What Cable is doing wrong

Earlier this week I outlined why I think cable (and by cable, I mean satellite, telco TV, etc.) are doing a great job with innovative new products like their iPad apps that include both on demand and live content. 2011 was a pivotal year where we saw that the future is not tied to a set-top box or a single device. Unfortunately, there is less innovation happening on the business side of things. We are still years off from a free market for TV programming. The film industry offers some compelling options now for digital distribution beyond even Netflix. Vudu, Apple, Amazon.com, Sony Pictures’ Crackle. They are all doing some nice stuff. We still see too much friction in getting new releases to the latest platforms in a timely fashion (why is the Netflix window later than Apple’s?) but the motion picture business is still doing a much better job than television. 

We should applaud the technical innovation in the TV business. Initiatives such as TV Everywhere are a great thing that add value to the existing pay TV subscription. This benefits all parties:

  • Customers get a  multi-platform value add to their existing subscription
  • Distributors get further lock-in to their subscription offerings and stay ahead of possible new entrants into the market. 
  • Programmers preserve a lucrative existing production and distribution model. This allows them to produce great (at least high production value) programming because of   committed fees they receive annually from distribution partners. Without those dollars, there would be no Shark Week. No Kardashians. Well, maybe the existing model isn’t such a great thing after all. 

But from a viewer perspective the cable companies and programmers are still moving too slowly. There are a few aggressive movers out there but for the most part the content libraries are still limited. It’s this scarcity that is the single biggest problem that they face. The technology problems have been or are being solved. That is less and less of an issue. And TV Everywhere authentication works pretty well. 

I spent the early part of this year working with the fine ladies and gents in the Brightcove London office. After returning to the US I wanted to catch up with a favorite cable drama that’s season was in progress. A great job for the TV Everywhere offerings! But only the most recent few episodes were available on either VOD or the iPad and PC offerings. The only way to get the full season - if one was so inclined - was to hit the torrents or to go back and time and set the DVR. 

I’ve brought this up with peers at cable TV programmers and it seems that despite the CES speeches and the great apps - there’s still not enough momentum behind TV Everywhere at the negotiating tables in New York, Philadelphia, Denver and beyond. There are several problems I am hearing about:

  • Cable providers are seeking long-term, very long-term, distribution deals that include all current and future distribution technologies. Smart approach, longer negotiation. Now that David Boies is finished with the NBA, maybe he can help. 
  • Programmers are hesitant to run older content on on-demand platforms including TV, PC, or iPad, because they will incur royalty charges that they don’t want to take on for an unproven model with little additional revenue...at this time. You can see this on the new platforms as well. Try to watch Always Sunny via Hulu on a Roku box - even with a Hulu Plus subscription. You can watch on the PC, but not the Roku box. What’s the difference?

I believe both issues are problematic, but the second in particular, is very short sighted. The future of the TV business requires, as the music industry showed us, unfettered access to all content on any device. These arbitrary (to the end user at least) distribution limitations will push viewers to alternative means of discovery. Time Warner Cable has already started calling itself a broadband company, not a cable company. And metered broadband is only a matter of time. Piracy and alternative legal means of distribution will eventually add up the same for the distributors. I believe it is actually the programmers that have the most to lose. 

If there is any actual cord shaving, cord cutting or cord nevering going on, I believe that it is choice and control that is driving this shift, not dollars. Viewers demand and expect unfettered access to everything they want to watch whenever they want it, and for that content to fit into how the Web works. Sharing via Facebook and Twitter (side note I think it's cute that people still say "social networks" as if there weren't just two that matter), IM, device compatibility. For distributors the loss of TV revenue may just really be a shift in revenue to broadband. For programmers this change could be catastrophic in the short term. 

Coming in the next few days - one big prediction for 2012. 

Eric Elia
@ericelia
VP, TV Solutions