Cable Television Bids To Control Internet Distribution

I wrote my last post about the coming trouble for cable television here, only a few weeks ago.

Thanks to my acquisition of a TiVo unit, which connects wirelessly with my computer network, I wrote,

"My TiVo accesses NetFlix through a wireless adapter which gives it access to my home computer network. While I can't program NetFlix choices on the TiVo controller, TiVo can access my NetFlix account on its own to retrieve my selections.

Thus, it would seem only a matter of time before TiVo provides a feature on its own website that would let me either type in my preferred websites, or simply import my web browser bookmarks, so that I can access this menu on my television screen via TiVo's content menu.

Once I can do this, TiVo would let me watch various programming websites, such as HuLu, as well as NBC's own content, delayed, on its website.

As I discussed this with my business partner Sunday morning, I remarked that, once TiVo does this, I am just one step away from cancelling my cable television service.

The only missing content would be my two primary news channels, CNBC and Fox. Once I could stream these, I'd be ready to cut the cable connection, slicing my monthly content delivery bill in half."

I've been writing about this eventuality for several years, and it would seem that it is finally within sight for an average American internet user and cable television subscriber.

Imagine my surprise, then, when I read an article in last week's Wall Street Journal revealing that US cable systems are in talks with content providers about restricting the latter's distribution of said content, for free, on the internet, on pain of losing some of the revenues they receive from the carriers.

Cable systems like Comcast, Cablevision, et.al., are not stupid. They see the future, and it looks like what happened to the music industry.

So they plan to provide extra internet-accessible content to those who retain their cable television subscriptions, thus, hopefully, saving the vulnerable half of their revenue streams.

I have been reflecting on this approach for the past few days, and I don't think it is a universal solution for the cable system companies.

Back in August of 2006, I wrote this post, in which I mused,

"I don't know what the arrangements are for the provision of, say, ABC's Lost or Desperate Housewives. But it would seem reasonable that production contracts for serial programming is going to change. Before, it was just about syndication rights and royalties. Now, a good production company with a hot property can air it initially via a network, then go solo after the brand has been built. Or, perhaps they'll just go directly to a YouTube or other online video content concentrator site.

Then again, perhaps a really good production shop will simply secure its own financing via the capital markets. Maybe they'll sign a long-term distribution agreement with YouTube to provide basic cashflow while they develop properties for the online market. The possibilities seem truly too many to contemplate just yet."

I still think that scenario can occur. It boils down to branding, doesn't it?

Someone like Larry David, Jerry Seinfeld, or Dick Wolf can probably secure financing, run a few pilot videos on YouTube or another popular site, and then invite viewers to screen a new series directly from their website, going to a paying basis after one viewing from that address.

My point is, while new, unknown content providers may still have to approach networks, cable or broadcast, and be handled by the cable television systems, established artists would not seem to have this problem.

Whether they be actors, writers, directors or producers, veteran talent would seem to be able to marshal other necessary talent, funding, and equipment, in order to create and market their new content directly to viewers' televisions over the internet.

They might go directly to TiVo, as a distributor, among other outlets, for preferred, easy access.

The move by cable companies, of which the Journal article wrote, is surely a clever step, if not a bit late in the game. It will keep a number of viewers connected to video content via their cable television subscriptions.

But I do not think it's a long term, nor necessarily foolproof solution. It seems to me that the Schumpeterian winds of change have already begun blowing at gale force through this sector. As the Journal piece noted,

"Some critics say it might be too late to put the online-video genie back in the subscription bottle. A growing number of people are growing accustomed to watching TV shows online, without paying. About 136 million people watched online video content in January, up 16% from the same period in 2008, according to Nielsen Online."

That would not seem to bode well for cable systems, no matter what they try to do to block this trend. But, they can always ask the music industry executives about this sort of trend. Their experience may hold more parallels than cable industry executives dare to imagine.