Gorilla against ghost in fight for television

Tony Glover: There is a broadcasting revolution coming that analysts say will be as big as the advent of colour TV. But the main protagonists face a major battle for control.

YouTube faces competition from telecoms operators who are competing with broadcasters for the rights to live sports coverage.

The TV industry is up for grabs as telecommunications operators, internet service providers, electronics manufacturers and even pirate websites start to compete with traditional broadcasters. This has been made possible by the increasingly widespread adoption of broadband internet, which provides the "pipe" for all types of video content.
This month, the leading internet video service YouTube announced it has a staggering two billion downloads a day and its owner Google last Thursday unveiled Google TV, new software powered by Intel chips that will be incorporated into a range of Sony TVs and also into a set-top box from Logitech. But, despite its early lead, YouTube faces growing competition from other new players such as the telecoms operators, who are now starting to compete with broadcasters for the rights to premium live sports coverage.
Etisalat has, for example, signed a three-year deal with the Abu Dhabi Media Company, which owns and publishes The National newspaper and owns the screening rights for English Premier League (EPL) football, to broadcast live sporting events over the internet. Next season's EPL will be broadcast throughout the UAE through a combination of internet protocol television (IPTV) and encrypted satellite TV. The UAE has the region's most developed IPTV market and coverage of the EPL will include not only matches but also pre-game and post-game interviews, reports and even interaction with fans at the stadium.
"Telecoms operators have a number of advantages in the internet TV market: an existing customer base, installed equipment in the home and a trusted brand name for supplying communications," says Adrian Drury, a principal analyst at the researcher Ovum. But Mr Drury also says telecoms operators such as Etisalat are already starting to face intense competition from brand leaders from the computer gaming and electronics manufacturing industries.
"The most interesting group are the consumer electronics and games console manufacturers such as Microsoft, Sony, Samsung and LG," he says. Manufacturers such as Sony have a simple choice. They can follow Apple's example of delivering vertically integrated hardware and content services or watch themselves sliding down the value chain and being relegated to making devices compatible with the content provider's services and standards.
"Sony is now the third-largest digital movie retailer in the US through its PlayStation 3 video service and its Bravia Internet TV services - behind Microsoft and Apple. Samsung, LG, Sharp and Panasonic have similar services," says Mr Drury. Analysts believe that electronics manufacturers such as Sony are in an excellent position to grab market share gradually as there presence in the consumer market grows.
"As people replace their TV sets over the next few years, the manufacturers will become major players in the content provision market," said Mr Drury. But he does not believe that the deciding battles for internet TV will be fought over Hollywood movies or traditional TV series but over live access to major sporting events. "Exclusive premium sports coverage is fundamental to building any pay TV brand. Hollywood films have less value in establishing market share as they are widely distributed through a number of alternative channels. This does not apply to exclusive live sports coverage," says Mr Drury.
Earlier this year, YouTube signed a two-year deal for the exclusive rights to stream Indian Premier League cricket matches to every country outside the US, making the Google-owned video service an even more formidable contender in the world of internet TV. "Premium live coverage of major sporting events has long been the crown jewels of broadcast TV. There are competitors at national levels but YouTube is definitely the 800-pound gorilla in this space," says Mr Drury.
Using Intel's atom processors and Google's Android operating system to create a new type of internet TV access, the two IT giants believe their new set-top box signals a sea change in the industry. Paul Otellini, the chief executive of Intel, is reported to have told analysts earlier this month: "The revolution we're about to go through is the biggest single change in television since it went colour."
But if there was a ghost at Google and Intel's media feast last Thursday, it was internet piracy. It is a dark secret in the TV industry that a huge proportion of people under 21 years old in geographies with broadband access rely entirely on illicit file sharing and video streaming sites and have little contact with legitimate services. "This is potentially a huge problem for the legitimate content providers, and anybody who claims to know the extent of internet video piracy is lying," says Mr Drury.
Despite draconian laws, such as those brought in the US where video piracy can carry a heavier sentence than manslaughter, video piracy is gaining political credibility in some countries. In Sweden, the country's Pirate Party, which last year won more than 7 per cent of the national vote in the European parliament elections, made a decision to provide bandwidth for The Pirate Bay, one of the world's best known internet file-sharing sites, after a court injunction obtained by US movie studios pulled the plug on the site.
"We got tired of Hollywood's cat-and-mouse game with the Pirate Bay ? It is time to take the bull by the horns and stand up for what we believe is a legitimate activity," said the party. Whatever Google or traditional broadcasters may wish to believe, analysts agree that the market for TV viewing is still up for grabs as different technologies and brand names compete with one another for TV viewers' eyeballs.
"In 2009, we saw the mighty four broadcasters undertaking drastic cost-cutting measures, once sure-growth cable companies losing market share, and internet TV portals collapsing thanks to faulty business models ?," says Bobby Tulsiani, a US analyst at Forrester Research. "We believe that the TV industry's three biggest markets - broadcast, pay TV and the internet - are in for another year of dynamic changes."
Mr Drury says: "What is not clear is how the power play will pan out between all the current contenders. If they cannot clearly differentiate their service offerings then new content aggregators will step in and do it for them."
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