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Here at Cable Tech Talk, I generally try to keep it civil. I believe in a discourse based on facts, not emotion. I think that the best ideas win.
But I’m going to come right out and say it: The Atlantic‘s Max Fisher has written one of the most uninformed articles I’ve ever seen on the cable industry. (It feels like he has inserted a vague reference to the just-released National Broadband Plan to increase his likelihood of getting page views.)
His thesis is “Cable TV Is Doomed,” which is fine. One could make a rational case that other competitors will eventually overtake cable or you could argue that consumers will eventually seek other entertainment choices over television. But I got as far as the second paragraph before the thing fell apart.
Cable TV was always a bad model for the consumer because, in a sense, you’re paying twice. When you watch The Daily Show, for example, you pay the cable company to bring Comedy Central’s programming into your home. But you also contribute to Comedy Central’s bottom line by watching its ads. However, the Internet allows you to connect directly to Comedy Central without the cable company go-between. You only pay once — either with your eyeballs on ComedyCentral.com, or with your wallet on iTunes. (Sure, you have to pay for Internet access, but if you consider it a necessary utility rather than an optional luxury, as the FCC’s national broadband plan clearly does, then that cost is incidental. That is, access to streaming TV shows isn’t the primary reason you buy Internet access. It’s a bonus.)
For thirty years, cable (and, more recently, satellite and telco providers) has been based on a dual revenue model. Currently, just over 100 million Americans are making a conscious choice every month to subscribe. And the evidence shows that subscriptions keep increasing (300,000 new multichannel video subscribers were added in the last quarter) and the number of hours that people watch cable programming continues to climb.
Broadcasting is, by definition, “broad.” It reaches a lot of people and makes money from advertising, but now even broadcasters are looking at generating revenue from distributors since the ad market has been suffering.
Cable programmers are able to target niche audiences and collect carriage fees from operators for the distribution rights and advertising for delivering desirable viewers. Without the advertising, consumers would have to pay a larger fee for access. If a programmer went ad-free, (a few basic cable nets don’t have advertising) it would be tougher to produce compelling new content. Fisher seems to see this as some sort of scam, but then he goes on to immediately note that you don’t really get Internet content for free either, since you’ll first have to pay for broadband access.
Fisher thinks that Hulu (ad-supported) and iTunes (which he calls a form of “micro-payment,” which it isn’t) are “more cost-effective,” because you only pay for what you watch. Of course, content on Hulu has already made its money elsewhere and is being offered on a secondary basis; even with that, Hulu is not proving to be profitable and the company has already indicated it is considering moving to a subscription model. And as for iTunes, I recently pointed out on this blog, that you might pay $40 for a season of a single cable program. Fisher buries down in a footnote this admission: “Five hours of TV a day multiplied by $2 per hour-long show would means $300 a month on cable. That’s too much.”
But back to the programmers’ dual revenue approach. That’s how they can afford to produce the programming. Fisher says that the goal is to eliminate the “cable-bill middle-man,” and instead pay Hulu a subscription fee. But Hulu would then have to turn around and pay the programmer a fee for distribution rights and you end right back up with the cable model.
Mari Silbey at the MediaExperiences2Go blog addressed the issue that it’s a lot easier for cable operators to add Internet content than for over-the-top video providers (such as Hulu) to add “a full slate of premium TV content to their services.” She also hits the other key point: the “model is moving toward IP (not Internet) delivery.” A cable operator could use Internet Protocol to move the bits that make up your favorite TV show; that’s not the same as Internet content. What makes the difference between services like Hulu & iTunes versus cable is about what content you can offer. You either have to produce the content yourself or you have to be willing to pay for it.
Take a look back at my write-up of the Cuban-Ronen debate. You might also want to take a look at an article Fisher’s own Atlantic colleague Derek Thompson, who made the case against paying for individual shows.
I’m happy to discuss the future of video entertainment and how it will reach the home in the future. But the sticking point is almost always in how to recover the production costs.
(Even Lauren Weinstein, at the Network Neutrality Squad forum, acknowledges that “the concept of purely ‘a la carte’ programming (regardless of the delivery mechanism) carries with it the risk of a ‘race to the bottom’ of lowest common denominator programming that will appeal to the most people.”)
Consequently, I have a knee-jerk visceral reaction when I read things like this: “I’m thinking something bigger — like tens of thousands, maybe hundreds of thousands, or even millions of customers canceling their subscriptions or deciding not to pay their cable bill, meanwhile educating each other on how to find other ways to get the same programming.”
But you can’t duplicate your cable line-up online for free. Not yet. And I have difficulty seeing a future in which you will.