This is part 2 of my six part series reporting and commenting on what the top media and technology execs had to say at two investor conferences. Today, Cable TV on the Internet – and tomorrow we’ll be talking about the ad market.
One of the more interesting themes of the DB media conference focused on how cable networks make money – and how they’ll continue to survive as everything starts being distributed through the Internet. Discovery, Scripps, ESPN, Turner and others tend to make 50% or more of their money via affiliate fees – a fixed amount that the cable or satellite providers pay them for every subscriber. These can range from a few pennies to more than $3 for ESPN.
Jeffrey Bewkes, CEO of Time Warner, has been promoting the idea of streaming your subscribed cable channels over the Internet. “We think.. everything on television should become available to you on broadband for free. You should be able to watch TNT, MTV, everything on demand.” He envisions the Internet as a huge video on demand box, letting you rewind, fast forward, even “take it with you on a mobile device. ”
The technology, according to Bewkes, exists today. “It’s easy to do, HBO has already done it.” He publicly called for every satellite and cable distributor to offer the same stuff on broadband. “the only condition is that everyone that gets it should be a multi-channel TV subscriber”, which covers about 90% of the households in the US. Turn it around, and according to Bewkes, “ Almost 100% of people with broadband are video subscribers.
Viacom’s Dauman agrees “are working with several operators with authentication”, to make that happen. But “it has to be seamless for consumer, you can’t type in your PIN every time” you want to watch MTV or Nick.
My take? It’s a slippery slope. We’re already seeing a significant fraction of people abandoning cable (ie multi-channel in Bewkes’ parlance) to stream everything via the Internet. Once you can get all your 120 channels on demand via the Internet, to any PC, phone or set top box, the whole concept of programming packages goes out the window. Why pay for a bundle of a hundred channels when, according to Bewkes, we typically only have five or ten favorites”. And when consumers can just opt to pay for their favorite channels, that puts half of most cable network’s revenue at risk. I might spend a buck a month for Discovery, but I’m not going to pay for Animal Planet or Discovery Health. Similarly, I’ll pay a quarter for Nickelodeon and food, but not MTV or DIY. And that’s going to mean real pain for many media companies. I say bring it on – but be careful what you wish for.
13 Comments
Of course we all know that we are in the middle of a media revolution. We don’t know for sure how it’s all going to shake out but I think we can see some signs of what the future holds.
I ‘m pretty sure that what the Internet did to the music industry is what the Internet will do to TV. We can see the impact of the democratizing effect the Internet has had on traditional newspapers. Craigslist has made one of newspapers most important revenue streams, classified ads, obsolete in about 6 or 7 years.
The unfortunate thing is that TV executives are reacting not much better than the way newspapers reacted to the Internet. TV executives have, for the most part, stuck their heads in the sand and continue to cling to a business model that is disappearing. Newspapers ignored and ridiculed blogs and bloggers for years. Then suddenly woke up and realized, too late, that blog were stealing their lunch money. Now every major newspaper has a “blog”.
Much the same, television has been slow to accept online video delivery. Why did it take two guys in their garage to invent YouTube?
I work with a guy who is 25 years old. I think he may be typical. He doesn’t even own a TV set but he loves to watch Stephen Colbert. He has to have high-speed internet. That’s how he gets his video.
Watch out television. The Internet is coming for you.
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