Definitely Doug 11/17/23: The Hotel TV Dilemma

In case you missed the memo, people no longer watch television the way that they did ten years ago. Not at home, and not at hotels. Nielsen reported that streaming services cornered 34.8% of TV screen time in July 2022, when they overtook cable for the first time.  

The shift is hardly surprising. In 2013, cable TV was present in 90% of U.S. households, and most homes had about 189 channels (per Nielsen), but watched only an average of 17. As more and more prime content has moved to streaming channels, it made economic sense for viewers to ditch expensive cable bundles in favor of a-la-carte subscriptions to streaming services. While comparable current statistics are not readily available, the number of non-streaming channels watched is almost certainly going down; Gen Zs in 2021 preferred streaming services 77% of the time (vs. 40% for baby boomers).

Hotels have been slow to adapt. Part of the reason is that while the number of channels watched per household has been stable and likely declining, hotels must cater to many different guests who watch different subsets of channels.  Part of it has been the lack of simple solutions that can mimic the home environment, which has become well-integrated with mobile phones and streaming services.

Manufacturers of residential TVs and content control hardware such as Apple TV, Roku, Google TV, Amazon Fire, and others (including cable companies) have made it increasingly simple to mix and match content from so-called linear sources (cable, satellite, and roof antennas) with streaming sources – but mostly for the residential market.

The same products have proven difficult or impossible to adapt to hotels. One major issue is that Apple’s ecosystem is controlled and closed, while Android’s is open; the two don’t play together well. This matters little in residential environments, where most families need only one or the other. Hotels, on the other hand, need to support guests with both Apple and Android devices.

The Apple solutions can mostly support Android devices (with a few limitations), but the Android ones (which tend to be significantly less expensive) mostly cannot support Apple devices (at least, without the user having to purchase third-party apps).

Another major issue is that home solutions need only limited security: your personal information stays on your home network, except to authorize usage when you first log in to a streaming provider with whom you have an account.

Despite the undeniable shift of consumers towards streaming, most hotels support it poorly or not at all. Some hotels have added streaming for certain apps (such as Netflix and Hulu) into their in-room entertainment options, controlled by set-top (or set-back) boxes. This works, but (a) requires guests to enter their login and password, often using their remote-control arrow keys and an on-screen keyboard; (b) requires the set-top box to ensure that saved credentials are cleared when the guest checks out; and (c) offers a set of streaming services that may be both limited and slow to adapt over time. Streaming apps that the set-top box provider does not support cannot be accessed this way.

Guests usually have their streaming apps on their mobile devices but are challenged to connect them to hotel TVs. If you have several streaming services and want to browse them on a hotel guest entertainment solution that supports them all natively, then you still need to manually enter your credentials for each one, for each hotel stay – a high-friction process.

The more elegant option is to use the guest’s mobile device to authenticate each streaming app, but then to direct the streamed content to the TV rather than the mobile device. Technology from Apple and Google exists to do this, but only the Apple ecosystem can do it cleanly and safely.

An Apple TV device with mobile device management software can wipe out the user’s history (including login credentials for streaming services) when they check out.  Chromecast for Google TV is a technically similar solution for homes, but it is not offered in the hospitality market -- nor could it be without significant changes. It requires that the user log into their Google account, and it lacks the ability to clear their credentials (or be logged out) at checkout. This means the device would be left signed in for future occupants of the guest room to use (including the guest’s personal paid streaming subscriptions). This is not an issue in the residential market but is a non-starter for hotels.

For a time, the earlier generation of Chromecast devices (without Google TV) were seen as an interim solution for Android (and some Apple) guests in hotels, enabling content to be “cast” from the mobile device to the TV via the Chromecast device. The mobile device paired to a Chromecast device attached to the TV and then sent commands through the network to select and control content. The content is then delivered to the TV via the Wi-Fi network to the Chromecast device. Alternatively, the mobile device could send a real-time image of its display screen to the Chromecast device for display on the TV, via a wireless connection (known as mirroring). Some hotels have these older Chromecast devices, but they are no longer offered by Google.

These devices worked somewhat like Apple TV, although they handled only streaming content and mirroring (whereas Apple TV solutions could integrate content linear content sources as well). Setup was a bit more challenging, because the device usually required the user to switch the TV source, which most traditional hotel TV remotes could not accommodate (or if they could, it could easily lead to guest confusion, for example if a TV was left on the Chromecast source and the next guest wanted to watch a linear channel). The setup process on the Android phone was also cumbersome, having been designed for a home environment where you do it once and forget it. Few guests were willing to go through this for a short stay in a hotel.

For these and other reasons, Chromecast never really performed to expectation in hotels. Vendors who offered the choice of on-screen logins to streaming services (through a set-top box) and Chromecast found that a large majority of guests chose the on-screen login. While hardly frictionless, it was simpler and less problem-prone than Chromecast.

Google quietly discontinued marketing the original Chromecast devices about a year ago, transitioning to Chromecast with Google TV. This functions more like Apple TV, but as noted above is not suitable for hotels. Then this past summer, Google lost a huge patent infringement lawsuit over Chromecast, and was ordered by a jury to pay $338.7 million to TouchStream Technologies (Mark Munger wrote a great overview of this case last week; highly recommended reading if you have Chromecast in your hotels). While the unanimous jury verdict is being appealed and may well end up with a settlement, the legality of anything using Chromecast technology will be up in the air until appeals are exhausted or a settlement is reached.

Do We Need 100 Linear Channels?

Cable and satellite services provide bundled packages of linear TV channels to hotels, and these represent a major budget line item for most hotels. For more and more guests, however, there are only a few linear channels that they watch in hotels, typically with live broadcasts such as sports and news (in the US, the top linear channels in hotels are ESPN, Fox News, and CNN). Many but not all of these and other popular channels are also available for streaming (with or without a subscription, depending on the content).

Hotels may be unable to cut the linear TV cord today, but it would not surprise me if they can do so within the next year or two, as options for streaming news and sports increase. The cable and satellite companies understand this; many are offering incentives to lock in longer-term contracts and preserve revenue that they know is not sustainable under the evolving viewing habits of guests. Hotels that are thinking of signing such contracts should remember similar tactics from suppliers in the Wi-Fi space in the early 2000s and in pay-per-view TV a few years later. What might have seemed like a great deal at the time proved extraordinarily costly when the industry changed.

So How Can Hotels Support Streaming?

A reasonable objective is to replicate the home experience as closely (and as simply) as possible in hotels.

Today, this is possible using the iOS ecosystem, using Apple TV-based systems such as those offered by Roomnet and Monscierge (Roomnet’s platform sits behind some other commercial solutions as well).  While these solutions are not as cheap as some of the less-capable alternatives, they are starting to be able to offer linear channels natively, based on partnership agreements with content suppliers (rather than obtaining them via cable or satellite). This could relieve hotels of the substantial cost of paying for linear channels that guests rarely watch, substituting a-la-carte pricing for the ones they do. These products can also provide other cost savings and ancillary revenues through hotel services they may offer, such as a guest directory, food and beverage ordering, and other capabilities. In most cases, guest devices can be supported whether they are iOS or Android.

The return on investment for an Apple-based solutions will vary substantially depending on whether you can dump your linear channel package (meaning the solution can support the channels you need directly), how much the channels you really need would cost, and what ancillary revenues or cost savings you could achieve through the hotel-specific functionalities. But it is worth evaluating, if only so you will know when it is time to cut the cord on linear channels. That time is likely to arrive quite soon.

Android-based solutions from third parties, such as DIRECTV’s Advanced Entertainment Platform and DISH Business’s EVOLVE M1, have started to mature as well. While useful, the industry needs solutions from companies who, unlike DIRECTV and DISH, do not sell linear channels, since a major objective for hotels is the ability to get out of those expensive contracts that deliver lots of channels that guests rarely watch. I am aware of other efforts toward such independent solutions, but most are still in stealth mode or early stage (one, Telev8, did have a prototype product at HITEC in 2022). The experts I spoke with (including some with the companies involved) think these solutions still need to evolve. Many are also at risk from the unsettled IP litigation around Chromecast.

It is also entirely possible that Google will add the features needed to use Chromecast for Google TV in hospitality. This is not a minor ask; it will require mobile device management to clear credentials at check-out, eliminating the need for the guest to have (and log into) a Google account in favor of authenticating on their mobile device; provision of a default channel for hotel advertising; and curation of apps that the hotel wants to offer (as opposed to the entire Google Play store). However, I am not holding my breath that Google will do this, especially while the IP litigation is still ongoing. Once that is settled and the licensing options are clear, someone will solve this problem. But for now, it is a significant risk especially to early-stage companies that are typically the innovators.

Conclusion

The current environment for guest-room entertainment content is unsettled. Guest viewing habits have changed but the technology available to hotels has not yet caught up. There are available solutions based on Apple TV, but many hotels see them as too costly. Android platforms are considerably less expensive but have yet to evolve to support hotels’ needs. The Apple platforms may be cost-effective for more hotels if they can jettison their expensive linear content contracts, but that would require that more channels be available through the Apple platforms.

There is, however, a lot of innovation going on in both the Apple and Android spaces, and the options in a year or two may be quite different than today – especially if the cloud from the Chromecast litigation gets lifted. Stay tuned!

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