As more and more devices are connected to the Internet, the sum of their parts becomes exponentially more valuable. Person-to-device and machine-to-machine communication will open up new applications from home security to energy conservation, which in theory will make all our lives easier. The Internet of Things (IoT) is already happening but is it happening outside of the broadcast and media industry or can businesses cash in?
Consumer electronics and Internet giants are making waves in this space. Through its connected home division, Next, Google acquired Revolv to link to the Android operating system. Samsung spent USD 200 million on SmartThings, which does a similar job of syncing connected gadgets in the home. Apple is making a play with Apple TV, iWatch, and iPhone all linked to IoS platform HomeKit, and Facebook's acquisition in January of voice-recognition start-up Wit.Ai is considered its first major foray into IoT. Such companies are spending billions of dollars to acquire entry points into the home. Yet service providers, who have long delivered entertainment into households, are already there. Multiple system operators (MSOs) from cable to telco and satellite DTH providers have existing devices like remote controls and set-top boxes and dongles in consumer premises and are now extending their reach over Wi-Fi as multi-service residential gateways.
A residential gateway has typically meant a device that provides voice, video, and Internet services, but new devices fitted with radios are being created to support IoT protocols like ZWave and ZigBee. The idea is that operators can not only synchronize with other devices in the home but also perform physical installation and maintenance on them, reducing the capital expenditure it takes to add on services. What is more, with existing, trusted, billing relationships with customers, they are arguably better placed to deliver additional services into the home. The MSOs have to continue to invest in the cloud since a lot of business intelligence for IoT will be housed there. Security of the home gateway is another very powerful way for them to capitalize on their already considerable investment in security for set-top boxes. Far-sighted service providers like Comcast in the US are already employing product teams of specialists in medical and assisted-living solutions, and experts in smartgrid and energy management to build its XFinity Home platform.
The bottom line is that operators' subscribers are being approached by cable providers, ISPs, telcos, utility companies, and others with IoT multi-service offerings. The core focus for monetization for operators will be with incremental subscriptions and a move away from being a dumb pipe provider for the customer. The trick is to make sure the MSO is always in the value chain. If they do not do it, then the likes of Google will go over the top and service providers would not be able to add value.
Not pie in the sky, the IoT represents a significant business opportunity. While ARPU may only add up to a fraction of the media and network access services revenues that incumbent operators currently enjoy, there is definite potential for accelerated growth at some point in the coming months. There are also opportunities for broadcasters and content owners to capitalize on the IoT. This ranges from crowd-sourced weather forecasts to building information from the IoT into talent show formats to judge the emotional response to a contestant. Some content owners may synchronize the overall viewing experience with the home, potentially controlling your lighting system in sync with a movie, TV show, or live event. There may be unique merchandising opportunities where content owners sell branded IoT devices to enhance the watching experience. For example, lighting for any kind of movie, vibrating seats for an action movie, or a device that releases aromas for kids' content. The IoT may be superficially about the automatic dimming of lights when you want to watch your favorite serial, but it has the potential to dramatically widen the sphere of the media and entertainment industry.
While nearly all types of media and entertainment businesses will benefit from the IoT, publishers and broadcasters are ahead of the curve. Many can already harvest various forms of data - location, behavioral, consumer-preference, and demographic among them - from a variety of devices and systems, construct detailed consumer profiles, and use them to create and instantly deliver personalized content across multiple screens. Other companies seeking a piece of the media and entertainment industry IoT pie include telecom and cable service providers, advertising and marketing agencies, information technology firms, consumer electronics manufacturers, TV and movie studios, sports organizations, recreational facilities, event promoters, gaming companies, and many others.