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Me TV: the idiot box gets smart and personal

Two years after it launched its first line of commercial television transceivers in 1948, the Zenith Radio Corporation unveiled a device that would come to fundamentally alter the audience's relationship with the idiot box: the remote control.

Two years after it launched its first line of commercial television transceivers in 1948, the Zenith Radio Corporation unveiled a device that would come to fundamentally alter the audience's relationship with the idiot box: the remote control.

That small hand-held device, then connected to the television by wire, has in six decades become the tipping point in consumer electronics. TV audiences are no longer content to watch programs as scheduled; they now want programming at the press of a button.

In America, that revolution has played out quickly in the past decade, as new players such as Netflix, Hulu and Amazon have pushed aggressively into the broadcast market, aggregating old content and sinking billions of dollars into new, forcing traditional players, such as free-to-air and cable TV, to share their audience and revenue.

In Australia, that revolution has been slower to come, impeded by a cumbersome legislative environment, an anti-competitive broadcast culture and sub-par internet speeds. But as Australia plays technological catch-up, the stage has been set for the biggest revolution in TV history.

Historically, the good, the bad and the ugly were packaged and sold to audiences as a job lot, either in a network schedule, or a package of pay TV channels.

Now, feeling empowered, audiences are for the first time asking why they can't just pick and choose the content they want.

"There have been huge financial barriers to entry thus far," says EzyFlix chief executive Craig White. Sub-par internet speeds, he says, also held back the development of IPTV. "But for ourselves and others, those costs and technologies have changed dramatically in that we're now able to provide a good consumer experience," he says.

IPTV (or internet protocol television) is essentially TV-like services delivered by broadband. What left it languishing in the technological shadows for many years was a disconnect between content source and target audience. Or put simply, we knew what it was, we just didn't quite know how we were meant to watch it.

The answer has come in a new generation of remote control-powered devices - typically smart TVs and set-top boxes, but also game consoles, computers, tablet devices and mobile phones - which have built a bridge over the top of the traditional framework for film and TV distribution.

For that reason, they are called OTT services - or "over the top" - because they essentially leap-frog cinemas and TV networks to deliver on-demand content to audiences. The reason they're such a significant threat is that they also leap-frog traditional revenue streams.

In simple terms, they cut out the middle man. And that has a lot of middle men worried.

Television industry analyst Steve Allen, from Fusion Strategy, says Australia's traditional players are very conscious of the shifting paradigm. "They're very aware of the danger, but the biggest challenge [for IPTV] is getting the content right," Allen says.

In the United States, the IPTV market is booming. The titanic players on that landscape are Netflix, Hulu and iTunes, but a stack of second-tier players, including Amazon, Google Play, Cinema Now, Crackle, Vudu, Redbox, Flixster, HBO Go and Blockbuster, are gaining ground.

All of them are essentially offering applications, or app-based "channels" that serve as navigable tools to search and play library content through smart TVs or streaming boxes such as the Netgear NeoTV, Apple TV, Toshiba Symbio, WDTV Live or Roku.

They tend to offer content along similar lines: new and classic Hollywood films and blue-chip and library TV series. Among the strongest performers are top-tier US cable series, such as Breaking Bad, Boardwalk Empire, Dexter, Homeland and Game of Thrones, as well as original series, such as House of Cards and Orange is the New Black.

In Australia, the market is naturally smaller, and almost entirely dependent on imported content. Both Netflix and Hulu have flagged interest in launching here but have yet to make any formal steps towards it. A number of smaller players have launched, such as Fetch TV, Quickflix, Bigpond Movies, Playstation Network, XBox Live and, this week, EzyFlix.

Foxtel, which has hitherto taken a conservative approach to IPTV, has begun to expand aggressively, launching the tablet-based Foxtel Go, the internet-powered Foxtel Play and parallel services delivered via the XBox and other devices. "It's very simple, it really is a great opportunity to reach customers we may not ordinarily get," says Foxtel's executive director of product Jim Rudder. "Foxtel Play is certainly not a replacement for big Foxtel, with ... over 100 channels, but here we're appealing to a different market, which wants greater flexibility."

Rudder says the shift in consumer expectation was clearly felt when they launched the tablet and phone-based Foxtel Go app, based on its successful 2012 London Olympic games app.

"It took off much faster than we thought," he says. "We've had over a million downloads of the Go app, which has been a tremendous reaction."

The biggest challenge IPTV businesses face in Australia is content: a breadth and depth of material to provide a critical volume for viewers to choose from, and the right mix of valuable television properties. In that sense, free-to-air and pay TV, which still control major sport and other live events, will remain dominant players for the foreseeable future.

"When pay TV came into this country, the two drivers were movies and sport. Movies are matter of fact these days, so the biggest impediment for IPTV in Australia is [the lack of] live sports," Allen says.

Local IPTV players will also be hampered by the size of the market. "The big problem is 23 million people and how do you afford quality content that's home grown," he says. The local market will be developed by international players with proprietary content, such as Netflix and Hulu, he predicts.

White believes audience inertia - fuelled by fairly robust service in Australia from free-to-air and pay TV - have contributed to the consumer scepticism about IPTV until now.

"It is day one, broadly speaking, so it's very early days and Australians have been able to get great content in a number of different places and we've never had the choices or exposure to subscription TV like the penetration of 75 per cent the industry enjoys in the United States," White says.

One positive outcome will be lower prices as competition in the on-demand market heats up. An early sign of that is Foxtel's Play service which, while smaller in overall volume, has a significantly lower price and, significantly, does not require a contract.

In the US, cable TV costs about $US50 to $US90 a month. In Australia it can be higher. IPTV services in the US such as Netflix and Hulu Plus offer monthly subscriptions of about $US10 or less, and other services are either free but ad-supported (such as Hulu and Crackle) or offer consumers pay-as-you-go-TV (iTunes, Amazon).

Momentum, say White and Rudder, is being created by the removal of a technological barrier. "A couple of years ago it wasn't feasible to deliver Foxtel via the internet and now as a result of broadband speeds, which are faster, data caps which have increased and have become cheaper and the prevalence of wi-fi, we can," says Rudder.

"And people want to watch video. [Online] video is growing faster than Facebook and Twitter. It's a huge growth area. And as a result there is a huge demand for content."

Exactly how it plays out in Australia remains to be seen, particularly in light of the opportunities (or threat, depending on your perspective) offered by the government's national broadband network, or the less-powerful alternative offered by the opposition. What is certain is this: time and tide wait for no man. Nor television network.

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