Sorry Cable–TV Online is Not the Same Old Model

Thursday, 11. 5. 2009  –  Category: T2 Communications

There’s a general rule when it comes to innovation in the television experience: Don’t follow cable operators because they are always the last to change.

For the past decade, cable operators have been playing catch up to the technology of their industry.  Instead of following an innovative model and creating exciting new ways to view their content, operators chose to milk their existing systems for what they could.  In the meantime, new technologies were created to enhance the viewer’s experience, and operators were forced to upgrade their systems to accommodate these services when subscribers threatened to leave.   Video on Demand, high definition content and IPTV recently have pushed network expansions and adjustments. Now the shift is online.

Losing Customers to the Web

At the CTAM Summit 2009, Broadcasting & Cable is reporting that Comcast CEO Steve Baker stated, “An entire generation is growing up, if we don’t figure out how to change that behavior so it respects copyright and subscription revenue on the part of distributors, we’re going to wake up and see cord cutting.” Cord cutting desribes the trend of subscribers choosing to cancel traditional cable service because they can watch video online now through websites.  While Baker’s comments allude to users seeking pirated content online, the concern is much bigger.  If legitimate sites like Hulu allow the younger generations to become very comfortable with online video as a distribution model, it will put the vast cable infrastructures of Comcast and other at risk.  It could also mean that content creators like ESPN and CBS could slip past cable operators and begin engaging subscribers directly, cutting them out of the revenue equation all together.

Only Blame Yourself

Unfortunately for cable providers, they are solely responsible for this trend happening.  If they would have been focused on the next generation of services, rather than maintaining an increasingly archaic product, these customers would be viewing content online already through them.  In essence, the “experts” of video got lazy and gave others the opportunity to compete in what once was a near monopolistic industry.  As a result, they opened the door for the content creators to connect directly to consumers.  Despite many content owners balking at online distribution, new aggregators like Hulu, Amazon and Apple have given consumers access to nearly any content over any device.

So how are cable operators working to combat this new wave of video viewing?  If their complaints and hesitations about Hulu and TV Everywhere are any indication, they are intent on overlaying their archaic business model onto the online video market.  In particular, this includes an advertising model that is based upon potential households and certain slots in commercial breaks.  Instead of embracing the new possibilities available through the web, and the demands of their customers, they are simply looking to make “Cable: The Online Edition.”

Let Them Go

Why are cable operators so worried about cord cutting?  After all, we are quickly moving toward a model where users require a single data connection.  Over that connection, they will be able to choose from a number of carriers for video, voice and other applications.  The voice portion is already a reality, as anyone with a data connection can now purchase VoIP service from any number of carriers.  This a la carte model is very much akin to Apple iTunes platform for content and applications, which allows everyone a platform to sell their products.

For operators, a shift in the market to a single connection/multiple vendors model could be a huge benefit for them.  Instead of having to do significant network upgrades like they did with high definition and Video on Demand, being a data connection only would minimize network needs and allow them to focus only on bandwidth.  They could also stay in the industry as a video provider if they like, but could do so via a different delivery model that could save them in hardware and resources.

In order for cable operators to be competitive in this new video landscape, they will need to decide what is important for them: maximizing their old model or keeping their customers?

David Fleming is the Director of Corporate Communications for T² Communications.

Tags: Apple, cable, David Fleming, high definition, Hulu, innovation, internet, IPTV, online video, television, video on demand