Thursday, April 26, 2012

Web Upfronts Like The Early Days Of Cable

Cable Networks changed the video landscape for broadcast when they arrived on the scene.  Early on, broadcast networks pooh poohed cable.  Most offered short form content, lots of informercials, and little original content.  And what was delivered was everything from music videos to ping pong to old syndicated programming.  But cable networks kept chugging away, building content and creating their own award show to celebrate it - the heralded CableAce award.  Of course cable networks made it when they were accepted as Emmy nominations and soon after as multiple winners.  And broadcast responded by buying up cable networks.

Today, it is the web that is the upstart to cable and broadcast.  And like history repeating itself, they are pushing through with their own version of an advertising upfront and their own version of an award show.  But it is only time when the original web productions from folks like Netflix, Hulu, and others get accepted into the Emmy awards and Web TV is as viewed as much or more than a cable network.  They may be in the long tail now, but they are doing to cable networks what the cable networks did to broadcasters.

For Time Warner Cable, Data and Phone Matter Most

Time Warner Cable just released their quarterly financials and they confirm everything that has been speculated.  Operators may be losing cable subscribers, but they more than make up for it with broadband and telco customer growth.  The profit margin for cable distribution is eaten up by rising license fee costs, where the pipeline is a cash cow, already built and pushing profit like water through a faucet.

The broadband and telephone business have the best profit margins for Time Warner Cable and others; so that any gain more than offsets their cable sub drops.  It may also suggest that cord cutting as it relates to cable doesn't bother the  cable companies as long as the cord for broadband and phone remain attached.  TWC may have lost almost 100k cable customers in the quarter, but they added over 200k broadband and over 100k residential telephone customers.  As a result, their profit margin grew above expectations.  Frankly there is gold in that pipeline.

So shedding cable customers becomes less and less of a problem for cable operators.  There are other services that can better utilize the existing pipeline to the home.  It is why cable companies are adding security services to their business offerings.  The pipeline provides the conduit for communicating the security system back to base.  Cord cutting cable service; as costs for programming rises, it becomes a less profitable business.  The money is in the pipe to the home, not the content that runs through it.