Online Streaming Services Are Threatening to Take Down the Bloated Cable Model | Adweek Online Streaming Services Are Threatening to Take Down the Bloated Cable Model | Adweek
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DCNF 2014-15

After Streaming Kills Cable, Where Will the Content Come From?

Mutually assured survival

And those costs are going way, way up because rights holders are getting warier about the long-term consequences of providing consumers with a cheaper and more convenient way to consume ad-free video. The industry isn’t interested in bringing carriage prices down—not yet, at least—or in removing advertising, so it is focusing on convenience. And that’s what TV Everywhere has been about.

BEWARE THE STATUS QUO
There is some justification for the cavalier attitude toward ad interruptions and rising costs. The U.S. economy, as one programming vet notes, just bottomed out as badly as it has in decades, and yet the video industry barely blinked. Cable is one of the last things consumers cut when tightening their belts.

Pat McDonough, Nielsen’s svp of insights analysis and policy, concludes that consumers are simply adjusting to ad-supported DVR usage with surprisingly little fuss. “They’re adopting the VOD with fast-forward disabled,” she says. “That’s kind of their expectation for programming—I watch TV, I watch commercials.”

The deal breaker, networks believe, is the level of ease. Just as iTunes proved that one could compete with free in the music world, TV Everywhere initiatives are setting out to show their checkmate move will be a cable package allowing consumers unlimited access to recent episodes of their favorite programs. One reason that dream may not have been realized on a cable box is that MVPDs have been so slow to adopt them, because they perceive the networks’ demands for more service as leverage in carriage negotiations, rather than a call to unite in the face of an existential threat.

The MVPDs are playing ball—though rarely without prodding. The growing presence of TV Everywhere “is essentially part of the consideration set of doing a carriage renewal in the industry,” Legg says. “I don’t think it’s coincidental that we’re seeing these around the announcements of carriage renewals.” The price of that, of course, may be that there’s a less pronounced rise in carriage fees for a few rounds of negotiations.

Something has to give, because some MVPDs are responding to the effects of churn. For example, despite massive profits ($2.15 billion in 2012), Time Warner Cable’s COO Rob Marcus told Bloomberg last week that the company plans to provide “fewer channels and fewer features” to consumers in an effort to squeeze more profits from its shrinking number of consumers (11.9 million in Q1, down 119,000 versus Q4 of last year).

That kind of reaction to adversity will no doubt only serve to drive more subscribers into the waiting arms of the Netflixes and Amazons of the world. Should that come to pass, everyone loses.

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