Alberto Mingardi  

The new future of television?

Nudge, Policy, and the Endowme... Who's Second-Guessing...

Google is launching a new device, Chromecast, which has been hailed as a potential "game changer" for the television market. If I get it right, Chromecast basically allows you to bring your web streaming to your television. This would allow customers not only to change their TV diet substantially, but also to profoundly change their relationship with TV networks.

In front of our TVs, we are relatively passive viewers. Our freedom vis-à-vis the content producers is epitomized by the remote control. This has given us options, but typically in a number that looks more and more "finite", as opposed to the seemingly never ending, eccentric possibilities provided by the world wide web.

Reading about Chromecast, however, I couldn't but think how many memorial services have been celebrated for television in the past. And yet the TV is still with us. Look at the Internet, once forecast to be the killer of traditional television. In the last few years, Internet consumers increased dramatically - but the Internet itself became more and more "televised". Think about streaming video, or YouTube for that matter. The game may be to overcome by a device, not to get rid of the bundle of content associated with it.

A few years ago, Russ Roberts wrote a short novel entitled "The Choice: A Fable of Free Trade and Protectionism". Roberts' book is a fine variation on the theme of Charles Dickens' "A Christmas Carol". This time it is not Ebenezer Scrooge who receives a visit from the ghost that will offer him a chance to redeem his life. It is instead the ghost of David Ricardo that comes alive to discuss international trade theory and policy with Ed Johnson, a fictional American television manufacturer seeking trade protection from Japanese competition in the 1960s. Johnson's argument against free trade is based on the need to protect his employees from the negative impacts of a foreign product that can overtake the market. Ricardo will show him, in a sort of "sliding doors" effect, how protectionism today can change the future tomorrow. The reader will understand that Mr Johnson may have a truly benevolent approach towards his employees and their community, and yet the set of policies he advocates are not necessarily in their interest in the long run.

Bringing together Russ Roberts and Chromecast, we should marvel at the resiliency of television - and its apparently never-ending mutations. When I was a big consumer of television, in Italy in the 80s and early 90s, state monopoly had just been broken by the entrepreneurial genius of Mr Berlusconi, which circumvented the regulations that prohibited nation-wide TV airing by private companies to broadcast TV at the national scale. One of the immediate consequence of that was a much more contestable market for TV advertising, which meant among other things a wider and more diversified supply of cartoons for people my age back then.

No entrepreneur loves competition for the sake of competition, and after opening it spectacularly, Mr Berlusconi was all for finding a new market equilibrium between the public and the private (i.e., himself) provider. The next breakthrough was in the 2000s, when satellite TV really took off (Italy never had cable), and that enormously increased the supply to TV customers.

But think about technology, too. Today's flat, wide-screen television would have looked like Star Trek-science fiction to my parents some twenty years ago. TV proves to be extremely resilient and adaptive, integrating into itself access to Internet but also recording features that were typical only of VCRs.

Looking at contemporary TV and thinking back on the old TV sets we used to own, I think it is a good exercise for understanding what happens when you have a free market. Products and services are not set in stone: they change, they evolve, they adapt. So does consumers' demand, likely to point "where no man has gone before" as soon as that becomes technologically feasible.

A government actively involved in "protecting" the TV industry from Google Chromecast, for example, would produce exactly the kind of future the ghost of Ricardo was showing to Ed Johnson as the outcome of protectionist policy. A poorer place.

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COMMENTS (3 to date)
Daublin writes:

Among my friends, streaming services are steadily replacing broadcast, which I'll include cable. I don't know anything about Chromecast in particular, but Netflix, Pandora, Hulu, and Spotify have lots to offer compared to broadcast TV.

As well, I broadcast video mostly being consumed with a DVR as an intermediary.

A large +1 on the comment about protecting the TV industry. We live in a time of technological change. We will not reap the benefits unless we let the blacksmiths and buggy makers fade away.

Gordon writes:

The problem is that devices like Chromecast are limited by an underlying area where free market competition does not yet exist. In the U.S., people don't have unrestricted choices yet for whom is running cable and telephone wires to their homes and these are the main conduits for getting broadband connectivity. For example, my mother's cable company provided extremely poor service in which the cable was out for many hours each day. But using the phone company's DSL service to stream video was not an option for her because of the prices they charged for her bandwidth usage.

Handle writes:

"I couldn't but think how many memorial services have been celebrated for television in the past. And yet the TV is still with us."

Not a strong argument. What's the trend line look like? It seems to me we're past peak-TV. I haven't had TV for several years now, and more and more of my friends have opted for cord-cutting because of streaming options.

I'd submit that there's a core 'conventional-TV' audience that watches many hours of TV a day, which tends to be older or poorer or less educated, and that they will be slow to budge. But outside the core audience there is an accelerating flight.

This matters because the core audience isn't the prime-demographic wanted most by advertisers, affluent folks between 25-54. When you see TV numbers and you realize the large and growing split between core and prime audiences, you can't help but start writing dirges for CONV-TV.

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