Andrew Walmsley on Digital: TV on the web is breaking down walled gardens

Andrew Walmsley
Andrew Walmsley

The 'walled-garden' mentality failed on the internet and now faces a similar fate in the TV industry

The small wastepaper bin filled with popcorn is £5; a fizzy drink so cold it gives you frostbite on the way in is £3. No cinema visit is complete without this ritual of excessive consumption, and no better demonstration exists of the value of captive audiences.

In ancient times, before the advent of the remote control, TV companies relied on the disinclination of their viewers to ease themselves from the comforting embrace of the sofa; capture someone early in the evening, and you could keep them all night.

There's money in sloth, and media companies have always known this. It was no different when the internet came along, and a variety of businesses relied upon consumers' desire to stay in their comfort zone. AOL and MSN for instance were both 'walled gardens' - proprietary networks that looked like the internet, but weren't. Instead, they commissioned all their own content and presented this to their customers.

It was a lucrative business, and the sky seemed to be the limit; at its peak, AOL was a $240bn company.

For a while they got away with it. However, as the amount of content on the web grew, customer demands for access to it grew. The walled gardens simply couldn't produce enough breadth and depth of content to rival the broader internet, and eventually, faced with accelerating defection rates, they opened up access beyond their walls to the open web.

Suddenly, rather than being in one vertically integrated package business, they were competing in two spaces. First, as an internet service provider - the pipe into the home - and second, as a content provider competing with everything else on the web.

These are very different businesses. Today, fewer consumers feel the need to retain their ISP's site as their homepage, and not all of them even offer one. ISPs have become suppliers of the plumbing, while websites are media businesses.

In the world of television, however, the walled garden is still alive and thriving. The dominant player in the UK, Sky, has more than 9m direct-to-home subscribers to its satellite system. Its advertising might have trumpeted 'choice' as being the key reason for consumers to adopt, but the reality is that the choice has always been Sky's.

Virgin TV is no different. Although it offers on-demand access to BBC, ITV and C4 content, it only carries that for which it has deals - the consumer can't yet watch YouTube on it.

For the time being, these operators can get away with their enclosed gardens. It is still seen as difficult to connect your computer to the TV, and content isn't presented simply enough. Last year, a Thinkbox research project reported that 12% of UK homes connect a computer to the TV.

However, developments next year could spell the end of the road for TV's walled garden. The rebirth of the Kangaroo project, bought by Arquiva and soon to be launched under the SeeSaw brand, will bring TV content from several broadcasters to the web in one place.

Project Canvas, the BBC-led initiative to bring video on demand to your TV via a set-top box, is planned to 'allow access to other internet services', according to the BBC's proposal in February.

ITV is set to bring its programming to Hulu, the web-based video-on-demand service, and Channel 4 now streams its programmes on YouTube.

The explosion of TV content on the public web, and its accessibility via the TV, is a pressure wave building behind those garden walls. The effect may be limited at the moment, but when the walls give way, the speed of change will be overwhelming.

Andrew Walmsley is co-founder of i-level

30 seconds on the value of cinema snacks

  • Ricard Gil, assistant professor in economics at the University of California, Santa Cruz, and Wesley Hartmann, associate professor of marketing at the Stanford Graduate School of Business, carried out research into concession purchases at a Spanish cinema chain over a five-year period. Their findings were published in February 2008.

  • They noted that cinemas rely on concession sales. Food and drinks account for only 20% of cinemas' gross revenues, but 40% of profits.

  • They concluded that setting concession prices on the high side made better commercial sense than raising the price of tickets, because the minority of die-hard movie-goers will buy snacks at any price, while the majority who attend only major releases were more likely to be put off by higher ticket prices.

  • If cinema popcorn were free, the price of tickets would have to rise by at least 25%.

  • The research also found that film-goers who buy tickets online and those who attend in groups are more likely to buy concession items.


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