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by Christopher Tozzi, Feb 09, 2018

Will Blockchain Technology Finally Kill Cable TV?


Cable TV

Internet-based video services like Netflix and YouTube have created significant competition for cable TV networks in recent years. Yet they have failed to kill cable entirely and they don’t appear poised to do so anytime soon. 

Now, a new set of video services that are built on blockchains are eyeing the cable industry for disruption. Can blockchain-based video platforms do what Netflix couldn’t and make cable TV a thing of the past?

Netflix vs. Cable

For years, pundits have been predicting the imminent demise of the cable TV industry as a result of competitors such as Netflix, YouTube and Hulu. (Hulu is a joint venture owned in part by several major cable companies, so its existence can be interpreted as confirmation by cable providers of just how worried they are about internet-based video services.)

Observers point out that streaming video services are less expensive than cable for most consumers. They’re also more convenient because users can watch video on demand, rather than having to orient their schedules around showtimes for programs that interest them.

Most internet-based video services also have the advantage of being available on any device and anywhere. Although some cable providers offer similar features for their customers, not all do.

Yet the fact remains that, even though Netflix now beats cable TV companies in numbers of subscribers, the cable TV industry shows no sign of dying anytime soon. Netflix’s streaming video service and YouTube are both now more than ten years old, and although they have become serious competitors to cable companies, they do not appear capable of disrupting cable TV totally. 

Several factors have constrained the ability of streaming video companies to disrupt the cable industry. They include:

  • Data costs and limited bandwidth. Consuming large amounts of streaming video via the internet requires a lot of data. Customers whose internet service provides limited bandwidth may not have excellent viewing experiences. Customers may also have to pay for the data they use to stream videos, especially on mobile devices.
  • Fixed payment models. Most streaming video services charge a flat flee. Users pay the same whether they watch hundreds of hours of video per month, or only a few. This pricing model can make the services less attractive to new users, who are unsure how often they’ll use them. Most cable plans work in the same way, but because consumers are already familiar with cable TV and have a sense of how much they’ll watch it, their pricing structure is not as problematic for attracting new business.
  • Cable’s response. Cable companies have responded to the threat from Netflix and the like by offering competing services of their own. As noted above, the Hulu streaming video service is owned in part by cable companies. Cable companies have also expanded offline on-demand viewing services to cater to customers who want to watch specific shows on their schedule. These options make services such as Netflix less attractive.
  • Content control. In many cases, cable companies own the distribution rights to the content they make available to viewers. Companies like Netflix can’t offer the same content. Those companies have responded by developing original content of their own, but the fact remains that some of the content that viewers want is not available from internet-based platforms. Content designed for a small audience, such as local news programs, is a particular challenge for companies such as Netflix to distribute.

Blockchain vs. Cable

Blockchain-based video services may not be able to solve all of these challenges, but they can innovate in ways that traditional internet-based streaming video companies cannot.

Using a decentralized video streaming service, such as Viewly or Livepeer, anyone can create and distribute content with little overhead. This model empowers content producers to generate custom content that a service like Netflix would not distribute. 

For example, a local news station might distribute its evening program via a blockchain-based network in order to reach users without relying on a cable network. This approach is also more advantageous than uploading videos to a site such as YouTube, where the station would have little control over who can view its content or how it is redistributed. Blockchain technology makes it easy to customize the terms that govern content consumption. 

A centralized streaming video platform like Netflix requires a massive amount of IT infrastructure. In this way, Netflix is similar to cable companies. These costs are part of the reason why Netflix and Hulu, which was once free but is no longer, charge for their services.

Blockchain-based streaming video does not require such overhead. Using a blockchain and software like Livepeer’s decentralized media server nodes, users can create the infrastructure required to stream video using ordinary computers that they already own. The much lower infrastructure costs associated with the blockchain video streaming model can translate to low-cost or free video services, a major advantage over the likes of Netflix as well as cable TV.

Due in part to lower infrastructure costs, blockchain-based video streaming can provide cost-efficient service. If users pay a fee at all, it can be aligned with the amount of content they consume, rather than based on a flat subscription rate. In addition, fees can be offset by the work that users perform to contribute to the network; this is the model that Livepeer follows, for example.

Blockchain technology allows users to pay for services based not only on how much they consume but also on how much they like what they watch. Startups like Stream reward content producers on the basis of the number of views that their videos receive. Steemit, a blockchain-based platform with a similar rewards model that is currently oriented around text-based content, could be extended to support video as well.

Users whose internet bandwidth is currently too low to support streaming video in real-time are unable to use services like Netflix. There is no way to download a video on Netflix over a period of time and watch it later when the download is complete. Similarly, users who are worried about the data costs associated with streaming content from a mobile phone while away from home cannot download content over Wi-Fi to watch later.

Using decentralized video distribution networks, however, consumption models like this would be possible. Although most existing blockchain-based video platforms are designed primarily for real-time streaming, there is no reason why they could not also support content downloads.

In addition, by leveraging decentralized networks to serve video, blockchain platforms can potentially achieve higher bandwidth rates than centralized streaming services. 

There are some challenges associated with cable TV that blockchain platforms cannot currently solve. They’re not in a position to acquire distribution rights for big-name TV shows, for example.

But blockchain technology can solve the infrastructure challenges, bandwidth limitations and inefficient pricing models that stifle both cable TV and traditional online video streaming companies.

To be sure, the cable industry is safe for the time being, because most blockchain media startups remain in their infancy. In the long term, however, blockchain technology promises to enable a new generation of innovation in video streaming and consumption that poses a more fundamental challenge to the cable industry than the likes of Netflix.