This post originally appeared as an insight for Outsell’s customers. Republished with permission.
Will pay-TV companies continue to try to control access to content, or will they decide that their core business is something simpler, and possibly more profitable? Two keynote speakers at NYC Television Week differ.
Important Details
At NYC Television Week in New York on Monday, two keynote speakers presented entirely different visions of the future of television.
http://nyctelevisionweek.com
David Stern, NBA commissioner and attorney, told Multichannel News Editor-in-Chief Mark Robichaux that “TV Everywhere is going to be an accepted part of our video and television infrastructure“. Stern’s vision is that teams and leagues will contract with channels, which will work with pay-TV providers to charge consumers to watch games on the internet.
That same day, analyst Craig Moffett told his audience, “Imagine a world where content was purchased directly by the consumer. … The business that [the cable operator is] in is not buying and selling content, the business that I’m in is delivering content.”
These vision are mutually exclusive. In the short term, we can expect and emphasis on TV Everywhere from pay-TV providers. In the longer term, it’s far from clear that this is the right path.
Implications
Because of their desire to preserve their bundle, pay-TV operators take on many businesses and expenses that are unrelated to the one business they do that no on else can do: operate the pipe that connects consumers’ homes to the internet. These businesses include development, distribution, and maintenance of devices in the home, such as cable boxes, cable cards, and DVR’s; operation of vast fleets of service personnel and vehicles to maintain these devices and the connection to the video services; provision of cloud services, such as video on demand, virtual DVR’s and authentication services for TV everywhere; operation of the back-end services for delivering linear video the home; negotiation with cable channels, broadcasters, producers, and others for rights to video content; and running vast sales and customer service bureaucracies devoted to video channels and services.
As one point, not that long ago, there was genuine synergy between all these elements. It was necessary to bundle these services to create a product that consumers could understand, afford, and use. They became something that was more valuable than the sum of its parts: a simple linear television service that could be operated with a simple remote by a simple person.
But now the bundle is more complex. It is almost certainly hiding inefficient businesses that are cross-subsidized by the more-profitable core business. Meanwhile, the internet continues to innovate — from billion-dollar service providers, all the way down to the devices consumers hold in their hands. And, finally, content creators (including sports teams) may decide to take more control of their distribution.
The pay-TV industry will be unable to keep pace with change in the open market, and therefore its strategy must be to slow the pace of change.
Also, it’s also not clear how to transition from being a pay-TV provider to being a pure-play internet service provider. It’s also not clear what the regulatory implications of such a move would be.
Cable companies could find a profitable equilibrium at the end of either path. Consumers may finally come to love TV Everywhere in 2014.
But in the long run, cable companies may decide to be just cable companies.