Monday, July 29, 2013

Reports Say Netflix Doesn't Hurt Cable

In a surprising research study done by TiVo, it shows that Netflix does not hurt TV viewing.  In other words, Netflix is seen more as another "channel" choice and not as a replacement to cable networks.  According to TiVo Research and Analyst chief Mark Lieberman, “'The future of television may tell a different story, but as of today we’ve found that the Netflix subscribers in our study are not watching less traditional TV.'”In fact Netflix users watch more premium shows on HBO and Showtime than non-Netflix users.  In other words, Netflix appeals to the heavy TV usage who wants more choice and sees Netflix as a complement to cable TV and not a replacement.

This research study just might let cable operators breathe a little easier knowing that Netflix isn't a cause for cord cutting.  At the same time, consumers are cutting the cord to cable in an ever increasing stream.  If Netflix isn't replacing cable subscriptions then what is?  Perhaps this younger demo is bypassing TV altogether for gaming on their Xbox and tablets. 

Aereo and Dish's Hopper All Because Of The VCR

In today's New York Times, David Carr provides some context behind the legal challenges defending the practices of both Aereo and the Hopper.  Broadcasters are especially worried because their revenue is now based on both retransmission license fees charged to cable operators and the advertising dollars they earn.  Aereo takes those over the air signals without paying for them and sells them with DVR capabilities to consumers.  Dish does pay but the Hopper enables quick skipping over all commercials. 

So how can Aereo and the Hopper continue to operate? According to David Carr's article, the rise of the betamax and VCRs resulted in " a landmark Supreme Court case in 1984 (that) held that taping and time-shifting on the part of viewers was “'legitimate fair use.'”  In addition, Cablevision's plan to offer a cloud DVR platform, rather than a box in the home, to record programming was also affirmed by the courts.  The result, the VCR started a disruptive trend that leads us to today.

The VCR was indeed a game changer.  No longer did viewers have to wait for a re-airing of a show they missed.  VCRs put consumers in control of watching shows when they wanted, as long as you knew how to set the clock in advance; otherwise, you had to be present to press record before leaving your TV set.  Still, it enabled viewers to go out, not worrying that they would miss their favorite TV shows or movies.  And even better, consumers could fast forward through commercials to watch only the show.  It is because of the VCR that the DVR became so successful. 

Still, Carr's article does not argue the other element of the Aereo business model, the over the air capture and re-delivery of its signals into home for a fee.  That piece is certainly a different issue from the ability to record in the cloud.  The argument for Aereo is that the broadcasters use of the airwaves to provide a free signal over the air enables them to capture and resend.  It is their added value that they charge a fee.  So far, the courts have sided with Aereo.

Given the current fight between Time Warner Cable and CBS over license fees, a court ruling defending Aereo's use of signals could be a game changer, enabling cable operators to follow the Aereo model, to build there own antenna farms, an idea that I have written about before and Mr. Carr approves.  "You could easily envision a cable company buying the idea and technology behind Aereo as a way to work around big retransmission fees."  Of course, broadcasters could change their model too as the Fox Network has speculated and become a cable network as well. Or that might just be an idle threat.