Telecom and media conglomerate Comcast (NASDAQ: CMCSA) made waves last week when it announced it would provide free media streaming players to Internet customers only in an aggressive effort for court-cord cutters . Historically, cable operators would only offer set-top boxes to video customers with higher monthly bills. The new offering will help Comcast build its competing over-the-top (OTT) video platform, which gave Roku (NASDAQ: ROKU) shares after investors were keen to intensify the competition.
that is exactly what Steve Jobs feared.
History repeats itself
Once upon a time, Apple (NASDAQ: AAPL) dreamed of making a television set, a notion that has been a source of endless investor speculation. The Cupertino tech giant eventually came to the conclusion that it was more trouble than it is worth to make an Apple TV, instead decided to create an Apple TV set-top box and now a video streaming service (Apple TV +) which launches in November. [1
The problem of the TV market. .. The problem of innovation in the TV industry is the marketing strategy. The TV industry basically has a subsidized business model that gives everyone a set-top box for free or for $ 10 a month, and that pretty much splashes on any opportunity for innovation, because no one is willing to buy a set-top box .
Ask TiVo ask ReplayTV, ask Roku, ask Vudu, ask us, ask Google in a few months [crowd laughs]. So all you can do … Sony has also tried, Panasonic tried, many people have tried – they all failed. So all you can do is put a box on the TV system.
At that time, Alphabet had just announced Google TV, a smart TV platform that was discontinued in 2014 and replaced with Android TV. The inevitable result, Jobs said, was "a table full of remote controls, a cluster full of boxes, a bunch of different user interfaces."
"The only way it will ever change is if you can really go back to square one and tear up the set-top box and redesign it from scratch with a smooth UI across all these different features and get it to the consumer in a way they are willing to pay for it, "Jobs said.
Paying for Innovation
It's been almost a decade since Jobs made these observations, and much has naturally changed in the years since. Cable cutting has accelerated as OTT video services spread, which opened up opportunities for companies to develop streaming boxes. Apple TV has evolved significantly as a platform, providing the "consistent user interface", and consumers are very willing to pay for set-top boxes these days; Apple has sold tens of millions of Apple TVs.
Comcast's approach to distributing subsidized set-top boxes may change the relatively newfound propensity to pay for set-top-box innovation. In a research note yesterday describing a bearish thesis for Roku, Pivotal Research analyst Jeffrey Wlodarczak argued that the competition "is likely to cause costs for OTT devices to zero," eerily echoing Jobs & # 39; s mood.
The real question that the industry will face going forward: Will innovation suffer?