Sir Jobs Slays the Telco Dragon

image from news.cnet.com
Yesterday was a long day for me, I was presenting the results of a study to a customer and talked for nearly 6 hours straight. You would have thought that, sitting in the airport with a 3 hour wait ahead of me I would stay away from work related topics. But I had my ipad with me, the wifi was pretty decent (if expensive) and my twitter stream was yelling at me that Steve Jobs was announcing lots of really cool stuff.

So I plugged into the live stream of the Apple conference (not that good in terms of quality, or rather, really good when it worked, but it didn't work all that often…) and listened to Steve Jobs explaining in his low key manner how he was going to destroy the business model of a few other players in the industry.

I have already noted this oddity (in my opinion) that telcos blame Google for sending them too much traffic but not Apple for destroying their business models. Strange behaviour, for sure, but this might very well change now.

You see, beyond the fact that Jobs singlehandedly crushed any value in Myspace last night (Murdoch must be so happy right now…) by announcing Ping, he more importantly told telcos, and especially cablecos the world over: "let's start digging the tomb of linear TV, and by the way, you can forget about VoD revenues."

Ironically, this was a big topic of discussion and debate during the project reading that day. Discussing the importance of offering linear TV in attracting customers to FTTH, one of the guys in the customers' team was convinced that the shift from linear to on-demand would be fast and that within a few years, not offering TV would no longer be an issue. I disagreed, using the usual arguments of football and other live events keeping the linear going for a long time.

Now I'm not so sure anymore. Apple really hit all the right spots with the new Apple TV. Jobs shot most of my arguments a few hours after I made them:

  • "The physical real estate in front of the TV is limited, and wives will refuse another box in the living room": Jobs launches a tiny, discreet box that no one needs to see…
  • "It'll be a US-Centric offering and therefore not relevant in European markets for a while to come": Jobs launches in US, Canada, UK, France, Germany and Australia from day one with more to come. Note that this doesn't tell us what content will be available where…
  • "It'll be an expensive device in the Apple tradition of paying for brand and design": Jobs announces a $99 device, dropped from the previous $299 version…

So all I have left now is football. People will want linear TV for live sports. But not everyone is that sensitive to sports and willing to pay a high premium just for that, especially when world cup events and such are available on free to air channels. So the question then becomes, if Apple accelerates the delinearisation trend and most non-sports content becomes consumed on-demand, what happens to the premium sports side of the overall economy? Is it sustainable on its own ? I don't know. I still think the process will take time, but it might take less time than I was willing to concede yesterday.

The fact remains that if telcos who do IPTV and cablecos dismissed the threat until now, they can no longer do so. For telcos, this is a revenue stream they were hoping would become core (and for some already has become core) that goes away. For cablecos, it's a direct threat of cord-cutting that's looming. They should all be having crisis meetings this morning…

And again, Apple, the trusted hardware company that telcos know and love has swept the rug under their feet. But chances are, they'll still blame Google for disintermediation…