Deals and IPOs in video entertainment and advertising: an inflection point or bubble?

A spate of events this month argues that the industry that revolves around video entertainment and advertising (I no longer call it the "television" industry!) has entered a period where long-delayed change will burst out:

  • Video ad networks/technologies YuMe and TremorVideo both went public. While neither was blockbuster, these IPOs signal that investors have enough confidence in the future of digital video that they'll put some chips on the table. They see advertisers using online video to extend their TV campaigns and this sector growing at rates far higher than the advertising market as a whole. 
  • Two $400 million + deals for cross-device video ad technologies. The much-hyped AOL/Adap.tv deal and the quieter Extreme Reach/DG deal reflect different corporate strategies, but both are rooted in the idea that the distinctions between TV and digital video will continue to diminish. Marketers increasingly realize they must put their sight/sound/motion messages on every device if they hope to achieve the reach that TV alone used to deliver.
  • CBS/Time-Warner dispute. The mutual benefit of carriage fees has made the programmer/distributor relationship cozy for years. Now this relationship is fraying, and outright wars that include blackout of stations like the current CBS/Time-Warner fight have become increasingly common in the past couple of years. The lure to programmers of streaming their programs online increases in direct proportion to how contentious this relationship becomes.  
  • The rumored Viacom-Sony Internet carriage deal. Speaking of online streaming, this deal might just be the first major break that feeds current, top-tier programming directly to a streaming service. At the least, Viacom is using this threat to put additional pressure on cable/satellite distributors by just talking to Sony about distributing via the Playstation.
  • Aereo continues its expansion. This month and next, this service that feeds over-the-air channels onto the Internet will launch in Chicago, Miami, Houston, Utah, and Dallas. Having triumphed in court, Aereo is wasting no time in pursuing its goal to have 25% of Americans getting their major network programs from them in the next five years.

I hate to uses the cliché of a dam bursting, but it does have that feel. The TV industry has resisted change for a decade or more, but this sudden cluster of events demonstrates that the pressure has become irresistible and the immovable object has begun to shift. But how big will that movement be? Here are three questions I will be researching in the coming months that will determine whether real change occurs or if today's media behemoths just reshuffle the deck:

  • Will bundling crumble? Distributors and programmers have developed a cozy relationship around bundles: Comcast can't buy just ESPN, but they must buy a whole slew of ABC-Disney channels, including many little-watched channels. The current rumors of the Viacom-Sony deal indicate that it will be a bundle deal. If so, as far as the consumer is concerned, Internet TV is the same deal, just a different wire.
  • How will online services price content? The dream is that consumers will have a lower-cost option to the ever-growing cable bill, but the programmers have a big say. They want as much as they can get from the cable and satellite providers, so why should they settle for less from online streaming companies?
  • How much will broadband subscription prices rise? If cable companies lose TV subscription revenue and their bandwidth costs rise as video traffic surges, increasing monthly Internet subscription costs must follow. Consumers will do the math and, unless the Internet content fees + broadband cost is less than the cost of their current cable TV bundle, inertia will keep them firmly with their current provider.

What do you think: Are we on the verge of massive change? Or is the hype driving a bubble that will burst as the forces of the status quo bend the Internet to the old business model? Let me know what you think, and let's talk live as I conduct this research this fall.