Will Media Producers Embrace New Technology?

Jeremy Glaser: For Morningstar, I am Jeremy Glaser. I am here at the 2011 Consumer Electronics Show in Las Vegas and we've seen a lot of great shiny new gadgets like smartphones, tablets and connected TVs, but one of the things that we've wondered about is what kind of media are you going to be able to stream on to those devices.

Now, we've seen a handful of announcements related to actual media properties. Intel announced a new secure system that will allow a lot of Hollywood studios to stream high definition movies when they hit on Blu-ray to directly to your PC or to your TV and they don't have to worry about potential copyright infringement, and a few other partnerships like that.

But it does seem that a lot of the media companies that are represented here are taking very tentative steps into allowing a lot of their content to be completely uploaded and offloaded from the kind of traditional cable companies and broadcast networks they have been before into a decentralized, deaggregated content stream that seems like a lot of these new devices would be perfect for.

Certainly services like Hulu Plus and Netflix streaming and the Apple streaming store and Best Buy has a streaming store, and really everyone is trying to get this content out there, but it's coming in little dribs and drabs.

There are some shows are absolutely available while others aren't, you know live sports can be a little bit challenging to get. Microsoft announced their Xbox product that they'll have some ESPN content that will be available on the Xbox, but it's not really a universal way where someone who could take any piece of media they have anywhere and stream it on to any device they want.

And I think that people really want these devices. They really want the media on these things. So you can create the best device in the world, but unless you can convince the media producers to actually give it to you in the format that you want at a reasonable price that possibly isn't anything more than you are paying now for your cable, I think it's going to be difficult to see truly mass adoption and truly disruptive forces taking you away from the cable companies.

We had a chance to talk to an Executive Vice President at Samsung, and he had a lot to say about, what he thought if the cable companies would be destroyed in the next five years by this kind of disaggregation.

David Steel: No, I think it's hard to talk about people being cut out. At the moment, it's really an opportunity for a lot of different companies and everyone in the value chain ourselves included is trying to feel our way through this new landscape of smart connected devices. What do they mean, how should we adjust their business model, who should we be partnering with?

So cable companies, content creators, wireless companies, service providers and then hardware makers like ourselves are all finding our way through here looking at what consumers will use and enjoy and it's definitely a fast evolving landscape.

Glaser: So I think we agree that it's going to be certainly difficult for a company like Comcast or Time Warner Cable to just see their franchise disappear over time. I think those moats are there for a reason that a lot of the media companies like to have their content bundled like that. It helps them get new channels service new ideas to people and have them pay for stuff they might not necessarily want exactly.

But I think over the long term if you look really down the road, you are going to see that most of the content I think consumers are going to demand when they have these devices that it gets disaggregated, that it gets unbundled. I think that the cable companies are going to have to adapt to that. Now they have the pipe to the home, I think they'll be able to do it. It's not like their business will completely evaporate, but I think there is going to be a lot of changes and I think having all your devices connect to the Internet are going to really be the harbinger of a lot of those changes in the media industry.