The Influence Paradox

Did you watch the Emmys? Good. Then you probably witnessed how ridiculously influential cable networks have become. It’s an embarrassment of riches. Whether it was HBO sweeping several categories or AMC’s “Mad Men” taking its record 3^rd Best Drama win in a row, cable nets have in many ways surpassed their much better funded broadcast brethren when it comes to high-quality, edgy shows that push the envelope and take risks. In other words, cable now wears the artistic crown. And audiences are starting to notice and reward networks that concentrate intensely on quality storytelling and nuanced characters rather than mostly procedurals, medical dramas and reality game show fare (Although we admit that ABC’s “Wipe Out” is addictively entertaining).

 

Still, this immense recognition—while a vital promotional and ratings boon for cable nets and retention tool for cable operators—has a flip side. The popularity of all these shows makes people, uh… want to watch them. All the time. From anywhere. And from any device. That’s great, right! Yes, except that they no longer need to subscribe to cable to do so. Consider the options: There’s Hulu for many of the most popular shows, DVD rentals and purchases for many other series and TV movies (for those willing to wait) and, of course, the simple piracy option through numerous outlets like BitTorrent. Obviously, this is exactly why authentication has become so important to the cable industry—both for cable operators trying to preserve those monthly bills and for programmers trying to guard their dual revenue streams. The leadership of Comcast and Time Warner Cable in the authentication area deserves recognition. For an industry that often takes years to figure things out (tru2way, anyone?), it moved relatively quickly on authentication/TV Everywhere. But in the grand scheme of things, has it moved fast enough to avoid considerable short-term pain? Probably not.

 

The truth is that everyone wants a piece of cable’s entertainment pie. And tech companies like Google and Apple simply don’t have to work through myriad legacy issues that have increasingly stymied cable’s ability to move quickly with these initiatives. Not a week goes by that cable doesn’t face the dark possibility that all its effort to build a compelling content universe will, in effect, ultimately degrade its very gatekeeper advantage. Take this week for example: Google is reportedly working on a plan to sell movies through YouTube while Apple continues to negotiate with big media companies for a 99-cent per episode, two-day rental on TV shows. Both companies are masters of easy-to-use navigation schemes, which frankly have eluded cable operators on the VOD front. Cable content companies may look at this as a third revenue stream that will only add to cable license fees, but the smart ones out there know it’s a perilous game that could end with cable operators making a simple demand: Either give pay TV operators exclusivity through authentication or accept lower license fees from them. In some cases, the lower license fees could be zero. Accountants will have to figure out whether iTunes could make up the difference… but early guesses are no. Not even close.

 

So as cable basks in its Emmy glory from Sunday night, the industry’s biggest challenge in the coming months and years may be to simply ensure it isn’t a victim of its own success. People out there love cable shows. But given too many ways to get them cheaply and easily through third parties, they may eventually reject the idea of paying cable operators every month for 150 other channels they seldom or ever watch. And while that may seem consumer friendly and fair, it’s not a sustainable long-term business model unless those a-la-carte fees for TV streams and downloads get a whole lot more expensive. And at that point, what’s the difference? Consumers will still be paying for “cable,” even if they don’t call it that—and they’ll have fewer viewing options to boot because many of the critically acclaimed but lower rated cable shows that live off of those cable license fees won’t survive the Internet pay-per-view model. Meanwhile, rather than the money flowing toward traditional cable and satellite companies, it will just flow to Google, Apple, Netflix and others who ride those broadband pipes. Consumers should understand that these shows cost a lot of money to produce. Someone has to pay for them. One way or another.

(Michael Grebb is executive editor at CableFAX).