Ask a television viewer to describe the perfect living room world, and s/he would likely say unlimited content on demand for free and with no ads. Internet-based streaming devices such as Roku and Aereo will likely deliver just a small part of that utopia, according to those companies’ CEOs.
Speaking at Bloomberg’s Next Big Thing Summit in Half Moon Bay, Roku’s Anthony Wood said that live TV was “dying quickly.”
“Most TV on Roku is on demand that’s the real benefit. The top 25 percent of Roku users stream 30 hours a week, and almost all of it is on demand,” Wood (top left) said.
Roku originally launched as a set-top adapter that allowed Netflix subscribers to watch programming on their television sets. It has since expanded to include content from Hulu Plus, HBO GO, sports programing and Internet radio from Pandora and Spotify.
But Wood and Aereo CEO Chet Kanojia (bottom left) said that neither channel bundling nor advertising were likely to go away as video programming is increasingly distributed through the Internet.
Aereo allows consumers to record traditional network programming using a cloud-based DVR and watch the programming later. Its main use case is that it allows viewers to watch programming on their own schedules.
“Behavior and habits are changing, and to be where the consumer is at a certain point in time is a good thing,” Kanojia said.
Aereo is fighting a number of legal claims from media companies that claim that the subscription-based service deprives them of advertising dollars, as ratings companies are unable at present to count viewers using the service. But the service does not remove advertising.
Internet-streaming services like Roku and Aereo will reduce the bundling of channels that cable companies use to push viewers into higher-cost subscriptions. (For instance, consumers cannot subscribe just to HBO, but must purchase a bundle of channels that includes HBO.) They may also reduce the amount of advertising, but they won’t eliminate either, the executives seemed to agree.
“We’re fraying the bundle, but there’s still going to be bundling,” Wood said.
“What’s happening is fundamentally more choice. Customers do like bundling; it’s over-bundling they don’t like,” he said. “The least popular way to purchase content online is a la carte, because it’s expensive.”
Kanojia was more critical but still depicted streaming as a supplementary solution to conventional content packaging.
“Technology aside, the business models are still stuck in the 50s. New niche producers can’t get in front of the consumer. If that’s what it’s going to be, let’s create a very wide fringe,” he said.
Some products in the bundles Roku and Aereo provide rely more heavily on advertising than others. For instance, Netflix subscribers don’t see any advertisements, but Hulu Plus’s do.
“The amount of advertising per content that Roku users watch is generally a lot less. Ads per content will grow but I think there’s always going to be less,” said Wood.
Kanojia, given his company’s precarious legal victories over media companies, was terse.
“We have a philosophical bias that content creators should deal with advertisers, not us,” he said.