When Media Dinosaurs Attack

Headlines from yesterday's WSJ included the following: Pay TV is in a Perilous Bubble

Pay-TV Providers Tense as Subscriptions Drop

Embedded in these articles, and others this week, were comments by James Dolan of Cablevision and Charlie Ergen of Dish Network acknowledging that for large entertainment companies, who derive much of their Cable revenue from retransmission fees, these retrans arrangement are not sustainable.  In fact, one article provides stats showing that the percentage of younger folks who subscribe to cable is dropping.  This is a combination of cord cutting and simply just not signing up.  This generation simply can not afford to pay for cable when they can obtain all of the content they wish to watch on their tablet or computer online via Netflix, Hulu, Amazon or via the "watch" apps of every major program provider.

And yet CBS and Time Warner Cable keep trading barbs over how much CBS should be paid by

Time Warner Cable to retransmit a network whose demographic is an aging population.  Its like watching two dinosaurs battle it out while the comet that will destroy their environment is about to impact the planet.  HELLO!!!  Instead of working on a solution to a business paradigm that is not sustainable in the long term, these two keep poking each other in the eye in the press to make points about which no one really gives a crap, all in an attempt to carve out their share of a pool of money that will likely change dramatically in the near future.  CBS is quoted as claiming, to Wall Street analysts, that their retrans fees will double to more than $1.0B by 2017.  This is only realistic if you and I and advertisers buck up, and that ain't gonna happen.

Long term this business model does not work.  The cat is out of the bag.  The horse is out of the barn.  The train has left the station.  The business model must evolve.  A generation is among us who only needs broadband access to a network and they will gladly select from which aggregator they will stream content to their device of choice, and when.  The demise of this business model will not happen overnight, but it will happen.  And just as the music industry woke up to the disruption of its business model, a model that required the purchase of 12 songs on a disc when the consumer only wanted the hit song, so, too, will the model requiring the consumer to pay for 500 channels of content when they want to pick and choose which programs from any network they wish to watch, and when.

How much longer do we have to watch dinosaurs battle over a economic pie that will inevitably shrink?  Better to be more in tune with reality like, I can't believe I am saying this, Jim Dolan of Cablevision who this week was quoted as saying that one day his company may only be the provider of a pipe by which customers in his market have access to sources of content that are not provided by Cablevision.  Blasphemer!!!  And his family may not own the company at that time.  There is a reason John Malone is back in the Cable business and has invested in a company run by one of the most regarded operators in the industry, Tom Rutledge.  Its not because he has cash lying around he just wants to park somewhere until a better deal arrives.

I close by quoting Charlie Ergen of DIsh Network, who states "I don't think the industry quite understands how the internet works".

The younger, tech savvy, generation does.

Credits to Martin Peers and Shalini Ramachandran of the WSJ for their reporting on these issues.