Why I was rooting for Cablevision: Free Glee!

Glee - wide-eyed 04Believe it or not, I was disappointed that Cablevision settled with Fox, albeit grumpily, agreeing to pay retransmission fees for its signals. It’s not surprising: Baseball fans wanted their World Series; the FCC was hankering to intervene (without the power); and one really couldn’t imagine going without Fox forever … not yet. So Cablevision caved. Some say this is a sign that content remains king. I think it’s more a case of Humpty-Dumpty teetering.

Hanging tough against Fox was a first shot in the next media battle: the unraveling of TV, the separation of programs from channels. Old TV channels have become an unnecessary layer of curation. It’s the shows we want, not the networks. Networks are and always have been meaningless brands. They provided services: distribution, promotion, monetization. But as in the rest of media — as with news publishers, book publishers, radio stations, book stores — those functions can now be taken away from the middlemen and done more efficiently elsewhere.

The problem for Cablevision is that the unraveling has to start at home. It can’t unbundle Glee and the World Series from Fox until it unbundles its huge packages of utterly unwanted channels that cable companies force us to pay for though we never watch them. Physician, heal theyself.

Of course, this unbundling will be painful for cable companies. They gather huge revenue selling those bundles to trapped customers who have no choice but to pay for Fuse if they want Food. It won’t be an easy transition. But once choice arrives, we will demand our freedom from bundles.

And this unbundling will be quite painful — no, fatal — for many channels. No longer subsidized by being sold with Food, Fuse may die.

Producers and stars will also have trouble with the transition, though I think they’ll come out on top as kings of content. Today, they have to share revenue with many middlemen but at least they know how to use the system. It gets better for them, though, when they’re on the other side of the transition, building direct relationships with fans and not sharing revenue with so many middlemen. They’ll be more efficient — maybe smaller but also possibly more profitable with more control and less risk. Yes, it’ll be harder to make blockbusters but that’s getting harder anyway as we get more fragmentation (read: choice) in media.

What it will take to start disrupting the old ways is for a big star or show to start distributing directly on the internet. The big star’s name will be sufficient for promotion. Distribution is all but free. There needs to be a structure for monetization: selling ads (Google? AOL?) and/or subscriptions (Amazon?). Note well that in entertainment, as opposed to commodity news, I believe pay walls will work. I’ll pay for Weeds — I already have — but won’t pay for one of 5,000 news stories about the same event I could watch myself.

So when we reach the promised land of entertainment, we get rid of the old, value-extracting middlemen: channels. Will cable companies still be around? Possibly. Probably. Someone will still deliver the internet to our devices. That could still be the cable company if it learns how to start adding value rather than just extracting it with bundles and fees and restrictions on what we can do with our own TVs.

There is a new role for curators who add value by helping us find the entertainment we’d like. Enter Google TV among many hopefuls for that job. There are new opportunities to make money with data and targeting (cue privacy fretting). We the audience are no longer hostage to Burbank programmers’ schedules, so entertainment can change form; it can be something other than 22 or 44 minutes long; it can be collaborative, with someone becoming a host and a platform for our creativity (YouTube?); it can last for as many episodes as it should rather than as many as The Office is making.

As with so much else in entertainment and technology, the FCC could screw this up. They’re about to try by asking for more authority to intervene in the retransmission negotiations like those Cablevision and Fox just went through. The problem with that — as with so much else the FCC and FTC and meddling in — is that they would act to support the incubments and prevent disruption, against our own interests, propping up old pricing structures and old models of entertainment and keeping disruptive newcomers out. No, FCC, no!

Here’s the problem with retransmission: Fox succeeded in making Cablevision pay for the right to transmit its broadcast signals. Except those broadcast signals — transmitted on airwaves we, the people, own and gave to channels — are supposed to be free. But now Cablevision is paying for them and those fees will be passed onto its customers. So we, the viewers, will pay for Fox twice — once as an opportunity cost in revenue lost to taxpayers by not selling TV spectrum and now twice in new fees to Cablevision and other cable companies. Thank you very much, FCC and Congress. Way to go. Whom are you serving again?

Once we get socked with more and more fees thanks to retransmission blackmail by channels, I’ll just bet we’ll start protesting to the FCC and it will have reason at last to pressure cable networks to unbundle. Once that’s done, we also need the right to unbundle broadcast channels; I don’t plan to pay for the CW, whatever the hell that is anyway. And once that happens, retranmission becomes as irrelevant as rabbit ears.

Now the next problem is that channels will give up their exclusive rights to programs over their dead bodies. But it has been happening, starting when ABC streamed Desperate Housewives online and as shows show up on Hulu. But now that, too, is getting ugly as Fox tried to block Cablevision users coming to Hulu (until it found it was screwing non-Cablevision viewers, too). And now ABC, CBS, Fox, and Hulu are blocking Google TV, which is insane, for they’re only blocking viewers who want to find their shows. Thus arise all kinds of new (and, for me, unanticipated) network neutrality issues, blocking content based on how you come to the internet or what search vehicle you use. Insane.

Listen, people, TV should be simple. It will be simple, damnit: We want to watch the shows we want to watch whenever and wherever we want to watch them. We’ll watch ads with them or we’ll pay for them. We won’t give a damn whether we watch them on a channel or on a web site or in an app or via Facebook; via a TV or a computer or a phone or a tablet; streaming from the cloud or from our hard drive; found via search or friends’ recommendations on Facebook or Twitter. Channels that stop us from watching them [Fox, are you listening?] are hastening their own deaths. Stars, producers, and studios will, like water, find their way around you as will we, the viewers. You middlemen are doomed. It’s only a matter of time.

So don’t think that Fox won this war. It only won this round. Fox’s parent, News Corp., is turning into the last of the great control freaks of content, building pay walls around its newspapers; blackmailing cable providers — not exactly a sympathetic bunch — into paying retransmission fees for content that is otherwise broadcast free over our airwaves; and pulling links off Google. News Corp. is turning into the uninternet. So fine. we’ll watch how they do as TV and media unravel around them. Can’t wait.

  • Matthew

    I disagree that it was stupid for them to block Google TV. First, they already blocked Boxee over a year ago; why anyone was surprised by this is strange. It would have been shocking had they not blocked it.

    The difference between watching Hulu on your laptop vs. watching it on Google TV is that Google TV competes with TV and your laptop does not. Sure, you might be one of the people who plugs your laptop into your TV; but that’s such a tiny minority that it’s not worth their effort trying to block. It’s insignificant. A mainstream device sold in big box department stores, created by Google, is not insignificant. You’ll get your Hulu through Hulu Plus. That’s the appropriate way to transition into internet delivered television.

    People want to find an enemy for why internet TV isn’t already here. You have found your enemy in the networks. The truth is that there isn’t an enemy. It’s a slow transition that is no ones fault. The network’s would be negligent to their stockholders to put all of their shows on Hulu and allow it to be played on any device, for only the advertising money that is a TINY TINY FRACTION of what they get on TV.

    Consider this. Hulu advertising is a flat cost. TV advertising is not. Brands who want the primetime slot have to pay a LOT for it. It’s a chicken and egg problem. Currently the eyeballs are on the primetime cable and network TV channels. When those eyeballs are instead on a particular internet TV platform, then advertising will be more profitable. It’s a slow process but we’ll get there. Looking for bad guys doesn’t make it come quicker.

    • There’s no time for slow transitions.

      • Matthew

        No time???

      • Don

        “The network’s would be negligent to their stockholders …”

        Don’t the networks have a responsibility to their stockholders to stay relevant and figure out how to survive as the number of internet viewers increase and cable viewers decrease? I don’t have statistics on how many people are skipping commercials on their DVR’s but I know in my house we rarely watch the commercials. When I watch on Hulu or the net, I end up seeing more commercials than I would otherwise.

    • “The network’s would be negligent to their stockholders to put all of their shows on Hulu and allow it to be played on any device, for only the advertising money that is a TINY TINY FRACTION of what they get on TV.”

      That, I think, is the part which does not make sense (which is not to say that it isn’t true). How is it possible that internet advertising does not command the same rates? Has TV advertising always been too expensive? Do advertisers not understand an eyeball is an eyeball? (and that you probably know a lot more quantitative and qualitative information about the internet eyeball).

      Yes, the TV has a limited set of advertising opportunities (limited by the number of channels any hours of the day) whereas the internet is essentially endless. TV advertising is driven by scarcity, but it seems absurd that the price of getting one pair of eyeballs to look at the same advert is so different between computer and television. Given the price differential, I don’t understand why the advertisers who pay for adverts during Glee on television are not bowling each other over in an attempt to get the cheaper and demonstrably more effective ad onto the internet alongside the streaming version of Glee.

      This does not make sense to me (and yet, it is happening, so why?)

      • The ratio of commercial time to content is much higher on television than for online video. It is not so much that TV advertising has been too expensive; rather, it has been too ubiquitous. Take a 30-minute nightly newscast, for example: it carries roughly ten minutes of commercials; play its seven component packages individually online and each one will have a 15-second or 30-second pre-roll — a total of no more than 3.5 minutes of advertising.

        That said, it does seem that video is one of the few formats for mass media advertising that does not lose its CPM pricing power online (unlike display and classified).

      • David

        No, we actually know far less about internet TV eyeballs (I do this professionally). With TV, advertisers (such as P&G) have sophisticated econometric models that can accurately forecast how much they need to spend to drive a certain level of sales.

        No such relationship exists online because the audiences are simply too fragmented and the big agencies’ operational costs are so high that they can’t cherry pick audiences here and there to meet a certain target.

        With the exception of maybe portal homepages, there simply aren’t enough eyeballs in the same place at the same time to move the online advertiser needle in the same way as TV, which is critical for many (though not all) advertisers who need to instantly get a time sensitive message to a large number of people.

      • Matthew

        Good post David. That’s what I think the rabid anti-network folks are not seeing here. Eventually the needle will start to swing the other way. Networks could easily stream their new shows live (on Ustream or their own service) in the 8-10 primetime slots, then put them on Amazon/iTunes the next day. The advertising of the stream should be about the same as on TV, once everyone is using internet streams instead of broadcast.

        Couple of things we need before that’s going to happen: We need the internet to pick some standards and stick with them. Whether it’s Flash or h.264 or WebM, it doesn’t matter. Currently video is fragmented, which is why internet companies like Ustream, Livestream, etc. don’t even have apps on platforms like Roku, Boxee…. it’s crazy to think that we’re ready for all internet TV when businesses who live by this aren’t even ubiquitous yet.

        Secondly, we need better broadband. We need it to increase faster. Once more people start using IP exclusively for their video content things will get even worse than they currently are (I get occasional buffering on Netflix on my 20mbps connectIon).

    • David

      Mattthew wrote “The network’s would be negligent to their stockholders to put all of their shows on Hulu and allow it to be played on any device, for only the advertising money that is a TINY TINY FRACTION of what they get on TV.”

      Yes, exactly, because the audiences at any one time and at any one place are far smaller online, even with the top TV content, despite the fact that most online viewing takes place within a couple of days after the show airs on linear TV.

      “Consider this. Hulu advertising is a flat cost. TV advertising is not. Brands who want the primetime slot have to pay a LOT for it.”

      Not sure what you mean here. Hulu ads AFAIK are generally sold on a sponsorship or CPM basis, same as TV, and in fact since the broadcast network partner sales teams (i.e. NBC, Fox, and ABC) sell Hulu’s best quality ad inventory themselves (most likely in TV-digital package buys), they often monetize this content very well, though it is true there aren’t as many ad units per hour of content as you point out.

      Also worth pointing out here that the content against which the ads are served has a very strong relationship with ad effectiveness and thus on advertiser ROI. Recall and purchase intent uplift and other key brand metrics tend to be much better in a high quality, predictable, professional, branded ad environment. Same goes for new content, among a host of variables that also generally favor the networks.

  • Great post Geoff. I guess the question is when? If the agnostic platforms exist and are ready to catch the disaffected amongst the content creators and consumers, it should be inevitable.

  • Distribution is all but free. There needs to be a structure for monetization: selling ads (Google? AOL?) and/or subscriptions (Amazon?).

    Don’t overlook Netflix.

  • Yes, Netflix and even more perfectly, Pandora – great content services that I pay chump-change for, rather than tolerate commercials, contract collapse blackouts like fox/cablevision, or fake and/or low-quality torrents.

    Trent Reznor (NIN) has been uploading his own official torrents for some time now, but as he’s already 3x richer than God, and is his own label, he may be the exception.

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  • You’re a little late to this party Jeff and perhaps your hatred of Fox is blinding you to a larger picture. The MTV’s and Discovery’s of this world began meaningfully ‘curating’ content decades ago (before ‘curation’ became fashionable again) and building multi-billion dollar businesses on the back of doing so. While these companies still depend largely on cable/satellite to provide the infrastructure to connect content and audience, there are already many ways which they can build direct relationships with their audiences and these will only increase.

    Two points made by earlier contributors are key:
    1. A broadcasting system steeped in regulation, legacy behaviours and vested interests is not going to change rapidly.
    2. Content creators have to engage in a new ecosystem to replace the great revenue streams the currently receive but it would be irresponsible to abandon a system while it still produces good returns.

    One final point, don’t you think the argument ‘problem = old media, solution = Google’ is wearing a bit thin ?

    • Andy Freeman

      > ‘problem = old media, solution = Google’

      In some sense, “Google” isn’t Google the company but an idea.

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  • Joe White

    Does anyone else find it interesting that the block did NOT apply to the Fox Noise echo chamber?

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