So back in September ’08, when ESPN.com cut a deal with Verizon and AT&T to lock out subscribers to rival ISPs, I predicted the cable guys would try to lock up content of their own. and, indeed, the cable guys have proven uniquely ambitious. As reported at DSL Reports and elsewhere, the cable guys want to lock in all cable network programming. But subsequent reports, and a lack of object from competitors like DIRECTV, make it look more like a cable programming network play and less like an incumbent cable ISP play.
One way or another, I expect this to keep getting interesting over time.
More below . . .
I’m not really sure yet whether I think this is a good thing or a bad thing or just a silly thing. Not enough details are available to form an intelligent opinion. This, of course, has not stopped irrepressible cable cheerleader Craig Moffett from having orgamsic raptures over the brilliance of this strategy and reminding everyone that, as always, it is a swell time to buy cable stocks. (I swear, Moffett is to the cable industry what CNBC is to the financial sector).
At first, it seemed from this write up, that Comcast had deals with various cable network operators to be the exclusive provider of their content online. If you don’t subscribe to Comcast, too bad for you. That would, however, exclude telcos like Verizon, overbuilders like RCN, and DBS providers like DISH and DIRECTV. Given that plan, it would appear to be a tit-for-tat against Verizon, leveraging the superior market power of cable operators on the upstream programming market.
But this further report suggests something else. In this Ad Age article, quotes Time Warner CEO Jeffery Bewkes explaining the new intiative, dubbed “TV Anywhere,” as follows: “If you want to watch your favorite TV network or shows through broadband on any device — PCs or mobile — you can do it as long as you subscribe to any multichannel provider.” The fact that DIRECTV is cool with the plan would indicate that they see this as a way to leverage their content (John Malone owns both DIRECTV and Liberty Media) without requiring a subscription to their cable rivals. The lack of any backlash from the usual suspects in the MVPD world that could stand to lose under the way Comcast described this initially as exclusive to cable, e.g., telcos and overbuilders, would also seem to indicate that it is a strategy driven by content producers and a general effort to keep the availability of content online from trheateneing the existing MVPD model, as some have feared. (Mind you, I expect cable and broadcasters to continue to protest that “the internet” makes opwnership limits obsolete, even as they lock up content and tie it to MVPD subscriptions, but that is how it goes.)
Karl Bode thinks this ties into cable plans to make metered billing a profit center. Could be. But as long as Verizon is still deploying fiber, I can’t see metered billing being more than a stop-gap. Especially with DOCSIS 3 coming along, the argument that ISPs need to throttle the last mile would seem increasingly difficult to sustain as a competitive matter. Perhaps more importantly, cable operators and the content generators still seem puzzled over how to make money. These companies actually make money moving bits, but they dream of fat revenues from leveraging content and “owning” customers.
The one thing that does appear to be happening, however, is that we are seeing the continuing pull of fragementation games trying to wall off content and services on the one hand fighting with the actual desire of customers to use the network. Historically, the matter appears to be settled by user expectation. People put up with this fragmentation in the mobile world, where it has always existed and they always expect it. But they don’t tolerate it very well on the wireline side, where they are used to having pretty much the same internet no matter who sells them access.
My personal opinion is that the cable content guys have already missed the boat here. The future is increasingly in social networking to create communities around your shows and get people to watch in real time, and mobile access to maintain constant connection with fans. This is why everybody and his producer now has Twitter and Facebook widgets to put on your cell phone so they can keep you constantly stoked with promotionals and track your behavior so they can hit you with targeted advertising. Making it harder to access content and interrelate with other fans and with the community around programming is counterproductive to this. You want to make it as easy and attractive as possible for people to come and play on your online websites so you can sell them to online advertisers and sell other forms of personal information. Proving subscription to an MVPD in this universe is likely to be a nuisance and incurs expense to the content provider that is not offset by any new revenue brought in by the online visitors.
I suppose, depending on how this plays out, you can try to exact some additional revenue somewhere. But, at least at the moment, I’m not sure where. It is also possible that in hard economic times people may be more likely to drop video subscriptions if content is available online in the same way that many people “cut the cord” and only use a cell phone. Stopping churn like that could make this scheme worthwhile, despite the headaches and costs incurred by keeping programming exclusive to those who prove an MVPD subscription. But it seems awfully speculative to me.
Bottom line, I continue to predict that now that we have reduced the broadband access market to a handful of players dominant in various other markets (such as video or voice), we will continue to see these players chase imaginary pots of gold by playing fragmentation games (much like the broadcasting and newspaper industries destroyed themselves by chasing “synergies”).
Stay tuned . . . .