The Revolution Will Not Be Television

To quote Captain Bart Mancuso of the USS Dallas, "The hard part about playing chicken is knowin' when to flinch."  Right now, the nation's cable distributors are playing a three-way game of chicken with their networks and their subscribers. The networks are demanding higher carriage fees for their content, mostly because advertising isn't paying the bills. You could make the argument that this is a result of a down economy and tight-fisted advertisers or you could make the argument that this is also the result of internet advertising reaching more targeted audiences in increasing numbers which has made advertising costs fall dramatically. In either case the networks are exploring new sources of revenue, and in this case it's demanding higher carriage fees from the cable companies. Cable companies have largely accepted these higher fees. Time Warner Cable and News Corp (FOX) made a big show of their pissing match over the fees, but this is probably half because Rupert Murdoch is a whiny, bloviating pain from down-under and half because it was free advertising for all of the football they had in their line-up on Saturday and Sunday. Cablevision, on the other hand, told the Scripps Network, which owns Food Network and the Home & Garden channel, to take a hike over their fee demands. At midnight on New Years Eve while everyone was watching the ball drop, Scripps yanked Food Network and HGTV channels from the Cablevision line-up and Cablevision promptly put up this passive-aggressive explanation in their place. These channels are still unavailable for Cablevision's 3 million plus subscribers which, full-disclosure, I happen to be among. Time Warner Cable and Scripps have also failed as of this writing to come to an agreement over carriage fees but they have agreed to an extension of their previous contract's terms until a new one can be agreed upon, which leaves the Food Network available to Time Warner's customers--for now. It remains to be seen whether either Cablevision or Time Warner will flinch and ultimately give in to Scripps fee demands, as the rest of the nation's cable carriers have, or if Scripps will flinch first and bring their network back to Cablevision without the fees. Personally, I'm betting Cablevision will flinch before Scripps does. Virtually everyone has at least neutral or positive feelings for the Food Network, whereas one's feelings regarding one's cable provider is almost always in the neutral to negative spectrum. In other words, this hurts Cablevision far more than it hurts Food Network.  

 Which brings us to the other game of chicken that the cable companies are playing with their subscribers. If networks demand higher rates as News Corp and Scripps have (mostly) successfully done, do we think for one moment that those costs aren't going to be passed along to the subscriber? Of course they are. So how much can a cable company charge for an ever decreasing (in both quantity & quality) bundle of channels, the vast majority of which most people never watch, while still charging premiums for networks like HBO and Showtime? Economically speaking, there is a point at which most subscribers will tell the cable company--or indirectly through the FTC--to take their bundled packages and shove  them someplace dark and unpleasant. I'm at that point already, but I realize that those of us willing to forgoe the football and basketball (I can watch all the Baseball I want in HD online) and other live events and live off the content of Hulu, Netflix, and Amazon On Demand are a growing but small minority. But I don't think they have much headroom to operate in. It once was that the cable companies could charge virtually whatever they wished because there simply was no other option for the consumer. In most of the country there is one, and perhaps if you're lucky, two cable service providers where you live. Now that broadband speeds have increased and video encoding and decoding technologies have improved, the prospect of leaving one's cable TV behind while still enjoying the majority of its content is a viable one.

 What's it going to take to break the cable company bundles and force them to offer a la carte network service? Well, it could be any number of scenarios, including government intervention by Congress or more likely the FCC. I think the best and most likely scenario, however, is one in which a network with some demographic clout takes itself out of the cable game and moves entirely to an internet distribution model, either behind a paywall or free with advertising. I don't believe it would take more than one such network to do this in order to prove the concept* both to the consumers and that cable providers that a bundled cable television service is a square wheel in a round wheel world. Food Network would make an excellent test case, given it's strong favorability among multiple demographic groups and its already very targeted advertising market. Of course, this won't happen so long as they are able to demand higher fees from cable companies, but sooner or later cable will flinch--or their customers will--and the cable gravy train will end for the networks.

 Of course all of this is predicated on the notion of Network Neutrality preventing the cable companies from blocking networks from streaming content on the broadband they provide. If that is allowed to happen, well, then we'd all better get used to giving "Insert Big Cable Company Name Here" 5% of our monthly income from here on out.   

*Major League Baseball has already proved the concept as far as I am concerned, as their online and mobile offerings this past season were nothing short of excellent, and a model for content distribution for the future.  However, as they are not a year-round ad-supported network in the traditional sense, I concede they aren't the most solid example.