Cable May Be the Next Internet Victim

It´s true a massive migration to portable media devices has been occurring since the last years.
But we can´t forget two big keys features that benefit the cable distribution industry: “Habit of the audience” and “Platform”.

In the western hemisphere from Alaska to the Patagonia, the people have the habit of watching T.V.. Yes you can download almost any kind of media content to your iPhone, BlackBerry or any other hybrid  communication gadget. But some people get frustrated when words like Looking for, Downloading…, Communicating, or any other term equal to Wait appears on the screen.

Now in this precise moment, there are people thinking how to create and distribute any kind of media content. But these new delightful bits of information/recreation aren´t free!. So even if cable disappeared to give to the audience a new horizon full of pseudo free-mobility state of mind, is just temporary until the final user
check the phone bill.

I believe that a selection of new possibilities will appear for the user, customizable packages for your TV at home (paying just for the content that you want to receive and watch), a globalization of the media content available online, big cities newspapers that really give you the chance to read the whole edition without be a member (fee free!)

Other thing that hurts the transition to a whole unit for everything is that if you spend 8 or more hours working in front of a PC, sometimes you just want to unplugged yourself from the machine.

Also parents pay for cable, satellite, etc… for the same reason that bought boxes of cereal or cookies: for them and  their kids, because even my older son with just 4 years old, is now going online and playing games, watch cartoons and
speak with my dad in South America using Skype or Messenger… but he still crying if mommy try to change from PBS Sprout to CNN.

Now, in this stuck-market epoch, companies are cutting expenses drastically. So, where are the clients to pay the advertising that keep running the "free content" in several websites. This economic phenomenon could affect the whole entire structure of the distribution on-line.

Content is a good, like milk, laundry detergent or diapers. It's possible that for some people these goods are irrelevant, for other people are a necessary expense. The prices of these products can vary because of the sales volume and the level of quality.

There is a lot of people involved in the manufacturing of any commercial good, for example bread, we ever think how many people is involved in the whole process that finish with a bag of sliced bread in the shelve of a supermarket?

The same structural logic can be apply to analyze how complex is the creation, production and distribution of an audiovisual product (sitcom, documentary, game show, etc...)

And don't get me wrong, I love freebies, but in this particular case... whether we like it or not, somebody has to pay.

Let's go back to the supermarket scenario... Imagine that you receive a shopping cart full of different products, delivery every two weeks to your door. Your bags include a lot of different items, and your bill is always the same amount every month, but you are a little bit frustrated because you receive always the same two items: Shrimp and mustard! Why you should pay for those items if you don't like mustard and, you are allergic to shrimp...!

That's something that the cable companies should be more than focused in fix, let the audience select the content that the want, and based on the selection charge for the content that you want to consume, is fair to pay for 160 channels when you really enjoy watching just less than 19 channels?

The first disaggregation (or dismemberment for the less squeamish) for the cable industry to go through is the separation of content vs. delivery mechanism. And it's happening already. When you can get the same content, without commercial interruption, on a website, why would you bother with a cable subscription? Only so that you can access that content quickly (if you're a cable modem subscriber)... otherwise, if your connection is of another sort (DSL, satellite), there's not a lot of need for the cable company to be presenting you with a bill. The problem with being in that 'sweet spot' of being the delivery mechanism is that it takes enormous amounts of capital to put infrastructure in place, and once it's there, you hope to optimize it for long time periods. Ask the old telco folks who were amortizing their investments over 30 or 50 years. But in our era, the technology is changing from year to year for that famous 'last mile.' 

So tell me.... if you were a content creator, why on earth would you hitch your wagon to a company that's counting on long term stability of technology like cable? One reason and one reason only: Money. To date, the only way for a content creator to really assure a revenue flow is to sell his or her programming to a cable network, who in turn sells it to the subscriber. If the content creator could cut one or two layers of that supply chain, they can lower the cost to the subscriber, and/or pocket more profit. 

But until someone figures out the way to get the money out of the subscribers' pockets and into the content creators' pockets directly, the cable companies will keep their stranglehold.

Hello Peter!

Thank you for the interesting post. I am wondering  what will happen in the countries where the cable is not so widely used as in the US. Will they have a cable stage or they will be switched directly to the Internet?

The cable-based content providers of today have already begun to straddle the Internet and cable for delivery of their content. At the end of the day, they will follow their primary revenue source, advertising. If the advertisers shift their spend to the Net, watch how fast the content goes. Their basic business model is the same, and they get a "free" distribution network with only their own last mile being a cost.

That should have been the case with the newspaper/magazine industry. Back in the olden days, the Washington Post played around with Digital Ink. Instead of giving the content away, they got hung up on subscription pricing--like the WSJ still does. They can't claim they were blind-sided--just that they turned a blind eye.

But if we are not talking about the content providers--but the infrastructure providers, that is an interesting thought. How does the cable franshise owner compete going forward? They have to find a way to use the infrastructure they own to deliver either unique content, or at least unique bundles of content. And the gates are wide open here. Cable, FIOS, Wireless--all have a place in the sun if the cards are played right.

At my house today, the cable only goes to my office, where it provides the fastest pipe I can buy in my neighborhood. Wireless spreads that around the house, and we use that for VoIP and traditional Net access.

Someone mentioned video-on-demand as the end-all. I still remember the trials in Orlando (our servers held the content). I think I've shared this before here--the most popular application during the trial was the ability to order postage stamps online from the USPS, and have them delivered by the mail carrier the next postal service day. The free--read that again--free first run movies didn't even place or show.

Hi Peter,

Very interesting post. It is very interesting to study how cable, somehow, has maintained its reign in this time. However, as you say, I don’t believe either it will last for that long (unless cable changes its model). If you think about it: 1) There is that box sold by people like Netflix, which you can access to as many movies as you want for something like $9 a month. There is a version of that box that will come out soon with more than 100 cable channels affiliated. 2) Most networks websites have their entire shows online for everyone to watch for free. 3) Hulu has risen, which I am sure will not be alone in the battle of free content over the web. Cable is king right now, but for how long?

I ditched my cable three years ago after realizing I have DVDs and watch certain shows on the tube. Most of those shows can be watched online.

Since then my belief for cable companies has been customization. Let me select up to five channels per month for say 14.95. Chances are I still would have been a customer.

Besides, with people having to work more (those still employed and some working two or more jobs), very few people have less time to watch prime time shows. I have watched cable in hotel rooms and nothing has changed in three years. So I am glad to have ditched cable, saving $60/month.

Nevertheless, what has happened to the newspaper industry and music industry will also be doubted by the cable industry. Dinosaurs do not change; they just die.

I am currently in the US, and recently I was thinking I was paying to much for cable TV (since I barely watch more than a couple of TV shows that where mostly broadcasted on free over the air signals). What kept hooked to cable was the DVR, as as student, my schedule is hectic and fairly unpredictable, therefore I liked the fact of watching 24 at 1am, or Lost while having breakfast. 

I thought that the movies I saw on cable were mostly old ones (TNT, USA, etc) since I did not pay for any previous channels (HBO, Showtime, etc), but then realize there was netflix or redbox for that. Is it going to rain? there is a website for that, where I do not have to wait to see my local forecast. And then came online broadcast, first on each broacasters website and then hulu.com. that was it, the DVR made its way back to its creator. I now prefer to pay a little more for bandwith and just watch basic channels.

another interestic issue arises when you go overseas, outside the reach of the copyright infrigement laws, where they might be a law, but nobody to enforce it.

there you could have seen in the past that one might have to wait months if not years to see a translated version of american series. Eventually translated subtitles made the wait shorter (you hear english, read spanish or whatever). There was a boom in cable!

Now, you can donwload a copy of your favorite shows virtually minutes after it is broadcasted in the USA, and if you do not speak english, just wait a few hours and you get your languages subtitles, This is the fastest video on demand ypu can get, all thanks to the bittorrent network.  Now cable looks like old TV, suitable for those ignorants of the power of the net. 

If you do not want to wait, tune into other places such as justin.tv, where people rebroadcast american tv into the net. 

eventually "video on demand" will replace cable, (and also BluRays Disks). The consumer motto will be something like those annoying lawyers tv ads (those who promise you to get your money fast), they will say: "I want my content, and I want it NOW!" 

Internet users are not just good at getting to the source of content, they consistently demand the ability to customize and personalize that content. Seems to me that a big weakness in the current cable business model is the inability to customize the programming package at a granular level (e.g., channel lineup). Comcast has recently even made changes to its guide-based interface that makes it harder to delete channels from the listings, so that I have to skip past 10 home shopping and religious programming channels to get from the local stations to the sports lineup.

I am not an expert on the cable industry, but I suspect there are some economies of scale that cable carriers get by bundling channels that target very small niche audiences, so that each channel has potential exposure to a far larger number of people than would choose it from an a-la-carte menu of options in advance. That model serves the cable comapnies and the niche channels fairly well, and serves the audience poorly because people start to feel that they are paying for lots of content they don't really want and never really consume.

If the Web breaks cable, it will do so by tearing apart those programming bundles, giving customers a way to pay only for the content they really want. Just as newspapers can't sustain their business by charging for individual articles (even though that's how people consume news on the Web), the cable companies will not be able to survive this kind of deep segmentation and disaggregation of their audience.

This why cable maybe the next internet victim , we're going to wireless , in the next few yrs we won't need to get cable to access TVs , we've seen innovations for Mobile TV like the google one and other mobile companies doing their research to bring TV to their cell phones , if we can get TVs on our cell phone how to wast times buying cable and wasting times to do installation ?

I need my house connected to the rest of the electronic world so I can get

• Phonecalls
• Internet Access - Web Sites, Email etc.
• Over-the air TV
• Subscription TV stations
• Movies and Pay per view events

There are various companies and industries providing this where I live - but essentially it is all the same thing

• Comcast CABLE, a cable company, will provide all the above services
• Verizon FIOS, a phone company, will provide all the above services

Or I can pick providers who can do some services

• ISP like Earthlink can provide Phone and Internet
• Satellite Disk Provider can provide all the TV and movie options
• Buy select services from Verizon
• Buy select services from Comcast

The whole world of phone company, cable company, ISP and Satellite Dish are evolving to compete with each other - who will own the line into my house that connects me to the "global net."