January 2nd, 2013Top StoryThe Future of TV May Not Be Worth ItBy Brian Barrett
It's tempting to think that we're inching closer to a TV revolution; if recent reports of Intel's internet-TV set-top box are any indication, the technology is certainly in place. But, tellingly, the WSJ reports that Intel's ambitions have been stymied by the same thing that's kept Apple on the sidelines: the inability to cut a deal with the networks. This is the part where we grumble and stomp our feet about the incalculable greed of Big Cable. If Apple could cut a deal with record labels, the logic goes, why not TV?. But the truth is, there's more than just obstinance at work here. The music industry was dying a slow death when Apple offered a life vest; Time Warner's Networks division alone, meanwhile, posted a $1.2 billion profit just last quarter. Cable companies and content owners aren't damsels in distress; they're dragons stockpiling gold. Even so, there's almost certainly a price at which networks would license their content on a case-by-case basis. It's just almost certainly not one you're willing to meet. How Much Would It Cost?Let's say, hypothetically, that a la carte TV channels suddenly became available today. How much would you expect pay? Time to speculate. We can start with how much your cable provider pays for access to certain channels. Those numbers aren't widely accessible, but we do know that ESPN—the big dog of pay-TV—costs your cable provider at least $4.69 per subscriber per month. How can one station command such a fee? Because cable channel pricing, like everything else, is based on supply and demand, and ESPN's ratings are nearly twice that of the number two pay cable network. That's one channel, at its wholesale price. As an individual subscriber, you would end up paying much, much more. But how much more? Consider that HBO, in less than a third of the number of households as ESPN, costs cable companies a reported $7 per customer per month (you end up paying more than twice that, on top of your regular cable bill). Consider, too, the marketing costs that cable companies cover, the streaming costs of an internet-based package that would be shouldered by the networks. It's not unreasonable to think that ESPN alone would cost upwards of $20 per month as a standalone product. And that's probably a conservative estimate. So you don't care about ESPN. All you want are a handful of channels, the kind that cable companies typically pay less than a dollar per subscriber per month for. How bad could that be? Actually, in a lot of instances, still pretty bad. The Ownership IssueAs Gabriel Rossman says so eloquently here, the real reason you can't get HBO Go as a standalone network is that it's owned by Time Warner Inc., which stands to make far more by bundling its networks then letting them go one by one. Even if it made financial sense for HBO to set itself free, it would be absurd for Time Warner to let that happen. Bundles are more profitable than one-offs. But it's not just an HBO problem. Many, many, many of your favorite cable networks are owned not just by the same parent company, but by cable providers themselves! That's just how the industry works these days. For instance! Comcast Owns
And although Time Warner no longer owns TimeWarner Cable, it does own the following properties, all of which are more profitable when sold as part of a package than alone:
Even if the fair market, a la carte price of any of these networks turned out to be reasonable—say, four bucks a month?—they would never be untethered by their corporate parents. Why would Comcast give you access to Bravo alone when it can just as easily keep it wrapped up in a $70 per month bundle? And let's say, miraculously, that these companies feel particularly altruistic. Let's say they give you access to mid-tier channels for $5 each per month, despite the fact that it would potentially cost them billions of dollars over just a few years. Remember that these are the same companies that control your broadband access. And if you debundle your television from your internet, guess what? Your internet costs skyrocket. You just can't win. So Is There Any Hope At All?It's an unfortunate fact of life that just because a critical mass of people want something doesn't mean they'll get it. This is especially true when it comes to cable. While other markets are open to disruption—here's that thing you like, but cheaper—cable content and access is so tightly integrated, your choices so limited, that there's next to no chance of an avenging hero rising from the depths. Still, though, there's a glimmer of hope. Intel has apparently reached at least one content deal (although who knows at what cost). Apple may have set aside its grand designs in favor of a boring set-top box, but it's got enough clout to keep banging on that door. And major content companies like Disney (which, incidentally, owns ESPN) might be more open to a la carte deals than your neighborhood ISP. At the end of the day, though, no revolution ever came cheap. Your living room is no exception. |
|
No comments:
Post a Comment