Monetization. It’s one of those words that comes up all the time and yet carries with it the paradoxical tendency to evoke “duhs” from many while also spurring a lot of head scratching, soul searching and stress induction among others. The truth is that the cable industry has always been a cashflow junkie on both the operator and programmer sides. This mutual addiction serves the industry well as everyone makes a few bucks, creates a few jobs and ultimately serves consumers (even if cable doesn’t always meet its customers’ every expectation). Any disruption to these mighty rivers of cash can put even the calmest executive into a bit of a panic as they scramble to replace lost revenue. And in recent years, that’s been all about finding new streams in which to fish, whether new ways to exploit the cable wire on the operator side or new ways to squeeze money out of existing and new content on the programmer side.
It all seems pretty simple: Have a product, charge for it. But the Internet has largely trained the public not to part so easily with its hard-earned cash. In fact, over the last decade or so, the cyberabundance has trained them to do the absolute opposite. So that makes monetizing new media platforms increasingly tricky for an industry addicted to cash and hard pressed to watch its margins shrink out of some shoulder-shrugging surrender to this New Guilded Age of Endless Bits. Cable operators have started rolling out authentication to keep linear dollars flowing, and programmers are largely playing along in a self-interested bid to preserve license fee revenue. But many content owners are also going off the cable reservation with new over-the-top deals that offer viewers new ways to get that content—ways that don’t necessarily include a cable subscription.
Nothing new perhaps. This debate has raged for the last two or three years, and it’s only now starting to take shape into some sort of business. But it’s also still very early. Monetization is still shaking out. And new arrangements are bound to crop up, despite attempts to use authentication as an Internet extension of a typical distribution deal. Perhaps that will be the way of the future when all this craziness settles down into standard business practices. But if the experimentation taking place among traditional content players (not to mention the throw-out-the-rules attitude of new players like Netflix and Google) results in new business models that stand on their own… well, it’s hard to predict where the future will take us.
Could we face a future in which cable becomes a dumb pipe—and yet makes more money than ever (with ridiculous margins)? Could the iTunes phenomenon, which single-handedly stripped individual songs from their profitable album packages—play out with Internet video as premium content goes largely a la carte? Could consumers eventually tell the industry that, frankly… they simply don’t care about accessing 200 channels for one set price through a cable box and are content to pick and choose at much higher per-viewing-hour rates? Could this next generation—with its iPads, smartphones and vastly different viewing habits—simply overwhelm the natural tendency of the cable industry to preserve its current business model. Could monetization become decentralized to the point in which cable operators don’t even control program packages, rent boxes or send out trucks (other than to maintain infrastructure)? Could all content consumption come down to individual credit card, Paypal or iTunes charges—scattered out there on the same bills that list grocery items, restaurant meals and trips to Home Depot? And is all of this—while certainly disruptive and bad for business in the short term—ultimately a long-term win for the industry that’s just about single-handedly responsible for the broadband circus we enjoy today?
Lots of questions. Few answers. As the Cable Show approaches next month, let’s all just stay alert and try to figure it out. Together.
(Michael Grebb is executive editor of CableFAX).