Media Mind, Product Thoughts

Reboot Cable By Making it All Internet, All the Time

Dear Comcast (and other providers): it’s time to change your model. Creative destruction is the way Cable companies can become more than a mere pipe to the Internet.  Wikipedia defines this term, first coined by philosopher Joseph Schumpeter, by stating: “innovative entry by entrepreneurs was the force that sustained long-term economic growth, even as it destroyed the value of established companies and laborers that enjoyed some degree of monopoly power derived from previous technological, organizational, regulatory, and economic paradigms.”  Cable must change by offering a la carte programming to subscribers whereever and whenever they are, or Netflix, Hulu, Apple, or Amazon may leapfrog it by being able to offer the customer choice and convenience.

Having just re-enabled my Netflix subscription after a few years away, I think that the only place Cable companies can compete successfully is in the realm of sports.  Movies, TV shows, and other events have already time-shifted (and paradigm-shifted) to being available on partner web sites or individually available through services like iTunes.  So how can Cable compete? Imagine a world where MLB.tv, NFL Gamepass (not available in the US), and ESPN3 are available for a bundled price along with an Cable Internet package.  Comcast has already stuck a toe in the water here by offering ESPN3 to its subscribers through Single Sign-on (SSO).

The genius of Netflix is that the company uses Single Sign-on (in a very simple way) and builds intelligence into its clients so that the experience is optimized for the platform you choose to use.  Stream content on an iPhone, through a Wii, or through your computer, and the result is not quite perfect, but it’s most of the way there.  As compression algorithms improve, broadband speeds increase, and computer processor speeds grow, Netflix wins.  It’s much easier to use than other methods like BitTorrent (you know all of your content is legal) or iTunes (you don’t have to download the content and it’s a familiar “all-you-can-eat” model.

Cable companies will complain that the quality of service is lousy, that the public won’t like the potential technical challenges, and that the rights management and fees don’t add up to positive economic gain.  Yet events like this year’s World Cup broadcast over Univision and ESPN3 garnered millions of viewers around the world who were clearly engaged enough, technically savvy, and football-crazy to watch whereever they were. And if Comcast is losing a customer like me (I am a technically savvy, lucrative customer, who left because I couldn’t make their Video On Demand (VOD) service work the way I needed it too for my family), it’s not a good sign.

Now’s the time to open up the door to other live channels, yet simply change the transport mechanism so that we can watch the channels we want, at the time we want, and on the devices we want, without having to add the overhead of all of the silly channels no one watches.  Make Cable an actual free market experiment and let the pricing on events float (within a range), offering high-quality replays for less money, and I’m sure that most people will end up spending far more per month than they did under the old, monolithic, “bundling” model.  I’m still using a set-top box: it’s just that now that box is a Wii or a Blu-Ray player, running Netflix.

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4 thoughts on “Reboot Cable By Making it All Internet, All the Time

  1. I don’t think the cable companies are ABLE to change. They have their business model and can’t unwind themselves from it.

    My money is on Apple.

    Their latest Apple TV is even easier to use, they have a strong network already established with iTunes which already has imposed high switching costs and they are beginning to institute programs (ping) to increase network effects. They are not burdened by legacy business…

    It’s all set up for them. People are ready, the technology is almost there.

    MS has the Xbox and XBox live but that has a smaller audience and a smaller demographic.

    iTunes – iPhone – iPad – apple tv == no need for cable.

    1. Greg –
      I think that AppleTV has a great model so far — yet no one has cracked the “live event” solution. For recorded shows and movies there are many great solutions, but not for live events. ESPN3 and Univision did a great job on the World Cup this year – we need similar attention for all live sporting and newsworthy events.

      AppleTV could dip a toe in the water by sponsoring and streaming live concerts. Listening, Steve Jobs?

      –g

  2. Hi Greg,

    Like you, I think AppleTV is a great product, and overall has a great consumer-focused ecosystem and business model.

    However, one both cable and satellite providers seem to have a substantial leg-up on AppleTV because they have already negotiated carriage rights to the content. When it comes to on-demand style programming, it’s easier to add “On-Demand” rights via a pre-existing carriage contract than through a totally new business arrangement like Apple and more recently, Google are pursuing.

    With this in mind, it may be a difficult up-hill road for pure internet-play companies such as Apple and Google to execute long-term executing under a “free” or “freemium” style business model.

    The problem as I see it is that Apple is executing on a pure-internet play when Cable doesn’t necessarily need to compete because it already has content and carriage agreements established along with the customerbase.

    It would be better for Apple to extend their existing arrangements much like Google recently extended their existing arrangements with Verizon.

    Remember, Verizon has a number of carriage agreements via their FiOS business.

    Apple does not.

    1. Jeff –

      Great points here. What about the argument that carriage rights are periodically renegotiated (take, for example, the potential NFL lockout in 2011 as an event that might trigger such a renegotiation) and that these new players may trigger new models?

      Don’t underestimate the ability of NFL owners to see dollar signs in new revenue streams and to very narrowly slice the definition of existing agreements to capitalize on new potential agreements.

      In addition, Verizon may have carriage agreements through their FiOS service but I would guess they would choose a similar model that Comcast does today (e.g. sign up for our internet or other services, get SSO-protected online access to the content that we carry through our providers).

      It will be interesting to see what happens.

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