The Next Big Battle: Cable TV vs. The Internet

from the grab-some-popcorn dept

Tue, Jan 5th 2010 1:00pm — Mike Masnick

Leading up to the New Year, I was inundated with submissions about the supposed "battle" between Time Warner Cable and Fox over fees. The quick background is that Fox wanted to get a cut ($1/subscriber) from Time Warner Cable and TWC claimed it wanted to fight it. Neither side was being particularly honest about what was going on, with TWC launching a hilarious website asking consumers to "vote" on whether it should "roll over" or "get tough" and if you voted for it to roll over, it told you that you were wrong, and asked you if you wanted to change your vote. I didn't write about the whole thing because it was an exact replica of what happened a year ago in a similar dispute -- and, just like in that dispute, the parties settled up just in time to keep Fox from being deleted from TWC's lineup. Of course, at the same moment, TWC also raised its rates. Of course, this was exactly what everyone expected all along, and TWC knew exactly what it was doing. Now it can blame the rate increase on News Corp., even though it had planned to do that all along. Other similar disputes will likely be settled in short order as well.

Of course, I find it amusing that the at the same time that content providers are arguing for service providers to pay them to carry their content on TV, those same service providers are suggesting that content providers should pay in the other direction on the internet. All the "net neutrality" battles are about the very same TV providers using their broadband divisions to claim that content providers should pay the broadband providers more to "carry" their services to users. It's just two sides of the same coin.

Still, the more interesting battle may be shaping up elsewhere. Some consumer groups are asking the Justice Department to investigate cable companies for their "TV Everywhere" effort, which they claim is almost certainly an antitrust violation of collusion to keep certain content from going on the internet. Not surprisingly, the cable industry and their lobbyists have hit back hard, claiming that the whole thing is ridiculous.

To be honest, I think it's a bit early to worry about collusion here. From everything we've seen so far, the cable industry is doing a pretty good job screwing up TV Everywhere on their own, so it's not like it's a huge problem yet. They're trying to turn the internet into cable TV with extra ads. Like the recording industry's many attempts to create their own online efforts, it looks like they're hamstrung by their own legacy view of the world. That isn't to say that there may not be an issue eventually, but it does seem a bit early to be ringing the alarm bells.

There's no doubt at all that the cable companies view "TV Everywhere" as an attempt to keep people from ditching their cable TV accounts and going internet-only. But if those efforts are stymied by terrible execution and implementation it won't do much good. People are already learning how they can watch TV over the internet (without a cable or satellite subscription) and if the cable companies really succeed in blocking TV content from going online in other ways, people will simply route around those blocks and get the content in an unauthorized manner. We've seen this game before, and it doesn't end well for the companies pretending to be gatekeepers. But that doesn't mean the Justice Department should be wasting money investigating them just yet.

Either way, both of these stories suggest a prime battleground for the next year: as the old TV businesses come to grips with the internet (finally). Just like other parts of the entertainment industry, it will be messy and annoying -- and incumbent players are going to make a lot of really stupid mistakes. But, in the end, we should start to get some pretty cool stuff out of it -- though, most likely not directly from the incumbent players, but from the upstarts and innovators on the margins.

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Filed Under: cable, carriage fees, internet, satellite, tv, tv everywhere

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Ima Fish (profile), 5 Jan 2010 @ 1:18pm

Television is certainly at a crossroads. On one hand Fox and NBC are thinking about dropping the "free" broadcast model for the "superior... cable model." In other words, they want to profit from both by collecting advertising dollars and monthly user fees.

However, most people want a Hulu/DVR type solution. They want to conveniently watch their shows when they want, for free, without impediment.

I don't know which side will win. But I'm guessing that the content, cable, and satellite industries are going to use every dirty trick in the book to keep the money flowing.
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jsl4980 (profile), 5 Jan 2010 @ 1:43pm

My response to TWC
I just received my new Home Theater PC today and I'm about to install Boxee (boxee.tv) on it and dump cable all together. There aren't many other companies that can raise rates every year and stay in business forever. Then again with monopolies in every location there isn't much that can be done traditionally, so I'm trying to get creative and hope this catches on.
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Jimr (profile), 5 Jan 2010 @ 2:05pm

In the end they will ask for a government bail out - dam pirates!

In all honesty the cable companies are least trying various business models to make money. I like the Hulu/DVR solution... parents-in-law have never had cable and never will as long it is still free over the air via rabbit ears. No one solution will work for everyone.

Some cable companies show online via clunky user interface embedded a browser with minimal commercials. Hopefully in 5 year the interface will improve and I can watch it just on my TV (with out a computer). Maybe some free stuff and pay for just the channels I watch.... what a novel idea to kill the middle man (local cable companies) to save money for both parties.
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Emilio, 5 Jan 2010 @ 2:09pm

re: Cut It...
I tell you all, it's a strange weight that's lifted, when you don't have cable advertising yelling at you (at increased volume) 6 to 8 hours a day, most days of the week. I miss football (have to go spend some money at the sports bar) but other than that, Netflix and Hulu (over a 'dry' DSL line) keep me plenty entertained.
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a-dub (profile), 5 Jan 2010 @ 2:16pm

I watch netflix on my XBox 360 much more than I watch DirecTV, but it wasn't until I watched the video game awards on spike.com that I realized how amazing internet tv can be. Spike offered multiple uncensored cameras and one was even back stage. DirecTV's one censored, commercial filled, delayed broadcast simply cannot compete with that.
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Dark Helmet (profile), 5 Jan 2010 @ 2:25pm

Re:
"dam pirates!"

AAAAHHHH! Alert the Hoover Dam and that place that killed Jean Grey! AAAHHHHH!
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Anonymous Coward, 5 Jan 2010 @ 2:32pm

Re: re: Cut It...
I miss football (have to go spend some money at the sports bar)

This supports your local economy, and you're helping to keeping people employed. I can't think of a better way to spend entertainment dollars.
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Dark Helmet (profile), 5 Jan 2010 @ 2:36pm

Re: Re: re: Cut It...
"This supports your local economy, and you're helping to keeping people employed. I can't think of a better way to spend entertainment dollars."

Agreed. This might be my unholy love for Wrigleyville, but there is something oddly different and special for a sports fan in cheering on your team with several like minded fans. Some of the most interesting sports conversations I've ever had have started just that way....
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The Anti-Mike (profile), 5 Jan 2010 @ 2:51pm

Re:
Which is fine, except that Spike could only offer it because of what the cable companies are paying them per subscriber. Remove that money, and most of the current cable channels (and their original program) dries up faster than a puddle in the desert.

Cause and effect.

Why do you think Fox was pushing for more money per subscriber? Quite simply, the advertising model is broken, no longer functional. Yet, most of the models being pushed for internet distribution are based on advertising. It seems like a bit of a paradox, moving from one system which is failing because of a lack of advertising revenue, and moving to another distribution model that will be even MORE dependent on advertising dollars.

Can you see where this will crash?
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Dark Helmet (profile), 5 Jan 2010 @ 2:56pm

Re: Re:
"Why do you think Fox was pushing for more money per subscriber? Quite simply, the advertising model is broken, no longer functional."

Hmm. Do you have some insider's reason to think/know this, or are you simply assuming that your explanation is the most logical reason for Fox to take such action?

Because the "We simply want more money" reason makes at least equal sense to me as "advertising is broken"....
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Rex, 5 Jan 2010 @ 3:13pm

I don't get it
The part I do not get is why the Cable and Satellite companies are NOT being paid by the networks to carry their programming.

My reasoning is simple. With 20 minutes per air time hour devoted to commercials, the cable/satellite companies are expanding the exposure of the network's commercials. It just stands to reason that the content providers should be paying the companies that send it on to consumers.
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The Anti-Mike (profile), 5 Jan 2010 @ 3:13pm

Re: Re: Re:
You only have to look at the ratings. Network TV viewership continues to go down. The mille rate for ads isn't going up. Less viewers, stagnant rates = less total revenue.

They are also competing against cable only properties that get paid by the cable and sat companies (often at quite high rates) allowing them to survive well with lower ad rates. They cable outlets are also more likely to use recycled programming (USA = the Law and Order channel, it seems). Their programming costs are lower, they are getting paid more by the cable companies, and they don't have to maintain broadcast stations around the country.

I don't think it is that they want to make more money, they just want to make what they were making before, and want to be sure of it in the long run.
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ppartekim, 5 Jan 2010 @ 3:18pm

Re: re: Cut It...
Never watched it so never missed it. I now watch it occasionally on Sundays in the background cause on the FREE broadcast stations is it either that, PBS or TV Buy-Mes on... So, no need for the sports bar. Besides I can tune into anything on Hulu, Boxee and the 2K+ DVDs I own and are available to my Tivos via my Drobo. More money for other items now that I save $100/mo not having cable. Gotta love the free the OTA/Web connection..
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Richard (profile), 5 Jan 2010 @ 3:24pm

Re: Re: Re: Re:
TV ad revenue is shrinking because the ads have gone elsewhere. Now where would that be?

Yep - its the internet. The ad model isn't broken - it has simply shifted. It WILL work on the internet because that's where it's gone....
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Michael C (profile), 5 Jan 2010 @ 3:31pm

Just cut out the middle man already
If content providers want more subscription money, then just get it directly from the people. I have no problem paying Fox twice the money for their programming than they were asking from TWC. I would also pay the same amount to a handful of other media companies for their programming, ditch my cable TV, and still come out paying less than I pay for Internet and cable TV today. In the end, I only pay for the content I want, and I get it when I want. It's a win-win situation for me and the content providers. Sorry cable TV. You're just not necessary or relevant anymore.
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Anonymous Coward, 5 Jan 2010 @ 3:31pm

Re: Re: Re: Re: Re:
Advertising works on the internet? Since when? If advertising worked on the internet then Google wouldn't have gone out of business all those years ago.

Living in an alternate universe is weird.
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The Anti-Mike (profile), 5 Jan 2010 @ 3:41pm

Re: Re: Re: Re: Re: Re:
Google ads work because Google's content isn't expensive to produce or deliver. You don't see them crowing about the amazing margins on YouTube, do you?
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Anonymous Coward, 5 Jan 2010 @ 3:50pm

Let's go with the medium that creates the most new sustainable employment ops and call it a day.
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raindogg (profile), 5 Jan 2010 @ 4:43pm

Cable vs Internet
Cable is a joke. They charge you $70 a month to watch crap and commercials. You can get an HD antenna for your basic channels and use the internet to watch worthy shows on Cable. Which are very very few.
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Elohssa (profile), 5 Jan 2010 @ 4:57pm

We have a winner!
KO in the 1st round. The crowd goes wild!

I haven't see a beating like that since Tyson-Spinks!

I hope Cable's got a good cutman.
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Joe, 5 Jan 2010 @ 5:28pm

yep, just about right
I cut the cable cord last November (2008)and didn't look back. But then I got laid off and my wife worried about what we would do with our time. We did fine without cable and I can't count how many times my provider called me trying to get me to add their cable service.

Then I started working again (I work in advertising) and I was definitely out of the loop on the channels my demographic watches. So i bit the bullet and resubscribed to cable. I really don't watch it though. It is only slightly more conveniant but the HD DVR box I have just sucks, super slow changing channels, and more disturbance in the signal then I had in my online viewing. I have my computer set up behind my TV with an IR receiver so I could watch the online content through my TV (Via HDMI or VGA cable)

I miss the days of not having cable. Granted I like working so I need it for when I meet with TV vendors and they talk about their content.

When you say you canceled your cable it makes them nervous.
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Overcast (profile), 5 Jan 2010 @ 5:47pm

I shut my cable off 3 months ago - saving $90.00 a month.

That's enough for NetFlix and one of two other options 1-2 Blu-Rays a month or I can go to the pawn shop and get the older format DVD's for $2.00 a pop - which I usually do, the upconvertors do a good enough job to justify the 38/48 dollar savings per disc, IMHO.

If I do the NetFlix + Pawnshop route, I can watch about as many movies a month as I want to - and Blu-Ray along with the 'bad economy' is leaving *no shortage* of DVD's at the Pawn Shops, heh. (That's like 30 movies a month purchased and 15/20ish via NetFlix) - 30-45 movies a month is one a day or more - plenty to watch and I get to keep most of it.
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Pjerky (profile), 5 Jan 2010 @ 6:52pm

Rate Hike
After reading this story tonight I decided to call Time Warner to see how much my service fees went up and it went up $10 per month. Because of that they have now lost my business. I will be turning in my cable boxes later this week.

I will keep the high speed internet because they are the best option available in my area for the price. But I will stick to over the air digital TV or nothing at all. Next up, figure out a DVR system that I don't have to pay a subscription for... or just watch TV online.
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Pjerky (profile), 5 Jan 2010 @ 6:55pm

Re: Rate Hike
Oh and my cost will drop from $127.50 to $41.94 a month (for just internet). Those are nice savings.

By the way, does anyone know of any set top boxes that can connect to the internet to update its TV schedules and automatically record my shows (without paying for a subscription)?
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Anonymous Coward, 5 Jan 2010 @ 8:28pm

The fact is that the evil cableco/telco companies have an unearned monopoly on the cableco/telco and on who can build new infrastructure thanks to their immoral lobbying efforts. This is what we need to resist. We need to compel the government to stop acting in the best interest of evil rich people at public expense and to open up the cableco/telco infrastructure to free competition.
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Anonymous Coward, 5 Jan 2010 @ 8:31pm

Re: Re: Re: Re:
"I don't think it is that they want to make more money, they just want to make what they were making before, and want to be sure of it in the long run."

What they were making before was criminal and their crimes should land them in jail. What they were making before was a result of them using the government to unethically monopolize the market. It needs to stop.
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Anonymous Coward, 5 Jan 2010 @ 8:33pm

Re: Re: Re: Re:
"I don't think it is that they want to make more money, they just want to make what they were making before, and want to be sure of it in the long run."

We as a society do not owe them a monopoly and we do not owe them the money they were making before or the monopolies that enable them to make the money they were making before. That's the problem with these evil corporations, they want to make all this money and not do any work and they want the government to provide them with a guaranteed revenue stream. We owe them no such thing. They need to get some sense of morality and stop lobbying the government for monopolies.
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Anonymous Coward, 5 Jan 2010 @ 8:37pm

Re: Re: Re: Re:
In fact, what these cableco companies are making now is criminal. They provide us with nothing but lies and commercials and they charge us a fortune. Their stolen monopolies need to end and the government needs to stop granting them monopolies. The government needs to either allow anyone to build new infrastructure or to open up existing infrastructure to free competition.
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Anonymous Coward, 6 Jan 2010 @ 12:31am

Re: Re: Rate Hike
have you tried these open source DVRs?

http://www.mythtv.org/
http://www.boxee.tv/
http://www.team-mediaportal.com/
http://xbmc .org/
http://tvtime.sourceforge.net/
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MarksAngel (profile), 6 Jan 2010 @ 1:23am

Windows Media Center, has a built in Guide, that will download info, just get a t.v. tuner and a version of windows with media, center, BOOM built in DVR management as well as few other goodies. You can also download the Netflix plugin for media center. Then you can also download Media center studio http://www.adventmediacenter.com/ and add shortcuts which will launch boxee, hulu and whatever else media programs you want right inside media center. I have mine set up this way and it works great.
I haven't paid for cable in quite some time we do just fine between Netflix, Hulu, Amazon, boxee and our own movie collection. Cable is over rated these days and over priced. We're saving ourselves about $70.00 a month.
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:), 6 Jan 2010 @ 1:29am

The owner of fox news said...
...that free TV will die and it will all be paid.

Seriously now I want to see TVs trying to charge people LoL
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Idobek (profile), 6 Jan 2010 @ 5:50am

While I suspect at some point in the next there two will finally be a few good sites to watch all your favourite shows on demand at a price (be it ads, pay per view or subscription) most are happy with. I am absolutely sure there will be very little available outside the US and Canada the TV industry will still be screaming about piracy - despite the fact that there is either a) no other option, b) overly long release windows, or c) riduclously high costs for consumers.
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The Anti-Mike (profile), 6 Jan 2010 @ 7:11am

Re: The owner of fox news said...
What the TV networks are pretty much saying is that the local affiliate model is dead or dying.

http://localtvmatters.ca/

This is a big battle in Canada as well. The networks and such want to get paid, because while the networks as a group are making money, the reality is that the smallest players have either been swallowed up (City, A Channel, Chum), are losing their asses bigtime (Global) or are running on the public dole (CBC). The local end of things is losing money hand over fist, and each of the networks including the CBC have been forced to shutter stations and terminate local news coverage, just to stay viable.

A more viable market model for the networks is to have only one "east" and one "west" network feed that runs 24 hours per day, don't broadcast locally at all, and just present via cable / sat. All of the local stuff is expensive as hell to do. They either want enough income to support the local model (which actually does matter) or to be able to walk away from regional broadcasting altogether, perhaps replacing it with a network repeater system.

The funniest part of this story (and the one that Mike would love) is the cable and sat companies are running the counter site:

http://www.stopthetvtax.ca/

Campaigns like this are why I tend to object to the term "DRM Tax". Using the word TAX is an attempt to scare consumers, to make them angry and upset, rather than to truly explain the nature of the situation. The cable companies fail to explain how they in facts of the situation, such as that they already pay the cable only channel companies significant money per user. They fail to explain how they in fact need Canadian content to be able to bring in more US programming (there are ratios here of Canadian to US channels), etc. They fail to explain to the public how they often take off hours times for cable channels and turn them into infomercial channels, not for the benefit of the broadcaster but for the benefit of the cable company, etc.

It's ugly.
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JEDIDIAH, 6 Jan 2010 @ 7:59am

"Renting" versus buying...
It's amazing how expensive that cable has become considering what little it offers. You would be suprised how much stuff you can accumulate in a couple years by buying content rather than "renting" it. The cost of a cable subscription can pay for a lot of shiny disks.
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JEDIDIAH, 6 Jan 2010 @ 8:10am

Something for nothing...
Basically, the broadcasters want something for nothing. Not only is cable giving them an audience on a silver platter but they want to be paid for the favor. They're like the whiney news outlets complainging about Google.

If it were not for my cable provider I would not be willing to watch my local channels due to poor signal quality. This is something that has not changed much over the decades despite the change to digital.

As long as cable doesn't hijack their commercials, the broadcasters should have no cause of action. This nonsense will inevitably lead to me being charged more. If I am going to be charged extra for a network affiliate than I WANT the non-local affiliate.

Cable already charges far too much for relaying channels full of commercials.
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Hephaestus (profile), 10 Jan 2010 @ 7:07pm

"This is an important test for Congress and the antitrust authorities to make sure dominant old media companies don't kill off potential sources of innovative, new competition just as consumers are getting accustomed to the possibility of that new competition."

In an age of true corporate greed, I want it now, and I want it at my convenience. You have two groups fighting against each other. The consumer and the corporate entity, one wanting to save money, the other wanting to optimize profits. Currently we have reached a point in telecomunications where a saturation point has been reached. Cable companies have no further possiblity of profitablility and have become ulitities and last mile providers.

This as led them to collude with content providers to prevent a redistribution of wealth. The only outcome that will work in the end is for them to become public utilities.
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Nick H, 16 May 2010 @ 10:05pm

Bundle Packages Is Their Only Way
I think cable TV services will die off very soon unless they can provide great offers through 'bundle packages' with telecommunications companies.

TV over the net is about to get huge. As the quality increases, more and more people are going to make the switch unless cable TV services can give consumers more value for the monthly fee they charge.
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