Cable’s Binky at Risk: Rethinking Internet TV

 

binky

This NYTimes article is a wonderful example of the current struggle among industry players (Google, cable, television, and startups) when it comes to free, ad-supported programing. Here’s the “least you need to know,” followed by my predictions.

  1. The television industry’s push to web has given viewers “nirvana”: access to almost every show for immediate free viewing (often with ads). As a percentage, we online viewers are still the minority, but we’re growing rapidly (42 percent growth from Jan to Feb says comScore). If ABC’s “Lost” counted online viewers, according to Nielsen, ratings would be 25 percent higher.
  2. Cable is a $60 billion-a-year subscription business. Monthly bills are its binky. The revenues and stock prices of the major media companies have fallen significantly in the last six months, and advertisers can’t yet (or won’t) justify funding the model sufficiently. So industry players are questioning whether free is a sustainable model — and are grappling for reasons to keep us paying hefty cable bills.
  3. Time Warner Cable, the second-largest cable operator in the country, is working with customers in some markets to test subscriber-based TV viewing (limited access). AT&T, Comcast, DirecTV, Time Warner Cable and Verizon are among the companies exploring a subscribers-only approach to online TV. The distributors have approached cable channel companies like Viacom, owner of MTV, VH1 and Comedy Central; Scripps Networks, owner of HGTV and the Food Network; the BBC; and Discovery to talk about giving subscribers online access to their shows. Time Warner has also approached YouTube about distributing episodes from channels it controls. Almost every show from the broadcast networks is now free online, at the networks’ sites or at hubs like Hulu, while almost every cable show is not. But in recent months, there have been signs of retrenchment by the broadcasters; CBS no longer streams its hit show “The Mentalist,” for instance.
  4. Another trend that terrifies television networks and distributors is the prospect that Web video will move from the PC to the television itself. Products intended to bridge that gap, like the Apple TV set-top box and the Roku digital video player, are now used by only a small percentage of people but could become more popular.

Predictions

We’ll see a game of “Surviver” play out in the next 6-18 months, where the power of distribution/access (YouTube) is pitted against the power of content ownership (producers and networks). Loyalties will be tested, legacy intermediaries will be threatened, and startups will emerge (like Boxee). Think of the video marketplace as a “value chain” that flows from writers/producers to networks to distributors to video destinations and finally to audiences. Some content producers will cut their own deals “downstream” to snatch better margins and assert their influence, but potentially risk smaller audiences. Others will remain loyal to intermediaries, squirming at the deal structures but hoping they’ll be better represented long term.

To predict the winners, simply follow the money. Ultimately, we’ll see 3 models emerge from the chaos:

  • a free, ad-supported lower quality distribution (via PC and webTV) — will include amateurs
  • a subscription-based model for higher quality video (high definition) — may include amateurs
  • a “pay by demand” model for higher quality shows that we can rent or own — won’t help amateurs

Two viewer segments, I believe, will be quite satisfied: first, those of us willing to forgo quality to avoid fee-based programing will get our ad-supported shows online. Our options may be limited, but we’ll be happy. Second, the larger segment will continue with regular subscription fees (because we’re too lazy or confused by other choices).

Consider as an analogy the deregulation of energy: Monopolies thrive because we’re either too content or confused to bother finding alternatives. Your friends at Comcast, Verizon, Cox and Time Warner are counting on this.

The segment that will struggle is the growing audience that demands a la carte programing (in decent quality) in lieu of writing fat monthly subscription checks. As I said, cable’s “binky” is monthly subscription fees. But some of us will grow weary of paying for fixed packages when we don’t watch enough to justify them, and our innovative friends continue to gloat about their innovative alternatives. Instinctively, cable will try two things to preserve this precious segment: marketers will try increasing value (and there’s no shortage of new video content to justify high subscriptions), and the lawyers will remain busy squashing alternatives.

And it won’t be gentle. Ever seen a baby when you take its binky away?

Author: Nalts

Hi. I'm Nalts.

4 thoughts on “Cable’s Binky at Risk: Rethinking Internet TV”

  1. OMG, I can’t believe how cable is still trying to get my business, what a farkin’ outmoded entertainment delivery model.

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