Providers and Programmers Should Work Together, say Executives at Cable Show
LOS ANGELES -- Programmers and cable providers should work together to keep programming costs down and repel challenges from companies outside the industry such as Google, said a panel of cable and content company executives at the first general session of NCTA’s 2014 Cable Show. “The partnership between programmers and operators needs to be solidified or a lot of competitors are going to pass [cable] on by,” said A&E President Nancy Dubuc. Such a partnership seems unlikely while cable companies have to pay programmers high prices for content, said Massillon Cable TV President Bob Gessner, in an interview. “I don’t work for ESPN, I work for my customers” he said.
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The competitive threat to cable from online video and ways to address it was also the focus of a second panel, and NCTA President Michael Powell’s kick-off speech warned of the dangers of regulating the Internet as a public utility. “The potholes visible through your windshield, the shiver you feel in a cold house after a snowstorm knocks out the power, and the water main breaks along your commute should restrain one from embracing the illusory virtues of public utility regulation,” said Powell.
Systems like the electrical grid and municipal water pipes were constructed by the government, but have since suffered “chronic underinvestment,” said Powell. “Because the Internet is not regulated as a public utility, it grows and thrives, watered by private capital and a light regulatory touch.” Powell said the Internet’s separation from government allows it not to “depend on the political process for its growth, or the extended droughts of public funding.” Though Powell’s speech didn’t give specifics on how the Internet should be regulated, he argued against Title II reclassification. That distinction was notable, said a cable attorney in an interview. The cable industry supports net neutrality, so it was surprising that Powell’s speech focused on the problems of Title II reclassification without taking a specific stance on how the Internet should be regulated, the attorney said.
"Pipes are not enough to move people” without the content they carry, Powell said. But Suddenlink CEO Jerald Kent said the price of that content is becoming a threat to cable. “I'm concerned we're gonna reach a tipping point and price people out of the market,” Kent said. Echoing Dubuc, he said programmers and cable providers should reach a deal to offer customers less-expensive tiers. “If there is call to action it is this, for programmer and distributors to work together,” said Turner Broadcasting CEO John Martin. The executives said a better partnership could protect cable from challengers who want to compete by creating and distributing their own content. Cable and existing content creators “have a better product” and should be able to overcome outside challenges, said ESPN President John Skipper.
Despite the declarations onstage, there’s not agreement that such a partnership can work. Operators and programmers wanting to “protect their own ecosystem” from online video was the genesis of TV Everywhere, said MoffettNathanson analyst Craig Moffett in an email. However, distributors and programmers have differing incentives “and their interests always seem to diverge just in time to snatch defeat from the jaws of victory,” he said. Gessner also said it’s likely to be against cable operators’ interests to accept rising content costs with resignation.
Customer service is also a competitive problem for cable, said Rogers Communications Executive Vice President Phil Lind. “We still have not come up with an effective formula for consumer care.” CableLabs may be able to help there, said CEO Phil McKinney. He said most customer support calls are generated by outages, and the industry is working on technology that will make such outages more predictable.
Netflix was a focus of competitive concern among the cable executives. Though Time Warner Cable CEO Rob Marcus denied that Netflix’s success represented a failure of cable innovation, Liberty Global CEO Michael Fries conceded that Netflix had exploited “a functionality gap” by making it easier to browse and access content over its system than over cable. Several executives identified the problem of authenticating users to give them access to TV Everywhere products as a barrier holding cable back from competing with Netflix. Martin said he never uses TV Everywhere because he’s unable to keep the necessary passwords and access codes straight. TV Everywhere offerings “need an easier process” said Skipper. The industry is working to create better authentication methods, said McKinney. It doesn’t matter that Netflix made it easier for users to access content before cable did, because cable companies can adjust, said Fries. “Did we invent the DVR?”