Photo: Photo: jtuason (Flickr)
The latest spat between Time Warner Cable and Viacom is just the tip of a massive problem facing content distributors and content creators.This issue is compounded by consumer demand to access content across multiple devices on their terms.
People are no longer satisfied with television as the gatekeeper for entertainment, and this desire is only going to grow thanks to increased mobility. With the mobile spectrum evolving as a result of 4G, new fibre is being laid every day, virtualization technologies are advancing, processors are becoming more powerful, and devices are easier to use. These innovations have opened Pandora’s Box, and it cannot be closed.
Cable companies (Time Warner) and content creators (Viacom) are used to being in control. They have been in the driver’s seat for decades, and, much like the music industry, they are struggling with change. Now, like two school yard bullies, they are fighting each other because the playground landscape they once controlled is changing almost daily.
There are new apps being created and fuelled by investors looking for the next Facebook, Google or Amazon. As this future unfolds, there will be new services, like Amazon Prime, looking to challenge Netflix so consumers will have even more options. To make matters worse, the proliferation of personal devices is creating a problem for the entertainment powers that be. Television was once king of the entertainment world. The additions of PC’s and Macs for two decades did little to change the situation. Fast forward to the last five years, and the landscape changed dramatically. The advent of powerful browsers, Flash, Silverlight, Netflix, Amazon, increased broadband access, smart phones, tablets, laptops, and media solutions like Roku, Boxee, Apple TV, Google TV, Playstation, Xbox and Wii has deposed television from its place at the top. Before, there was order and simplicity for both cable companies and content creators; now there is chaos. Managing channel distribution strategies across these new platforms can be a nightmare for content creators. Conversely, the load demand created by these platforms is rapidly increasing costs for cable providers that need to upgrade and maintain their networks.
Cooperation in Chaos
Now that we’ve addressed the technology behind this problem, how can the issue be resolved? The Time Warner Cable/Viacom argument shares roots with net neutrality. These ties are connected to keeping profits and changing consumer behaviours. Technology has disrupted the old way these organisations conducted business. Out of this chaos, both industries will need to embrace each other to secure their futures.
Comcast’s acquisition of NBC Universal means the company is both a content producer and distributor. The company has proven that it’s interested in embracing Web platforms and technologies to provide value added additional channels to its customers. The two largest examples of these technologies are Fancast and Hulu. Comcast is an example of what can happen if both the content creator and distributor can financially share in the revenue potential that new devices can provide. This coexistence transforms new Web services, applications and devices from headaches into additional revenue channels. Innovation is not going to slow down so embracing a strategy like Comcast of finding benefits from both content creation and distribution is a sound solution.
Music provider Rhapsody has pursued a strategy that solves legal content rights issues and benefits the customer. Rhapsody has an interesting channel for cable companies to consider because it distributes licensed quality music across multiple devices. Consumers pay a monthly fee and can use the service on a designated number of devices based on their payment plan. The music creation industry is not at odds with the distributor in this case, Rhapsody, because both sides benefit from current consumer demands, behaviours and technology.
A Question of Bandwidth
Finding middle ground with content licensing is the first part of the solution. The question of upgrading and maintaining bandwidth still remains. The load placed on these cable distribution networks by multiple device access and consumer demand will need to be addressed in order to solve the current problem. One potential solution is positioning the value of bandwidth in a similar fashion to the way cellular providers like AT&T, Verizon and Sprint sell their networks. Consumers are already familiar with paying metered services for premium content including Rhapsody, Netflix, HBO, Showtime and Cinemax. The revenue/licence agreements shared between content providers and distributors as a result of these metered services is the glue that binds both parties.
This is not a new business model. Rather it’s a further extension of the same framework for the once dominant TV model. Device access and bandwidth metering are not “bad” when handled correctly. In fact, Rhapsody’s model with the music industry is a good thing. Most consumers understand that it takes money to create and distribute content. What most do not consider is that building a robust network for fibre and wireless-based bandwidth – the connections that deliver content – also requires a considerable investment. To keep up with demand, distribution networks need more investments and incentives to continue building infrastructure. Since consumers have shown a willingness to pay for content across multiple devices, the necessary funds could be extracted from these fees.
Neither of these two industries will stop the train of technology innovation or the investment money that is fueling it. They must embrace cooperation on a deep level with each other with a unified, co-industry led approach. They can embrace the new channels that technology (software, web, and devices) is creating. The consumer will be rewarded with access to their custom content across multiple devices, and the industries will reap increased revenues by creating a broader, more personal consumer value proposition. The future is bright for content providers and cable companies if they can unify behind a cooperative revenue strategy that embraces the inevitable changes brought forward by consumer demand and popular Web services.