Monday, August 5, 2013

Have Cable Operators Painted Themselves Into A Corner?

The cable business model may just be broke.  As the very public spat between CBS and Time Warner Cable has shown, regardless of the outcome, the consumer has lost.  They have lost today as the CBS broadcast network and its sister cable networks like Showtime are dropped off the air and consumers will lose when they are put back on with higher license fees that will translate into higher subscriber fees.  It is a no win situation for all.

When cable television started, it was to provide broadcast signals to places that could not easily receive them over the air.  In addition, this wired service enabled a better signal and an opportunity to distribute more and more channels.  And so new cable networks emerged, some with little more than old shows and old movies.  ESPN's best show just might have been ping pong back then.  Consumers embraced this new distribution platform and happy to pay for a service that aggregated channels and sent them to the TV set.  New content programming was launched and our 13 channel universe doubled and doubled and doubled and doubled again.  And as audiences found these networks, so did advertisers.  Better programming was produced, higher fees were asked, and more channels kept coming.  And we as consumers couldn't be satiated.  We got on demand and DVRs to access and watch more and more content. We hit the 1000 channel mark and surpassed it.  Unfortunately, the price grew too at a better than inflationary rate.  This aggregated model has now become bloated and costly.

And then came broadband and a new streaming model that allowed content to be viewed away from the TV set.  This disruptive technology lowered the barriers to entry and new content was created, mainly UGC, user generated content, but now it has become the home for professionally produced content as well.  And consumers have found other aggregated content distribution models from You Tube to Netflix to Amazon.  And they have found a la carte from Apple and others.  This streaming model is an unlimited one as consumers no longer are limited to which distributor they want to buy their content from.

With so much streaming content competing for eyeballs with cable and broadcast, consumers can seek other options.  Exclusivity of programming will certainly prevent some content to be seen without a subscription but that seems to be the price that we must pay.  It is why Netflix charges a monthly subscription fee and why CBS is demanding higher fees as well.  As consumers, we can decide whether we want to pay it or not.  The current cable distribution platform model is broken and the future is beginning to look more and more like streaming and a la carte. 

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