Make no mistake about it. There have been skirmishes in the past, but this week in the hallowed halls of big media, war broke out.
Just as the “The shot heard round the world,” launched the American Revolutionary War in Concord, Mass, and the assassination of Archduke Franz Ferdinand of Austria kicked off World War 1, on Monday Time Warner Cable used the Internet to announce to the world that it was going to give some of its customers “more freedom to watch on more screens” by allowing them to watch several TV networks on their IPads.
The viewing is limited to the customer’s home, and can only happen if the customer downloads a new TWC IPad app and subscribes to both cable TV and the Internet from Time Warner Cable.
To many of the top cable networks, TWC’s actions are nothing less than a land grab, or rather a spectrum grab. The networks, owned by parents like Viacom and Scripps networks, have claimed that TWC’s actions are violations of their contracts, and that if TWC wants to put their shows on a form of distribution other than cable TV, they have to pay for that privilege. Time Warner Cable says it doesn’t owe them a thing.
Bring on the Lawyers.
This all goes to the heart of convergence. Suddenly the video world is in the midst of a content platform convergence that promises to be as confusing and unsettling as everything that has happened in the newspaper, book, magazine and music worlds.
All the traditional forms of distribution have been turned on their head by technological advances that have allowed television viewers to see their favorite programs on all sorts of new platforms, from computers to cell phones to IPads.
And, there are as many new ways to deliver those programs. The IPad can receive via WiFi or 3G (soon to be 4G), All the new TV’s can take input from over-the-air, satellite, cable, telephone networks or even the internet. Cell phones can take video over multiple networks, too.
Since the cable and satellite companies now pay the programmers billions of dollars each year, they make the case that those payments imply certain exclusivity and protection. The networks, for their part, say they specifically gave the rights for the cable companies to broadcast their programs over the cable networks, and the cable networks only. If the cable companies want to distribute those programs over a difference system, that’s fine, but it means a new negotiation with the content creator.
No one could have anticipated how quickly technology would enable consumers to get their programming on scores of devices both anchored and mobile. The business models that led to unprecedented growth in media creation over the past few decades were built in a world with limited alternatives for distribution and now suddenly seem so badly outdated.
So the plight of a pure distribution company is going to be challenged, as it has been in many businesses since the internet came into being. Whether a company is selling books, tickets, research, shoes or almost anything else, or an individual is looking for a buyer for a used car, antique or stamp collection or even a house, the internet has totally redefined those marketplaces. Anyone or any company in the middle of that process has been squeezed. The Internet allows buyers and sellers to be in direct contact with each other.
It is why companies like Comcast, predominantly a cable distribution company, spent billions to also become a huge content creator. Owning content through NBC and all of its associated cable networks becomes more of a hedge as the process of distributing that content is in flux. The one sure thing is that customers will consume the content SOMEWHERE.
But most cable companies have begun to adapt a strategy that would have them manage the consumer relationship for content creators across multiple platforms. Called “TV Everywhere,” the concept is that the consumer only needs to pay for the content once, but will have access to it on several platforms. To that end most cable operators are developing both the customer payment infrastructure and the ability to authenticate customers from each network over every available platform: an extremely difficult and highly technical task. They argue that this would be much more efficient than every network building the same function for themselves.
They are also building those apps for the IPad and other tablets that will allow their paying customers to view programs however they want. And starting now, they are launching those apps with content they believe they already have the right to distribute within the home.
At the same time new competitors, in the form of Google and Apple are also vying to build efficient systems to do much of the same thing through their special boxes.
This is a tough situation. The Cable Operators and the Networks have a history of pushing each other to the brink, usually in response to one or the other threatening to pull programming over a proposal by the network to charge more for the programming or by the cable company to pay less for it.
But over the years they have also been good partners and helped build their businesses together. Most insiders are hopeful that the two sides can work out their differences and take on the brave new world of digital chaos together.
(Writer’s Note: I am on the board of Discovery Communications, which has several cable networks caught up in this skirmish.)