How Apple TV Can Change the Economics of TV
The following is also my column in next week's Advertising Age.
This week, like thousands of early adopters, I picked up an Apple TV. It lead me to believe that as Internet-connected set-top boxes take off, Apple and others will change television, and with it, TV advertising.
Apple TV is a small set-top box that connects to any flat-screen television. Think of it as a smart iPod. However, bloggers have also widely reported that it will work with any set that has component inputs. The box also connects to any wired or wireless network in your home. That's all you need to get up and running. Apple TV will then take any media in iTunes on your PC or Mac and copy it to an internal 40 gigabyte hard drive. You can then access your audio and video content on your TV even if your computer is off.
Most of what consumers will watch initially via Apple TV will be movies and shows purchased from the iTunes store. Unfortunately, these do not come in high definition, at least yet. So, the viewing experience is less than ideal. However, as the cost of HD video cameras sink below $1000, individuals are rushing in to fill the void. Merlin Mann, a productivity guru, told me last week his popular video podcast will be available in 720p next month.
TV for years has been a closed system. It requires big infrastructure and dollars to create content and broadcast it to the masses. And although distribution has shifted from broadcast airwaves to copper wires and now fiber optic cables, the economics remain the same. The cable nets identify a niche that is big enough to support a sizable audience and therefore advertising.
Over time, however, niche content will change the economics of television. Millions of Americans will add one or more Internet-connected set-top boxes to their living rooms. Once they do, look out. As they discover there is niche HD video content that matches their precise interests, the existing TV networks will see their viewers erode even more. Further, brand marketers will see they don't need media to reach people in their living rooms. They too will produce their own content that will be distributed over the Internet for consumption on TVs.
