Cable Bundles Seen At Risk Amid More Digital Content Choices
As the amount of quality TV content grows along with the number of ways consumers can access it, the traditional cable model is at risk, panelists said at the Future of TV conference in New York Friday. Panelists debated whether there’s a “breaking point” for consumers determining how much they're willing to pay for bundled packaging that offers too many niche channels in a digital world where they can easily find the content they want to view.
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"Consumers are demanding ubiquity and the ability to watch great programming wherever they are,” said Matt Hong, senior vice president-sports operations at Turner Sports. That presents opportunities for both startups and traditional networks, he said, because the advent of digital platforms has allowed a lower barrier to entry for content creators along with ubiquity for consumers to watch TV at the office, on a train or at home. Traditional networks are exploiting the opportunity through TV Everywhere, NBC’s mobile app for Sunday Night Football and Turner’s NCAA March Madness offering, he noted.
Turner transitioned from an all-free March Madness model in 2011 to last season’s $3.99 app available to cable and satellite subscribers over broadband. That model “wasn’t about revenue but about giving people who had not yet tried authentication a quick and easy way to get access,” Hong said. For 2013, the network is going to an authenticated-only model as Turner is “a year further along in TV Everywhere,” he said, and “it’s a good point in the life cycle” due to increased awareness of the TV Everywhere model through March Madness and the Olympics.
Panelists said a wealth of content leaves room for both linear and digital platforms. “There are still a lot of compelling reasons” to pay for linear TV and for associated bundles, said Kelly Day, CEO of Blip, a digital provider specializing in original content. But the “risk is for the long tail of cable networks,” she said. “There are hundreds of niche cable networks that are being subsidized through these mega-bundles of channels being paid for by the cable operators,” she noted. In the next few years, Day said, those bundles will shrink because the type of “very targeted” interest-based programming that is currently fulfilled by digital cable networks “is really well-suited to digital platforms.” As more audiences find the interest-based programs they're interested in a more “interactive way,” they'll be “far less compelled to pay for that type of programming through cable package or linear TV,” she said, and cable bundles “are likely to get smaller.” The financial impact on the cable industry, where the revenue produced by the volumes of digital channels “do add up to a pretty significant amount of dollars,” she said, and could lead to a consolidation within the cable industry.
The cable model has already changed from its original charter to provide better reception to one focused on additional programming beyond the major networks, noted Hong. Now digital channels have changed the cable picture again, and consumers are demanding the content they want, where and on what devices they choose to view it on, panelists said.
Challenges looming for digital providers include reaching consumers with a platform they can easily grasp separate from the cable or satellite worlds they're accustomed to, said Andrew Kippen, marketing vice president for Boxee. When consumers buy a box from Boxee, Roku or Apple, “there isn’t a clear understanding of what shows you're getting,” he said. That extends to Netflix or Amazon Prime where “maybe something’s there, maybe it’s not,” he added. Kippen encouraged more collaboration between cable operators and content creators to create “the experience of the future” and cited talks between Boxee and Comcast that would enable customers with a Comcast subscription to use the Boxee cube as their cable box.
Debates over the definition of playback devices and concerns over litigation surrounding transmission rights are threatening the once symbiotic relationship between content providers and cable companies, said Day of Blip. While each side is debating “whether the iPad is a TV or a mobile device,” and who has rights to it and for how much, “there are tens of thousands of content creators” telling stories in “totally new ways” for interactive platforms and building “engaged, targeted audiences,” she said. That’s leading to advertisers wanting to reach those audiences “at scale,” creating a “huge opportunity,” she said. Day doesn’t see digital content replacing top linear TV programming such as “Mad Men,” “Homeland” or “Game of Thrones,” she said. Instead, she cited the wealth of “amazing programming” being created for both platforms.
As both TV platforms move forward, the line will blur between what’s considered professional content and that created by independents, Day said. As people want to watch shows on any device, any time, mobile is becoming a more critical element and over time “will undermine the television industry,” she said.