Internet TV is no longer simply linear, scheduled TV channels. DVRs will soon be passé. The future of television is video served on demand, by subscription and à la carte, on multiple devices. It is a cloud?based ecosystem with new apps, and an ideal environment for creating a “sticky” integrated social experience for video in the home.

As content becomes widely available à la carte and on demand, the predictable, scheduled nature of TV disappears. Each program has to stand on its own. Program promotion combined with search/discovery will become critical to grabbing viewers’ attention among the thousands of programs available.

We live in an era of social networks, and the new TV ecosystem includes a social component. Niche programming cliques form. The social conversation continues to highlight and spread the word about popular new content. It’s always been part of the cultural zeitgeist, but even more so now.

With the technology and content available to make this happen, there still is no device and service that competes with the incumbent pay?TV providers. None exists that fulfills the Holy Grail of internet?based TV: a comprehensive library of à la carte/on?demand content available whenever we want it, wherever we want it. Why?

The Players

Unhappily for open source proponents, the value in content delivery is in who owns and controls customers. The business is all about who collects the revenues on a recurring basis for the service. Existing pay?TV providers control the key elements in the digital entertainment supply chain: the service and the user’s device.

Today’s internet video providers cannot compete with pay?TV providers. They have limited content and their business models depend on third?party devices. Smart TVs and game consoles are intermediaries that can influence the quality and availability of the video providers’ services. Smart TVs merely offer features on the television to access the internet, with no compelling service. Televisions are commodities; pay?TV set?top boxes are not. Roku, TiVo, and others cannot compete with the pay?TV providers. They only provide hardware that supports video services.

Game consoles have different problems competing with pay?TV providers. An example: Sony, a film studio, can never be a neutral aggregator of content. PlayStation/Xbox are from companies that do not have strong records with service businessesand continue to promote their competitors’ offerings on their platforms.

In the age of internet content distribution, companies need to control at least the device and the service in the supply chain.

What’s the Problem?

To seriously compete with existing pay?TV providers, new providers need to offer at least what the existing providers offer, plus added benefits (more content, lower price, superior user experience, etc).

Successful internet?video providers will offer a comprehensive catalog of à la carte/on?demand content –- with an intuitive user experience. Existing internet video players are offering only a fraction of the programming of pay?TV providers and they are securing new content rights haphazardly. If you’re going to compete with the incumbents, why guess what programming is important to your customer by only acquiring rights to selected programs?

Launching DIRECTV changed the home entertainment paradigm. We learned it was critical to carefully navigate and choreograph the acquisition of content with the content creators, even the sequence of securing the deals was important.

The current program guide grid provided on existing pay?TV systems doesn’t work for thousands of à la carte programs. Among Internet video providers it seems everyone started copying the original AppleTV format. These randomly displayed, screen?hogging posters of each program/movie don’t work either.

So, who gets it?

Apple achieved success by controlling the device (iPod/iPhone/iPad) and the services (iTunes/App Store). And, using their experience, they might create a new ecosystem at the television with apps that haven’t been imagined yet. But will Apple pursue a television service that competes with pay? TV providers?

There are others that could make it happen.

Amazon understands vertically integrated ecosystems. They created and control the Kindles and e?books with cloud services. Yet, Amazon has soft?launched their video offering as a retail business enhancement, not as a stand?alone pay?TV service. Amazon also continues to host competing video services on their tablets.

Telcos could pursue expansion of their services beyond the limits of their physical plants. But they remain locked into the past?generation idea that their own plants must be used for video distribution. In the internet era, the network is only a utility in the supply chain.

Cable/telcos have their own problems competing with Internet services. They do not offer a uniform, nationwide service. The top 23 MSOs and 2 telcos serve 63 million subscribers across the United States, whereas the Internet is ubiquitous and worldwide.

Let’s not forget Google. Google TV has not caught on. While Google wants to build the new TV ecosystem and then control the search and advertising of that ecosystem, Google TV is not the answer.

With the cloud available, why are archaic DVRs still being deployed and whole house DVR systems being introduced by existing pay?TV providers? They won’t change until competitors enter the marketplace and force industry changes. Remember, cable didn’t convert to digital until after DIRECTV launched.

But it’s certain that à la carte/on?demand programming will happen. Who will “get it” first?

Thanks to Rick Erikson for his help in the preparation of this article.