Great article in Fortune about "The Jeff's" - Bewkes, Immelt, and Zucker - and the planned spinoff of Time Warner Cable from Time Warner Entertainment.
Where verticle integration was once key to control, Time Warners separation of content from distribution seems to indicate otherwise. Each entity would be free to go after more of its own to get larger and stronger. For Time Warner Entertainment, the chance to increase its content holdings with the acquisition of NBCU from GE. And for Time Warner Cable, the chance to work toward the acquisition of the Cablevision Systems, 3.0 million strong, in the NYC metro. Viacom made the decision to sell its cable systems a decade or so ago to concentrate on content ownership.
So, which would you rather be, content king or distribution king?
A look at other industries affected by technological change may provide a clue. For the railroad owner, changes in transportation made the airline owner more convenient and faster. The horse and carriage trade lost out to the automobile. Speed and convenience was again a factor in consumers switching providers. And with the internet, broadband beat dsl and dial-up; speed and convenience.
So now comes the entertainment industry. Cable pricing is going up faster than inflation. Consumers are tired of all the choice and would prefer a la carte, provided that the total cost remained cheaper. Content owners have found a way to directly reach viewers through an internet connection. Just watch the usage rates at Hulu continue to soar. While those that rely on a license fee are reluctant to change the model; aggressive upstarts with nothing to lose are reaching viewers directly through IPTV. As content owners separate from content distributors, watch as a new battle begins to emerge.
