Editor's note:Somrat Niyogi is the CEO of Miso.
There are advantages and disadvantages of being one of the earlier companies in a very early market. While new companies get to watch, observe, and create their own insights based on product features incumbents develop, we get to constantly introspect on "what has worked" based on real data, real feedback, and being out in the market talking to partners.
The second screen space is going to be a multi-billion dollar market. Just last week, Tim Cook announced that 67M iPads were sold in less than two years. It took more than 24 years to sell that many Macs. With the growing trend of second screen activity (i.e. using tablets while you watch TV), there is bound to be major disruption in the TV industry.
The second screen affects the entire TV ecosystem
Networks and Advertisers
TV Networks are paying attention to this space because it's their business that is being affected the most. They buy shows and sell TV advertising against those shows. In the next month's upfronts, it's estimated over $9.2B of advertising will be committed to TV.
Of course, TV has been and will continue to be a huge reach play for advertisers, especially given the 300M people who watch TV every day in the US. But with the growing trend of time-shifted TV viewing and two-screen behavior, advertisers need to think differently. People aren't paying 100% attention to these TV shows in the way that they used to, so brands are starting to pay attention to make sure their ad dollars are more effective.
Now, networks are tasked with finding solutions and advertisers are starting to seek solutions themselves. For example, Chevy built their own app for Super Bowl. Coca-Cola built their own second screen advertising experience with the Polar Bears. Verizon was a major sponsor of The X-Factor app by Fox. Advertisers are even going directly to the production companies with the question: Mr. Production Studio Head, how are you using the second screen for your shows?
Production Companies
And that brings us to production companies, who have built shows in a specific way for decades. Showrunners, executive producers, and writers have only thought about what appears on the TV screen when they create their shows. For the most part, the big 55-inch TV screen will still be the primary medium, and the show structure will still be an episode with a beginning, a middle, and an end.
These shows are meant to capture the hearts and minds of millions of people so they will tune-in week after week, which means greater attention from audiences. But with the second screen becoming a major part of the TV viewing experience and the pressure from the networks and advertisers both to tap into this audience, it is no longer a one-screen world. It's a two-screen world.
The way television shows have been created for decades will change because advertisers and networks will be collaborating with the creative executives to address the second screen. Can you imagine a world where every show that you watch has a second screen experience to go along with it? It's coming.
Operators
Despite all the "cord-cutting" talk that we hear about, there really isn't a lot of cord-cutting happening anytime soon. Why? It's the TV Circle of Life.
It works like this: networks collect big checks from the operators, production companies collect big checks from the networks, and operators collect big checks from people like you and me. There is a lot of talk about new direct to consumer experiences (such as HBO GO, where you can watch HBO shows anywhere) and it's definitely interesting, and it is coming…but it's going to take a very very long time. Why? Because operators write checks.
HBO gets paid from the operators, and it is too risky to go direct to consumers because HBO has a business to run. They can't jeopardize the distribution of their content from operators like Comcast, DIRECTV, DISH, Time Warner Cable, etc.
Of course, operators are seeing the same opportunities as networks and production companies. They are also identifying new opportunities to add value to their subscription base, new opportunities for leverage in their network negotiations, and yes, new potential for better and more personalized advertising experiences.
TV Manufacturers
What about Samsung, Sony, LG – the TV manufacturers? Several new innovative companies are focused on making TVs smarter by embedding automatic content recognition (ACR) in the TV so the TV is no longer a dumb device. What this means is that in the future, we can have Bluetooth-like experiences with our TV.
You come home and turn on your TV, and your phone knows the TV is on and knows what's playing. This enables a new level of seamless communication and messaging. Profit margins of televisions are getting slimmer and slimmer, so TV manufacturers are trying to create new revenue streams, such as more targeted advertising on TV, content for their TVs, and yes, soon we'll see TVs powering the second screen experience.
But the biggest question that companies in the TV space are asking is: where is all the value? How can we extract new revenue streams? How can I make sure our existing business continues to grow? After all, this is an industry with a total of $200B in revenue.
So what's happening now? Everybody, and their mom, is jumping into the second screen space.
It's too easy to develop a second screen app
Yup, you heard me. It's too easy. Take three engineers from a top-tier school and after writing some Objective-C and doing some simplistic design…there you go, app is launched. Since we started Miso, there have been more than 100 second screen apps developed (and this doesn't even include the one-off iPhone apps that have been created by the networks).
This notion of simplicity is not just a problem in the second screen market – it's a problem in any market. We've obviously seen it in photo sharing (we know who has won that game) but in the second screen space the problem is magnified and you know who loses: YOU.
As a viewer, you're constantly given mixed messages: Download this app, now download this other app, and now go back to the other app, and by the way, this second screen thing is only available for about 10% of the shows you watch.
The experience of downloading an app for every single TV show is poor. Don't get me wrong, there is a time and place where this could work, such as huge tentpole shows like the Oscars or the Emmys. Even so, look at The Super Bowl. I think I could have downloaded at least 15 apps just to experience that one-time event.
Several second screen startups, including ourselves, are trying to aggregate experiences. But a single app to rule them all is tough. If there is any second screen company out there that thinks they have the answer, talk to me first. Email me at somrat@gomiso.com.
Developing a single second screen app that can deliver value for all types of TV programming is incredibly tough. It's incredibly tough because every show is different and every genre has its own unique challenges. Dramas are different than reality shows, which are vastly different from news programs. And let's not even talk about sports – that's its own beast in itself.
Long story short, it's hard to get the perfect second screen experience for everybody. Is it social, is it about content, is it loyalty? Is it all of the above? Even if you were to do all of the above, how do you get people to remember your app exists when people watch TV? How do you sustain audience while someone watches TV?
There is a growing trend of start-ups that are building "white-label" platforms for the networks to build one-off iPhone apps for their TV shows. While I believe there is a place for the top 5-10% of all TV programming, this doesn't scale for all TV shows. I love Modern Family, Big Bang Theory, and Dexter, but downloading an app for each of those shows seems too heavy. Even if there was an app for every show, users will not adopt all of these apps.
For new shows especially, it's hard to push a new app for something new and unknown versus shows in their second or later season. Apps for every show would also be a poor choice for the overall larger market. Every app may have its own user authentication, it's hard to bring your friends on board, and while content may be unique to that one app, as soon as you change the channel…you have to find a new app.
The question ultimately is: which experience is the most meaningful for me, the most personalized for me, and is available consistently every time I watch TV?
Users need aggregation and and utility
Aggregation keeps things simple
The reason why people sign-up for paid subscriptions versus buying TV shows one at a time on Amazon.com is because there is value in aggregation. With paid subscriptions, you have one place to go to when you want to watch TV. As my friend Jeremy would say, TV is about escape. As a paid TV subscriber, I can browse aimlessly, find a show, change the channel, go back to the original channel and so on. While there might be challenges with aspects of the experience, ultimately, aggregation is valuable because it simplifies the way you discover and experience a TV show.
And simplicity is key. Aggregation is not just valuable on the first screen, but also the second screen. One place you tune-in to while you watch TV.
Apps with Utility Have a First Mover Advantage
While companies like ourselves are building interactive platforms, one thing is missing that sets us and any second screen app back: utility. No matter how we look at it – some things won't change. You need to turn on the TV, find what to watch, change the channel or access your DVR.
As aggregators of content, paid TV providers and TV manufacturers are in a unique position to add a lot of value to the consumer by building more meaningful utility into their second screen experiences. We're already seeing this today from a few paid TV providers. There are second screen apps that have basic programming guides, remote control functions, the ability to set your DVR, and the ability to stream and watch shows right from the app itself.
Utility. It's utility that is the first driver of the second screen – but what's next? So you use the remote control on your iPad, what happens after that?
This is space rife with opportunity. In the same way I can watch Modern Family on any TV via any operator, can I get a second screen experience for any show via one device?
Imagine that no matter what you watch, you can get complementary experience. Best of all, even if you switch channels, you are still using a single app. Sounds pretty ideal right?
Here is where we are…there is a war for control
Everyone, and I mean everyone, is competing for attention on the second screen. The entire ecosystem is striving to aggregate audience for the second screen to sell new, personalized, and meaningful types of ad units.
Networks are the most aggressive in trying to control the second screen space because they have access to "exclusive" content, talent, and the scripts themselves while startups are trying to crack the code via social and community-driven efforts. Networks are in a tough position because they are ultimately serving the TV viewer, but at the same time they are trying to control their viewership audience. They want everyone to have a great experience for Modern Family no matter where they flock, but they ideally want those viewers to flock to ABC. This is why they develop their own apps and partner with social TV partners.
Operators haven't made any moves to control the second screen experience in their apps, but over the next 18 months we will see some action from several paid TV providers. Those that don't implement a second screen solution for their subscribers will be forced to by the ecosystem that feeds it – networks, advertisers, production companies – and miss out on valuable revenue streams.
As for TV manufacturers, if it's true that broadcasters and programmers (i.e. NBC, ABC) want to go do direct-to-consumer via Smart TVs, why couldn't TV manufacturers partake in the advertising revenue upside?
So, the question in the long run is: who is going to own the second screen?
In short: it's unclear. With startups and networks creating their own apps, operators entering the game soon, and TV manufacturers developing new hardware, it'll be interesting to see who pulls ahead.
The future we need: sharing, learning, and standardization.
If utility is the first key to the second screen experience, then operators and TV manufacturers are in a good place to win. But only if they can deliver more value than the utility itself. Operators, given their competitive nature, may want to pick their own solution. They can develop in-house by taking what is available out there (e.g. hashtagged tweets OR cast photos from IMDb). But there is much more to the second screen than the standard fare.
The networks have the ability to provide richer information such as behind-the-scenes content, commentary, or access to talent. They can even go one-step further for episodic content where the second screen is used to deepen the storyline, and it can be a new format for storytelling. If deeper content delivers the most value to the second screen interactive experience, how will the networks syndicate all this content to the companies that want access to it – namely operators, TV manufacturers, or even startups that are building second screen apps?
There needs to be standardization. There needs to be pipes that power the second screen economy.
Operators can obviously create tools for networks to get the "deeper content", but if every operator develops their own tools, will the networks use every single one? If you were an executive at NBC or Fox and either DIRECTV, Comcast, Time Warner Cable, or DISH came to you with their own tools, would you use them? Maybe…if they write a big enough check. But this won't scale.
It's possible that there will be a breakthrough startup that will become the "Facebook of the Second Screen" where all companies standardize on that single solution. But this will take time, given the way the TV ecosystem works.
Ultimately, the TV ecosystem needs to come together. People are on Facebook and Twitter and playing Angry Birds while watching TV… and this is detrimental for the entire TV business! TV ad dollars will be migrated unless we, as part of the TV industry, address the larger problem: attention. Attention is being diverted away from the production companies' shows and networks' ads, away from the TV, to something else – the second screen.
To share insights and learnings is key to the longer term success of the second screen. As an industry we need to put more emphasis on user research – understanding "what do people want as they watch TV?" What kind of experiences scale for different types of TV shows?
The war to capture people's attention on the second screen is more fragmented than ever, and unless we come together the fragmentation will continue. There seems to be a need for standards on how content gets authored, published and syndicated on the second screen. Otherwise, the casualty in all this is the average TV viewer.
We need to, most importantly, figure out what YOU, the viewer, wants. To succeed, we need to all come together, share our learnings, try new things…or we all lose.
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