McSlarrow: Cable Must Adapt

ATLANTA In an opening address that was part pep rally and part mission statement, National Cable Television Association president and CEO Kyle McSlarrow told attendees at cable’s National Show here that if the industry is to survive the threat of new competition, operators must concentrate on serving the consumer.

As was the case with the DBS threat, incursions into the video space by the likes of Verizon will only serve to benefit the customer, McSlarrow said.

“Competition is the most pro-consumer quality there is,” McSlarrow said, adding that if cable is to outlast the telcos, it will also have to adapt to an ever-changing universe. “Change is part of our genetic make-up, and we have to act accordingly,” McSlarrow said.

The NCTA will continue to pitch this message to the Federal Communications Commission, as regulators decide whether to write a blank check for the telcos, effectively doing away with the sort of local franchise agreements that cable operators have pieced together over the last 40 years. McSlarrow said he feels that the FCC is getting the message. “We are a great American success story that has only just begun,” he said.

Following McSlarrow’s remarks, a veritable murderers’ row of executives from all sides of the business discussed the battle with the Bells and the inherent advantage cable has over its rivals. “If we didn’t have a new product to sell right now, then we could sit here all gloom and doom,” said Comcast chairman and CEO Brian Roberts. But because cable can offer superior high-speed data product, high-definition TV, video-on-demand, digital video recorder services and telephony—and all from one pipe—the operators have a nearly insurmountable head start over the telcos, Roberts said.

“They’re putting Ma Bell back together again, but the only new product they’ve [introduced] is DSL, which is an inferior product,” Roberts said. “So let’s keep investing. Let’s keep our lead.”

Another way cable operators can build consumer loyalty is by developing strong brand associations with content providers. Anne Sweeney, co-chair of Disney Media Networks and president of Disney-ABC Television Group, said the Mouse is creating a wealth of opportunities for MSOs to reach the younger generation of media omnivores.

“Consumers are different now,” Sweeney said. “We’ve been looking at a group we call Millennials, in that 8-to-27 range. Forty percent of them use five to eight different technologies, many simultaneously, before they go to bed at night. Compare that to Baby Boomers . . . Forty percent of them just watch TV at night.”

In order to create a “sticky” environment for the younger crowd, Disney has begun offering Lost, Desperate Housewives and Commander in Chief as free streams on ABC.com. Sweeney said the free on-demand model is “a test for consumers and an opportunity to take our broadcast advertisers into the online space.” Disney is also kicking the tires on a number of ad models, including 30-second spots and telescoped spots that allow users to “delve deeper into the product” via long-form ads.

“This is all about learning how the consumer is going to use all this technology,” Sweeney said. “It’s going to be the consumer first and the business model second going forward.”

Getting back to the competition, Roberts said he believes that Verizon is going to have “a hard time getting a foothold in the video space,” primarily because its plant wasn’t designed to serve up video. “I don’t know how easy it’s going to be to cram all this video down that old straw,” Roberts said.

As cable gears up to win over the FCC, it’s become apparent to some that much of the municipal carriage debate has been linked to the hot-button issue of obscenity, thanks to the lobbying activities of the telcos. When asked if Time Warner Cable’s hastily designed family tier of programming will be enough to appease the FCC, Time Warner chairman and CEO Richard Parsons offered the gnomic utterance, “Hope so.”

All of the panelists agreed that whatever steps cable takes to circumvent government intervention, failure to keep Washington out of their business would be disastrous. “The last thing any of us want is to have the government dictate how we do business,” Sweeney said. “The free market is a good market.”