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Ed Zander, chairman and chief executive of Motorola, carries around one of the snazziest phones in the world. Yet Mr Zander no longer thinks of the handsets his company makes as just phones. “This becomes my new remote control,” he says, waving a thin, gold-coloured handset around.
Motorola is just one of the many companies seeking to ride the dramatic shifts in consumer behaviour. With more than 40 per cent of US households having access to high-speed internet connections, viewing video content on your computer or your mobile phone and downloading it is no longer time-consuming or difficult.
In Motorola’s case, the company is developing products that easily allow people to network their homes, connecting all their devices – televisions, DVRs, computers, mobile phones – and sending content such as television shows, music or photos from one to the other.
The question is whether these shifts will shake the foundations of the entertainment and communications industries. Worth $500bn a year in the US, the way people have watched television has attracted billions of dollars of advertising that has underpinned the content industry. In addition, about 85 per cent of households pay cable or satellite operators for multi-channel television.
Both components of the media – content and distribution – are having to adapt. Content makers, such as Walt Disney, are increasingly willing to experiment with new business models. In Disney’s case, a pioneering move to provide hit series to iPod users was yesterday followed by a plan to make the shows, including Desperate Housewives and Lost, available for free on their website.
Anne Sweeney, president of Disney-ABC Television Group, told a cable industry conference that the audience for Disney and others was changing. In particular, she said, studies showed that 40 per cent of the eight-to-27-year-old audience came home after school or work and used between five and eight devices, many at the same time, before going to bed.
“Forty per cent of baby boomers go home and watch TV,” she said. “[These differences] are directing my experiments and efforts in technology and content.” Although Ms Sweeney admitted she did not yet know whether internet channels or traditional TV channels would be bigger, she said the overall market for content was growing.
That growth will depend, in part, on technology and how quickly it develops. One question is how long it will take Microsoft and other companies to ease the link between the television and the personal computer. Although consumers can download content from the internet and view it on their television today, it is cumbersome to do so.
Also, there is a question as to the picture quality the internet will provide. “The viewing experience is not there yet,” says David Card, an analyst at Jupiter Research. “The internet wasn’t engineered to be a mass broadcast medium.”
In spite of those kinks, cable industry executives tend to share Ms Sweeney’s optimism that the overall market for media and communications will expand. Consumers in countries such as Japan, Korea and Britain, where mobile content is more easily available than in the US, have already shown they will spend more and consume more.
“The pie is going to grow,” says Dick Parsons, chairman and chief executive of Time Warner. “When you look at the way people are consuming telecoms and communications services, it has already been shown the pie will grow.”
Brian Roberts, chairman and chief executive of Comcast, the biggest cable operator in the US, says that increased viewing of television content on, for example, mobile phones, did not threaten the cable industry. In contrast, he says it will increase demand for reliable, high-quality content and also for broadband access, which cable increasingly bundles with video and telephone services.
“All those people Anne was talking about will have broadband,” he says. “The biggest disruption is likely to be in the advertising business…advertisers are going to want to go to places where they can target audiences.”
This realisation is driving content providers to experiment. The internet test from Disney will include versions of top shows with commercials included.
“The horse is out of the barn,” says Bob Clasen, chief executive of Starz, a movie content business.
“For the next three to five years all these new distribution platforms will offer incremental growth. But at some point, there will be cannibalisation.”
Additional reporting by Joshua Chaffin