Here is a series of recommendations, rants, and observations about why MSOs (the cable companies) will be sad in 2011, unless they innovate and invest.

Entertainment = Consumption + Interaction:

Internet-enabled TV will bring about some radical changes.  Nielsen’s Three Screen Report indicates that consumption of the moving image is increasing across all three screens: traditional TV, internet, and mobile. The interactivity of this “data” will surely change. Entertainment now equals both watching and interaction: checking out additional content online, playing games, or participating in ads as entertainment. 3D and gesture-based interactions will also redefine this blurring of the line between passive and active viewing over the next few years.

Ditch the “dumb” set-top:

Content models that rely on “captive audience” set-top box capture of viewing habits are outmoded as delivery systems, and deliver poor analytics and reporting compared with the information we can glean from a data-only model. If content owners rely on this information, why does the old model remain unchecked? The set-top box is largely a passive unit that doesn’t include an interface, platform, or APIs for allowing advertisers to interact directly with their target audience in real-time like the Web does. We have seen some recent (and awesome) successes with new methods of delivery: Hulu, Netflix, MLB, and on-demand efforts. However we are in an infancy of thinking about the possibilities of satellite, cable, and their antiquated set-tops, and how broadcast can recapture some of the money that migrated to online advertising.

This is an opportunity for direct access to consumers in their living rooms. The delivery method is there, there is already a large internet-enabled box in many living rooms: tuner, DVR, AppleTV, Slingbox, etc. MSOs already have the access to provide value-add applications to the experience, but what is preventing them from radically changing the intersection of TV, Internet, and advertising? They actually have had a better chance than anyone.

Develop a platform:

Imagine tying content delivery to analytics and advertising – a platform that delivers both choice and guidance to direct viewers to shows they like, and then targets accompanying ads based on more granular information and feedback. Visible World does last-mile ad insertion for parent company, Comcast, who acquired one of the big three: NBC.  A small wrinkle in this still-disputed merger is Sen. Kohl, who is asking for a divestiture of NBC’s holdings in Hulu, arguing that it potentially violates anti-trust.

But this is an amazing opportunity for MSOs to radically change the model for consumers and advertisers by providing a platform for interaction. MSOs have a chance to drive people back to their subscriptions — otherwise we will see a switch to online viewing, where advertisers can get a lot more feedback for their digital dimes, and consumers can have more choice, and augment their experiences.

The TV could supersede the MSO-provided set-top box as a platform:

Internet-enabled TVs or TVs with companion internet-enabled boxes will supersede the current MSO interface and platform. Federated search across Internet/DVR/broadcast is far more useful and less clunky than a remote-driven interface.  In addition, the ability to bring in dynamic web content — ads, additional content, or related information — should quickly reduce the three screens to just two.

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When MSOs realize they are missing out on key advertising opportunities, we will see a rush to market with subscription- and licensed-content across the three screens. You would have thought that Hulu would have put the fear in them, but wait until Google TV takes their bite.  Their recent partnerships with TV manufacturer, Sony, ensures that this will be widely distributed to Best Buy, Walmart, etc. beyond the market reach of Roku, Slingboxes, of the world.

Prepare to lose ad revenue:

NBC Universal’s (current) CEO Jeff Zucker and his oft-quoted ‘trading analog dollars for digital pennies’ was revised last year to ‘digital dimes’ from the man himself. That is good news, especially for the multitudes of investors that entered into internet video ventures last year. Out of that gold-rush of investment though, there hasn’t been significant pay-dirt for many. Clearly the answer lies in uniting broadcast to the Internet, bringing the interactivity the web provides, in addition to the type of analytics that are possible. I predict Google TV will make more of an impact than Apple TV did to unite those advertising schemes, although watch out, Apple’s clearly got some plans a brewin‘.

Google TV offers the opportunity to sell ad’s within the interface, and provide targeted advertising, on the TV. Show me what you got MSO’s.

In Conclusion:

It is a rapidly changing world, and people have clearly shown that the TV, cable-tuner, and DVR do not have all the features people want. The cable companies who own the infrastructure and delivery method of video and data are being left out of this equation. Google has side-stepped around cable companies and the licensing issues — wisely I might add — and added a layer with enhancements that will allow them get deep into people’s living rooms, to collect data and provide a smarter ad platform. Things are going to get really interesting….

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