as well as Roku’s ability to sell one million devices to display Internet video on conventional TVs. And Apple TV sold more than 1 million similar devices in three months, he said. Brian Jacquet of Roku said it already has delivered more than 1 billion streams of video and buyers are using it an average of about 11 hours per week.

The broadband needed for OTT is becoming ubiquitous in the U.S. USTelecom President Walter McCormick cited FCC figures that 95 percent of Americans have access to fixed broadband with at least 4 Mbps, and 80 percent have a choice of at least two such providers. More importantly, he said, 95 percent of broadband customers are satisfied with their service and 75 percent are even satisfied with the price.

Verizon sees OTT as more of an opportunity than a threat because it spurs innovation, Denson said. He said OTT operators are finding it’s difficult to reach customers directly and get the scale needed to be a real threat to incumbent TV providers. As a result, he said, Verizon often partners with them, providing them with middle-man services. OTT may become a threat to mid-sized video network providers, Denson said, because they may have trouble providing enough bandwidth. But he said big operators like Verizon with its fiber-to-the-home won’t face problems, despite the “very low barrier to entry” for OTT operators.

Meanwhile, there are “tremendous opportunities for growth” in smart phones and data-centric devices, said Jeremy Korst, vice president-broadband and emerging devices for T-Mobile. He said more than 90 percent of Americans have cellphones, but fewer than 30 percent have smart phones. But 2010 was the first year in which more mobile broadband devices were bought by individuals than businesses: “We are just getting started.”

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The introduction of the Google Honeycomb mobile device operating system caused considerable buzz at the opening keynote. The system was shown on Motorola Mobility’s new Xoom tablet, which CEO Sanjay Jha said will go to market this quarter in a 3G version, and by mid-year in 4G. He said the operating system is optimized for tablets and improves on Android widgets, multitasking, browsing and customization.