Back in August, we wrote about a NY Times article insisting that the cable companies had beaten the internet and the idea that people would "cut the cord" and get their TV from the internet was something of a myth. The centerpiece of the story was a single anecdote of a guy who tried to just watch TV on the internet, but went back to cable. Because, you know, a single anecdote must represent a trend. We noted the irony that the day after that article came out, reports broke that cable TV had suffered its first ever decline in subscribers.
We already noted that the cable industry is really trying to stick its head as far in the sand as possible when it comes to the fact that many customers are starting to drop their cable TV subscriptions. First, they pretended it wasn't happening at all, and that they had somehow "beat" the internet (based on a single anecdote of someone who had dropped cable, but gone back to it a year later). Then, when news came out of massive numbers of people dropping their cable TV plans, they said that they weren't really cord cutters, because they were only canceling service due to the down economy. The latest strategy appears to be to insult the cord cutters, saying that while the idea behind cord cutters was that it would be young, technologically savvy folks, it's actually people who the cable companies just don't care about: poor older folks. Seriously. At least that's the argument being made by one of the cable industry's favorite talking heads, who tries to minimize the cord cutters by saying they're "poor" people who "eat a dog's breakfast."
Mr. Moffett said the image of the cord-cutter had been that of a "cutting-edge technologist" who preferred to bypass cable to watch programming on computers and on an ever-proliferating array of devices. "The reality is it's someone who's 40 years old and poor and settling for a dog's breakfast of Netflix and short-form video."
Sounds kind of like the cable industry is moving from the "denial" stage to the "anger" stage of grief...
One of the nice things about most tech issues is that they're not split down typical political party lines. In practice, tragically, that sometimes means that both of the major political parties side with rent-seeking interests, rather than the public good, but in other cases, it does mean that you can get actually cross-party discussion on the issues, rather than the talking points. However, it seems that whenever any particular issue gets "big enough," it suddenly has to break down on party lines. We saw it happen with net neutrality, but now it appears to be happening on the whole silly retransmission fight between cable companies and TV networks. As mentioned, these fights break out every few months, with both the networks and the cable companies blaming each other. In the end, consumers end up with higher prices either way. The whole fight itself is silly, but when TV stations get blocked during key sporting events (football, baseball playoffs), apparently Congress immediately sees an issue worth grandstanding over.
And, as Broadband Reports notes, at least in the case of Cablevision/Fox, it's become a partisan issue, with Democrats lining up behind Cablevision, introducing legislation that would bar broadcasters from pulling channels during negotiations. Meanwhile, Republicans are being lobbied heavily by News Corp to take its side. It could just be that it's because this is News Corp./Fox, which tends to support Republicans. So it will be interesting to see if similar battles involving other broadcasters split along similar lines...
These days, fights between the TV networks and cable providers are so common that we stopped bothering to report on them. Basically, every few months, there's a fight over how much money should be paid to carry the networks, and the two sides get angry, a public relations brawl ensues with threats of channels being removed (or, the channels are removed for some time). Eventually a price is agreed upon between the networks and the cable providers... and the consumers pay more. Great, huh? Of course, some have been suggesting that these fights could drive the push for people to ditch cable altogether, and switch to going purely online.
However, this does raise a bunch of pretty serious questions. First of all, why did Hulu consent to this move? If Hulu were serious about its offering, it wouldn't agree to take part in a silly fight like this, singling out people on a particular ISP. Once again, though, this shows how Hulu is way too beholden to the content providers. Second, while this is not really a "net neutrality" issue, it's somewhat surprising that Fox/News Corp. would take a step like this that undoubtedly will be talked about in "net neutrality" terms. Any move that specifically restricts content to a certain class of users isn't going to be looked upon kindly. Finally, in what world did News Corp. think this was a smart move? Did they actually think that users would be so upset that they'd asked Cablevision to raise their bills to bring Fox on Hulu back? Of course not. They're simply going to blame Fox (and Hulu) for pulling their shows.
The company is clearly trying to milk this for the publicity (they sent us the press release about the lawsuit trying to drum up attention). What's interesting, of course, is the legal "theory" behind this. Basically, they point to Section 111 of the Copyright Act, which allows for "secondary transmission" of certain over-the-air broadcasts for a nominal fee to the Copyright Office. The intention behind Section 111 was to let cable providers rebroadcast local network television to cable customers, without having to negotiate with every local TV station. Whether or not that also applies to a company like ivi broadcasting online... is an open question that the court will have to settle.
That said, this does seem like a lot of hype over not very much. While the company has suggested in interviews that it intends to offer cable channels like ESPN at some point in the future, right now it only offers retransmission of broadcast network TV -- as that's all that Section 111 is designed to cover. If it wants to offer any other channel, it's either going to have to work out some sort of deal (highly unlikely) or come up with some other legal loophole (which probably won't work). The company's business model is to charge users a monthly fee to get this content -- which seems like a pretty big request, considering most people can get network broadcast TV for free. Perhaps it's appealing to Americans abroad who want to watch their local news back home, but that seems like a limited market.
Of course, the company does make the quite reasonable argument that the content it's retransmitting is available for free, they are showing all of the commercials, and they are reporting their viewers to Nielsen, so it is difficult to argue what these networks are actually losing by allowing ivi to go forward. I'm sure the TV companies' response is that it's somehow "taking" their right to try to charge for programs online via sites like Hulu, but that's not that compelling an argument. If something like a Slingbox is allowed -- where I can set up a system to retransmit the TV service I receive in my home to my internet connected device, perhaps there is an argument that a network-connected Slingbox is equally legal. To some extent, you could see a second version of the famed Cablevision lawsuit, which questioned whether or not you could set up a remote DVR. If that's legal, perhaps a remote Slingbox would also be legal... There have been a few companies that have simply set up remotely hosted Slingboxes, which resulted in some public griping, but I'm not aware of any actual lawsuits. Thus, it could be interesting to see where ivi goes with this...
Apparently Time Warner Cable can be incredibly petty and vindictive when it wants to be. The company has said that it's not interested in carrying Epix, the premium movie channel, because that channel did a deal with Netflix to help stream some movies to Netflix customers. It's hard to understand how this makes any sense at all. If I'm a Time Warner customer (and thankfully, I'm not), a move like this is just a reason to drop them (and to sign up with Netflix). Why treat your customers so badly, just because you don't like a little competition?
There's a NY Times article that appears to have a bunch of cable & TV companies congratulating themselves for beating the internet in getting people to keep paying high monthly premiums to get premium TV channels on their TV, rather than using some of the various internet solutions out there. Like so many awful NY Times "trend" pieces these days, it appears to key off of a single anecdote of one guy who tried to ditch cable, and then went back after a year. How many people are actually doing this? No idea. It's not like the reporters at the NY Times tell us. They do tell us that not too many people have dropped cable, but that's hardly surprising. What's much more amusing is the suggestion that the cable and TV companies have somehow "beat" the internet by restricting content:
In part that is because the television business took action to avoid the same fate. Heavyweight distributors and producers have protected their business models by ensuring that some must-see shows and live sporting events cannot legally be seen online.
Legally. Yes. But, just wait until you see what that enables on the less-than-legal side of the internet. As for the fact that people aren't dropping cable yet, this all really sounds like the cable companies not recognizing how trends accelerate. They do, indeed, start slow, and as Clayton Christensen has noted for years, the incumbents don't pay attention early on, because the other solutions just don't seem as good. And... here in the NY Times article we get:
Technology companies are pushing alternatives like Web-connected set-top boxes. But these are still not as easy as signing up for cable or satellite service, particularly for those who want to watch on a big flat-screen TV and not a computer.
Classic innovator's dilemma statement. It's certainly true that, right now, it's not as easy to use these internet services as it is to sign up for cable, but it's getting easier all the time, and sooner or later, someone is going to create a breakthrough service that makes it really easy. We've seen it time and time again. Napster did it for music file sharing after we were told that people didn't want music online. Vonage did it for VoIP after telcos insisted that VoIP quality would never sell. Who knows who it will be, or when, but someone will figure it out, and then we'll see the cable and TV companies freak out, because the cable cutters will shift into high gear.
This is the problem we were discussing recently, where disrupted companies simply don't recognize the speed at which a disruptive offering catches on when it does finally catch on. They think that they're successfully "protecting" their existing business with things like Hulu's subscription plans, but that will cause them to miss the truly disruptive innovation.
At least the NY Times article hints at the growing undercurrent, in noting that the younger generation is four times as likely to go without a cable subscription. That number is just going to grow, and as new offerings come along that make it easier and easier to get what you want, when you want it, without silly restrictions, the idea that the legacy guys "beat" the internet by restricting access to content will seem laughable.
Update: And look... just as this is published, out comes the news that cable TV has suffered its first ever decline in subscribers. Nice work, NY Times, in pitching a whole story based on a single anecdote, about how cable has nothing to fear... just as the numbers come out to show that people are, in fact, cutting back on cable subscriptions. I'm sure stories like this will make the upcoming NY Times paywall that much more valuable.
Years back, I was a Comcast cable modem subscriber. That was until they spent a whole month cutting off my service, every single day, from 10am until about 4:30pm. Each day I would call to ask what was up, and I was told it was "scheduled maintenance." I asked for said "schedule" so I could plan around it, and was told that there was no schedule -- which made for an odd form of "scheduled maintenance." I also asked if it would be happening the next day as well, and was always told that I wouldn't be able to find out until the connection disappeared again. I dropped Comcast and switched to DSL. Even though Comcast is now much faster than my DSL, that experience so soured me that I have no interest in ever going back.
While Comcast has received a lot of attention for its "Comcast Cares" initiative (the head of which recently left the company), it certainly looks like they have a few kinks to work out. Phil Anderson points us to the story of Comcast demanding the $0.00 a customer owes and threatening to turn off service if it's not received.
It's not hard to figure out how something like this happens. For whatever reason, the customer didn't owe any money that month -- perhaps a credit, or he had overpaid in a previous month, or something like that. But, Comcast's system is probably set up with the recording of "a payment" separate from the amount, such that not receiving any payment sets off a red flag, with no simple check to see if the reason is that no money is owed. You would think that this is something that Comcast would have caught a lot earlier...
A year and a half ago we questioned whether or not Hulu could really survive, given the rock and a hard place situation it had put itself in by being owned by the content rights holders, who wanted to limit what Hulu could do in competing against the rest of the online world. This limitation by its owners was quite obvious in the recently released subscription package that felt wanting.
Now, Hulu's CEO, Jason Kilar -- who, it should be noted, has always appeared to fight for consumer interests against the demands of Hulu's owners -- has come out and said, quite clearly, that Hulu is not trying to "kill" cable. In other words, he's signaling to the world quite blatantly: Hulu is unable to do the one thing it needs to do to be a successful business.
If Hulu were a truly independent business, the main focus of that business would be to flat-out disrupt the monopoly cable TV business. That's a huge opportunity. But, of course, Hulu's owners don't want that, because they're in this neat symbiotic relationship with the cable companies, where those cable companies keep paying more and more money to the TV companies just to carry their shows. So they don't want to upset that business model -- even if it's incredibly anti-consumer. So, because of that, Hulu can't do the one thing it needs to do. It's telling, by the way, that the only people in our comments, who thought that Hulu's subscription offering was a good deal, were those who had or were planning to ditch cable. And here comes Hulu admitting that it's not designed to help those people. Yikes.