Cable TV Won't Lose To The Internet Because It's Making Too Much Money?

from the logic-drop dept

Tue, May 4th 2010 4:34pm — Mike Masnick

I'm pretty sure that one of my very first Techdirt blogposts over a dozen years ago was to a column written by Bill Gurley. Since then I've linked to him plenty of other times as well -- and I find that I almost always agree with him. It's rare that I find any point on which I totally disagree with him, so I'm a bit surprised to find that I think he's very, very wrong about why the TV studios and cable guys will win in the big fight between cable and the internet that we've been talking about here for a while. Gurley insist that the legacy players (cable and the TV studios, basically) are going to win this fight, but his reasoning leaves me scratching my head. It's basically this: they're making a ton of money with the way things are set up now, and they don't want to lose it.

Well, yes. That's true. But that's also true of pretty much every other massive industry that has been disrupted by new technologies over time. In fact, if you go all the way back to Adam Smith and The Wealth of Nations, he explains why such markets are ripe for competition, if not disruption. Indeed, Gurley does make a strong case for why the cable guys and the studios are so happy with the way things are today: thanks to affiliate fees, they rake in amazing amounts of cash in a very easy manner. Basically, the TV stations figure out a way to get a hot show on TV, which forces cable and satellite players to include that channel in their lineup, and then the stations demand a per subscriber fee. It doesn't matter if people actually watch or not -- they just get a fee per subscriber to the package that includes their channel. It's why we see battles every few months over just how big those fees should be.

But the massive problem that Gurley skips over in his post is that consumers hate this. Why? Because their bills keep going up. A lot. Way beyond what many subscribers see as reasonable.

And for all of Gurley's belief that the TV guys have this figured out, and that the infamous TV Everywhere program will solve the issue, this seems improbable. Perhaps they will figure some of it out, but the early reports suggest a disaster in the making, with execs focused on all sorts of limitations for consumers. And history has shown that your business model is focused on taking away value that consumers know can be provided, you will fail. Especially in a competitive market.

And while the entertainment industry works hard (with a big helping from the US government) to keep competition out of the market, they can't do so forever. Gurley notes that unauthorized file sharing is a challenge -- but he thinks that Hollywood will be able to contain it. That seems optimistic to me. When has anyone been able to contain unauthorized file sharing? Second, despite attempts by Hollywood to stop alternative browsers like Boxee from accessing their content, so far they've mostly failed in this endeavor, and with Google and other companies soon to enter the market as well... Well, it's going to be tougher than the TV guys expect.

Gurley is right that this won't happen overnight. There are billions in cash cow revenue that will keep this machine going for quite some time. And they will fight like crazy to protect their gatekeeper position. But you can't ignore consumers, and you can't ignore the fact that all that money that Gurley thinks helps the incumbents win also attract incredible interest from disruptive innovators. It may take some time, but the idea that the TV guys will stop the disruption seems unlikely.

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Filed Under: cable tv, economics, predictions

20 Comments

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Anonymous Coward, 4 May 2010 @ 5:08pm

I Don't Have Cable
because it is way too expensive for the amount of TV that I watch and there are really only a few channels I want and in order to get those channels I have to pay for everything.

Now I would pay for an online, on-demand, high-def (1080p) video service that charged subscription per channel or show I want to see. I would pay quite a bit for that actually. Plus I'd be willing to sit through commercials that could be much better targeted because the internet knows who I am when I log in.

So on topic, cable is already dead to me, they won't get my money, I just need someone to offer the online service we all want and I'll be all over it.
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Anonymous Coward, 4 May 2010 @ 5:46pm

The most valuable cable channels are the "adult" kind
Did you see that the adult entertainment industry recently started a PR campaign to raise awareness about porn piracy? Hey, you, quit stealing from the entertainers!

You gotta see this: (Safe for work)
http://www.youtube.com/watch?v=4xNzsTHA1nI

So cable makes most of it's money from adult entertainment, and now the adult entertainers are trying to look like a upstanding contributors to society. Is this coincidence or just plain sexy?
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Anonymous Coward, 4 May 2010 @ 5:55pm

Horsehockey.
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robin, 4 May 2010 @ 6:15pm

Re: titleist
i see your horsehockey and raise you two cow patties.

disruption always wins. i agree that mr gurley, of all people, should understand this.
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Anonymous Coward, 4 May 2010 @ 6:21pm

Social progress is inevitable. It takes time, but it's inevitable. Look how far we've gone in the last couple hundred years alone, we've progress incredibly (ie: slavery is far less common than it used to be, etc...). Social progress will continue whether the cable companies like it or not, but it does happen on the order of hundreds of years. Heck, in my lifetime alone I've seen social progress, just reading techdirt even. Sure, nothing on a large scale, but it's still inevitable.
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Anonymous Coward, 4 May 2010 @ 6:24pm

Re:
and hopefully with the Internet we can digitize the rate of social progress down from a couple of hundred years to a few years maybe. Computers can do certain things faster than us :) . A digitized version of social progress.
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rockman123 (profile), 4 May 2010 @ 6:46pm

no slavery?
wage monkies working pay check to pay check, no prospects for any kind of independence, no creativity, no time for the individual, constrained by society into subservience for the greater good, your labor props up a narrow segment of society that enjoys all the benefits of free life you are denied, while you slave at the monotonous tedious boredom of middle class existence waiting for the next two week vacation at the shore. i just joke- nobodies a slave. but you have to admit this incredibly detailed fiction we live in the 21 century is a hellva gag.
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Dan L., 5 May 2010 @ 1:15am

The very core of the truth is in caps in this quote,

"And history has shown that your business model is focused on TAKING AWAY VALUE THAT CONSUMERS KNOW CAN BE PROVIDED, you will fail. Especially in a competitive market."

Sadly until the providers realize and fully ACCEPT that fact, no matter what their product, market or gimmick they will continue to lose to the, um, "unrestricting suppliers" of their products.
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Jimr (profile), 5 May 2010 @ 6:02am

Google TV
With all the directed advertising experience of Google on the internet I can hardly wait till the day that Google offers a internet based TV subscription for free or nearly free. Subsidized by the ads that can be very specific to the users and the advertisers can get direct feed back to how many views and the demographics of the viewers who watch it. It is virtually a pot of gold full of view information.

I only mention Google here is because they often see the huge potential revenue to be gain from directed data mining and collection for the purpose of directed advertising. Plus they seem to have the capital to get such a massive indevour up and running.

After all you tune into your favorite program just to watch the ads. For it it was not for the ads you would not have your favorite program. It is not only the commerical break ads but the paid product placement within your program that all help pay for it all.
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TPBer, 5 May 2010 @ 6:23am

GoogoleTV
I helped a customer setup a beta Google TV box. This is going to be quite the game changer.

The only thing required is a fast internet connection
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chris (profile), 5 May 2010 @ 7:44am

WTF is cable?
oh, it's that extra thing they tack onto by broadband bill.

i watch all my favorite network and TV shows for free without commercials and i have been doing it for years.
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Anonymous Coward, 5 May 2010 @ 8:26am

Re: The most valuable cable channels are the "adult" kind
porn is the one industry that should NEVER get to whine about anything!
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vastrightwing, 5 May 2010 @ 8:54am

Sorry Cable Guy
Sorry cable Guy, but I left you years ago because you just didn't offer me anything I couldn't live without. Sure, I used to like watching FNC, but to pay a premium for it? No way. In fact, I dumped your EPG even though I liked it because the value for it was not high enough to cover your monthly fee. I look at your service like putting a toll both at the Mall parking lot. You want me to pay to park at the mall. Then you want me to pay to go in the mall. That's OK. I'll find something else to do.
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Anonymous Coward, 5 May 2010 @ 10:28am

Re: WTF is cable?
i watch all my favorite network and TV shows for free without commercials and i have been doing it for years.

Congrats on being a freeloading piece of shit.
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Anonymous Coward, 5 May 2010 @ 12:28pm

Re: Re: WTF is cable?
Digital Video Recorders say what?
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chris (profile), 5 May 2010 @ 1:11pm

Re: Re: WTF is cable?
Congrats on being a freeloading piece of shit.

i prefer the term "digital delivery pioneer".
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Nick H (profile), 16 May 2010 @ 9:54pm

Who wants to pay monthly fees anymore?
As the popularity of cable TV online increases, I think we're gonna see many people cut their existing providers. Unless today's cable TV services can cut their monthly fees or join together with telecommunications companies to give 'bundle packages' - I think their days are numbered.
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new, 20 May 2010 @ 11:25am

Gostaria de uma ajuda, eu adquirir um pacote de tv digital no site www.tvdigitalnopc.com.br tenho acesso a vários canais através de um painel de controle que eu visualizo no próprio navegador, como eu faço para gravar os programas e série de tv digital, lembrando que não tem nem um programa instalado no meu PC é todo pelo próprio navegador.
Quem tiver uma luz por favor me ajude meu e-mail: riclife@ig.com.br
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Aye to pirates!, 9 Aug 2010 @ 10:15am

Black Market Heros
The Black market has always been the champion of the free market that counters the goverment and corporate buddy-buddy system. Afterall, they're all criminals. Black market criminals just make less money.
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sprearson81 (profile), 8 Jun 2012 @ 7:03pm

Exactly, they are all criminals.
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