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The fifth generation (5G) of technology for wireless communication is coming soon, in the next two to three years in the U.S., according to the Red Chalk Group, with similar timelines in other pioneering countries. I expect nothing less than a disruption in the media and entertainment industry.
To make the case on how the change will be transformational, think how fourth generation (4G) telecommunications brought one major change in the way we consume media. From the first to the second decade of this century when 4G was introduced, we went from a culture of downloading content on home computers to a culture of streaming on mobile devices. 4G enabled fast enough streaming capability for us to enjoy quality content like music and video on our mobile devices. So how will 5G transform media and entertainment in the next decade? The impacts can be classified into content innovation, value chain effects, and consumption effects.
Red Chalk Group
Red Chalk Group developed this timeline for 5G implementation as follows: 1st Phase underway with 5G tests by Verizon and ATT. In the 2nd Phase, early 5G implementations in high-demand density areas will co-exist with 4G networks. In the 3rd Phase, full 5G deployment will occur, including in low-density areas.
5G will impact media consumption thanks to significant technical improvements in transmission speed, quality, and reliability, which will drive innovation in content.
Transmission Speed: Download speeds are bound to increase at least tenfold compared to 4G, and for true 5G standards, it could be up to 100-fold. So if an HD movie takes six minutes to download in a 4G network, with 5G it could take a handful of seconds. Also, in the era of user-generated content, photo and video upload speeds will improve, fueling social media content.
5G promises to enable close to zero latency between a streaming source and the viewer (from tens of milliseconds to less than three). The effect was well put by Juan C. Archila, Executive Vice-President of International Relations at America Movil, a global mobile network operator present in 26 countries and No. 340 in Forbes Global 2000 List: “With 5G, negligible latency will bring a new era of professional live-streaming of sports and other live events. User-generated live streams will also proliferate, although new challenges will emerge to limit violent or inappropriate content.”
A 4G culture taught us to be impatient. We are willing to sacrifice quality in order to avoid waiting. That is, we are ok with a half-quality stream as long as we get our content fix, uninterrupted. With 5G, there will be less of a trade-off between quality and speed. You will be able to get HD quality video on a fast, reliable stream, with little buffering.
These dramatic improvements in speed, quality, and reliability during media consumption will lead to radical innovations in premium content, such as dedicated virtual reality sports channels and multi-player mobile games. Chris McCann from Verizon’s Corporate Communications, states: “We see the distribution of high-resolution digital content and media as a tremendous opportunity for the technology.”
Value chain effects
In the internet era, it is easier and less costly to distribute content, so top content creators and owners have enjoyed a favorable position in the value chain to capture profits and margins. “Content is king,” many industry experts claim. But with 5G, the power will tilt back in favor of distribution. 5G providers will own the most fertile land to distribute the best content, and content providers will have to pay the price.
5G network providers will get plenty of market power, at the expense of cable broadband providers like Comcast. Expect cable providers to partner with, acquire, or be acquired by 5G mobile providers. Also, expect tech companies like Facebook, Google, and Amazon to try to enter the 5G game. Already, Amazon is reportedly in talks with Dish Network to develop a 5G network.
Transaction cost economics can shed a light on how consumer demand and behavior will change. Right now, streaming is preferred because of the high cost and delays from ownership. Downloading a movie can cost about $15 to $20 for an HD version. Downloading a song can cost up to $1. The economics of renting or streaming content is favorable, especially for content that we only consume once.
In terms of delays, in a culture of impatience, downloading content is on the losing end because streaming happens faster. But that will change with 5G. The time it will take to download digitally-heavy content like TV, film, or games will go down dramatically, to seconds. And viewing the downloaded version will be less subject to connectivity problems when we are on the go. Therefore, we should see a move back to downloading on mobile devices, either through online purchases or by using the download function of streaming services like Netflix or Spotify.
Looking at the economics of the industry’s value chain and of consumer behavior, we can predict that 5G will lead to major content innovation, a move to live-streaming, and a come back of downloading. But this is just the tip of the iceberg and as often happens in technological transformations, there are many other impacts of 5G that cannot be foreseen, so we will just have to wait and see.
Dr. Granados is an Information Systems professor at Pepperdine Graziadio Business School. He researches digital trends in travel, media, and entertainment. Follow him on Twitter, Forbes.