Cable TV Won't Lose To The Internet Because It's Making Too Much Money?
from the logic-drop dept
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.