The Pay TV industry is ripe for change. Outdated technologies and business models will give way to modernity. The challenge for Pay TV's incumbents is to overcome their own inertia and create something new. Earlier this year, Comcast launched a tech R&D fund to award "general and targeted research grants and provide support for open source development." The specific focus on building open source software for home gateways is indicative of the changes that the cable industry is anticipating. The internet revolution is finally making its way into Pay TV. As technologies develop and converge, the distinction between televisions and computers will blur. Rather than having a set-top-box in the home, consumers will have "gateways" that communicate with a service provider via broadband. Content will be stored on the cloud, enabling limitless DVR and On Demand choices. Apps - just like on an iPhone or iPad - already reside on some devices in the home. Home "gateways" will also have their own new apps with advanced functionality that is optimized for the television experience. Comcast's new venture indicates two things: 1) they are willing to embrace change; and 2) they do not quite know how to do it.
With the launch of its new R&D fund, Comcast is acknowledging and embracing these challenges. Certainly Comcast intends to remain a primary content distributor. What is not clear is whether Comcast intends to use the output of these research projects to develop something bigger: specifically, a home gateway platform. Think Apple's App Store. Think Facebook. Think Android. These are huge technological platforms designed in a way that allows anyone in the world to build a service that functions within that platform. Think Pandora, Farmville, and Angry Birds. Comcast understands that the real winners are not the Pandoras and the Farmvilles of the world; the real winners are Apple, Facebook, and Google. What if Comcast turned itself into the platform for home gateways? The consumer's Pay TV provider might end up just being an app installed on the Comcast platform. It is not unreasonable: already Time Warner Cable is trying to decrease its hardware costs by testing an app on some consumer electronics devices.
Currently Comcast, like their competitors, is in the business of video distribution. They are not in the business of platform development. Yet. With this in mind, offering R&D grants to the smartest minds they can find is a brilliant way of bringing development expertise into their enterprise without incurring huge capital expenditures until they are ready for them. This may well serve as an example for how other outdated or inefficient industries or institutions might explore change.