As the cable TV industry gathers this week in Los Angeles for its annual convention, the theme is convergence between Hollywood and Silicon Valley. That sounds promising, but even as cable celebrates recent upbeat earnings and success in selling telephone and data delivery, questions linger about the future.
It’s not just heightened competition from satellite and telco TV; it’s the issue of who will control the TV screen as network content converges with online, interactive and other sources of data.
“I don’t think of this as a threat,” said Kyle McSlarrow, president and CEO of the National Cable & Telecommunications Association, which hosts the annual Cable Show. The threat, however, comes into play “if we stick our head in the sand and not recognize the innovation that is taking place around us,” he said.
McSlarrow said cable TV is involved in “a massive amount of experimentation” that this week will involve public and private discussions with leaders in the tech and showbiz industries.
“People are doing a lot more collaboration,” he said, “and it has intensified in the last year in a way that was almost nonexistent a couple years before that.”
Although the huge investment in technology has positioned cable as the primary TV provider to homes and businesses, that doesn’t assure control over lucrative future growth. One reason cable is nervous is the Federal Communications Commission’s push for “net neutrality,” which would essentially require the cable companies to open the systems to all data traffic. So as they invest to improve the speed at which content moves, they could hasten their own demise.
“The more speed you get, you make it easier for somebody to do ‘Over the Top Video,'” said analyst and THR columnist Larry Gerbrandt, principal in Media Valuation Partners.
“Over the Top Video” equates to competitors offering bundles of channels, Web access, interactive services and more that turn cable into little more than a common carrier.
“You will have to give everybody equal and open access even if they are sticking it to you,” Gerbrandt said.
Said Wall Street analyst Harold Vogel of Vogel Capital Management in New York: “There is valid concern that cable TV is at risk of being commoditized in a certain way.”
He believes that Comcast moved to acquire NBC Universal to avoid that threat by expanding into programming, which should provide unique products and services to sell.
“Comcast did this out of concern that their base business is no longer expanding,” Vogel said. “I don’t believe they did it out of strength; they did it out of weakness.”
Comcast chairman and CEO Brian Roberts, who recently proclaimed the ad business was on the rebound, declined an interview request, but will lead off the Cable Show today when he is interviewed by producer Peter Chernin. Roberts will appear the next day on a panel moderated by former FCC chairman Michael Powell alongside Time Warner’s Jeff Bewkes, CBS’ Leslie Moonves and DreamWorks’ Stacey Snider.
They are among a bevy of big names from Hollywood, Silicon Valley, Wall Street and Washington on tap this week. On Thursday, FCC chairman Julius Genachowski will deliver the keynote, followed by a panel that includes WME’s Ari Emanuel, Sony’s Amy Pascal, Cablevision’s Thomas Rutledge and Twitter’s Evan Williams, moderated by Showtime’s Matthew Blank.
“The genius of the industry historically has been to figure out a way to build a business model that integrates a lot of innovation … and combines with the innovators from outside,” McSlarrow said.
Gerbrandt is skeptical because he has seen satellite and telcos take market share.
“The cable industry has a history of not reacting until their backs are against the wall, and they are losing body parts,” Gerbrandt said. “They’re not at that point yet.”
The danger is that competitors not only will take business but force cable to hold down pricing, even as they have to invest in upgrading technology and programming. “The best case is that they can keep prices where they are, but there’s a real risk over the next five years [that] prices will be down,” Vogel said.
McSlarrow said it isn’t a “zero-sum game,” meaning that cable will share the future with other formats.
“In the next 10 years, the interconnection, the personalization, the portability of all these services will require us all to cooperate,” he said. “It’s a widely held view in the industry this kind of collaboration lifts all boats.”