As TV Migrates Online, Cable Is Under Pressure to Change
By Matt Twomey
CNBC.com
19 May 2013 | 12:12 PM ET
http://www.cnbc.com/id/100739314
It's a long time coming, but television content is showing up on non-TV
screens like never before, and people are willing to pay for it.
Whatever will become of cable?
For one, experts say, cable companies may finally be forced to kill
their sacred cash cow: bundled channels. The battle lines are drawn.
There's Aereo, which takes the old-fashioned TV signal from the air and
delivers it to you with the Internet's help, cutting out the cable guy.
As for content beyond what's on the airwaves, big players—Amazon,
Netflix, Hulu and Google/YouTube—are frantically creating and/or
partnering for it at an accelerating pace.
On the other side is Disney's ABC live streaming all the network's
content online, which may look like a similar move but the objective is
opposite: by offering Watch ABC's live streaming only to authenticated
subscribers, it's shoring up the existing framework (the relaunched app
went online in New York City and Philadelphia this week and will spread
nationwide through the summer; restricted access begins July 1). Same
goes for HBO Go: Despite some loose talk from CEO Richard Plepler
suggesting the Web service could be bundled with broadband, Time Warner
CEO Jeff Bewkes said no, we've got some pretty important relationships
with cable providers to protect.
"You can't bet against the incumbents," said Cameron Yuill, CEO of
AdGent Digital, a tablet advertising and digital media company. Still,
he noted, the pressure is mounting for the Old Guard to change its ways.
"Bundling is a dead man walking," Yuill said, adding that as
alternatives to cable/satellite become better and more widespread, those
companies will "no longer have the luxury of not allowing the one thing
that consumers most want"—a la carte TV, instead of paying for hundreds
of channels few want or watch.
Some are even trying make cable unbundling happen by law—Arizona Senator
John McCain is pushing it in legislation he introduced on May 9, the
Television Consumer Freedom Act of 2013.
"They're going to have to bend a little on their delivery systems," said
Debra Caruso Marrone, owner of New York media relations firm DJC
Communications and blogger at TVTakesAll.com. Aside from cable
companies' forcing bundling, she said, "You can't watch what's on your
DVR from your iPad, even if you're in your own home. They're behind the
times."
The best bet for breaking the cable/satellite stronghold, Yuill said,
may be the route Fox followed to transform itself into a major network:
Sports. "If the NFL started to go direct to consumers, that could be an
absolute game changer."
CBS chief Les Moonves told CNBC that Aereo "is not a serious threat" and
claimed the service is illegal, because it charges for transmitting the
signal produced by CBS without paying the network anything. In response,
IAC CEO Barry Diller, which owns Aereo, told CNBC's "Squawk on the
Street" that the company owes no more to networks than Radio Shack does
for selling a TV antenna.
Aereo, which has been in New York for a year, this week launched in
Boston and is headed to Atlanta next month.
Television and Web pioneer Scott Kurnit said cable companies need not be
too worried about Aereo; if it's determined to be quite legal (it has
one legal victory in its pocket already), they can simply duplicate the
service and pocket the retransmission fees they currently pay the networks.
Perhaps that's why the networks feel the most heat. Moonves even
threatened to turn off CBS's over-the-air transmission and become just
another cable network.
"It would be a fascinating issue for the FCC," said Kurnit, adding that
if that bandwidth were then turned over to the mobile Internet it would
be great for digital consumers. "I'd love that," said Kurnit, who
founded About.com and the first pay-per-view cable network.
On the other hand, that would leave out in the cold the 17 percent of
Americans who still count on the over-the-air transmission.
While Aereo may be of little concern for now, there may be more to sweat
from the content threats.
Google's YouTube launched 53 pay channels (typically a few dollars per
month) with 30 partners last week. Then DreamWorks Animation bought a
YouTube channel—Awesomeness—for $33 million. Amazon last month released
14 original series, and on Friday signed an exclusive deal with
Comcast's NBC/Universal to stream five of its shows on Amazon Prime
Instant Video service. (Disclosure: Comcast is the parent company of
NBC/Universal and CNBC.)
Netflix is shooting the second season of it's well-received original
series "House of Cards," and it added 2 million subscribers—a 7 percent
gain—in the quarter when this first effort was released. And rabid
"Arrested Development" fans are planning marathon viewing parties of
long-awaited Season 4—all 15 episodes will be released exclusively on
Netflix on May 26.
Can Big Cable adapt? Andrew Susskind of Drexel University's Westphal
College of Media Arts & Design said it can hold onto its incumbent's
advantage by becoming more flexible on bundling and getting more
aggressive on video-on-demand. "Essentially making more or all content
available, all the time, to anyone, on any device."
DePauw University Media Studies Professor Jeff McCall agrees. "Cable's
financial model will undoubtedly have to change," he said. "Big cablers
have long thought they only competed against themselves. Now they need
to justify their existence more broadly, particularly to younger
audiences for whom traditional television, even cable, is just not that
essential or relevant anymore."
URL: http://www.cnbc.com/100739314
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