Evolution Shift
A Future Look at Today
October 27th, 2010

Was This Just Short Term Greed Versus Long Term Thinking or the Early Sound of a Death Rattle?

The Fox – Cablevision stand-off has been cast as a financial stalemate between a content supplier and a distributor.  Fox wants more money for their broadcast stations and Cablevision doesn’t want to pay more.

Broadcasters have viewed revenue generated from must carry rules as a now essential revenue stream for their stations since their audiences have been in a constant decline for the past 20 years.  Cable MSOs have made a lot of money charging consumers for bundled programming they don’t want but have to take to get the channels they want.

So in this stand off, who are the winners?  Sports bars in NYC and Philadelphia.

Who are the losers?   Consumers, sports fans in particular.  Fox, as ratings for sports events they paid dearly for are lower with resultant lower revenue.  Cablevision, as they will most likely lose customers who might choose to switch TV providers. Advertisers as they will have lower audiences than they expected.

So, most everybody was a short term loser except local sports bars where fans had to go to see their home baseball and football teams.

Do you think consumers care which company is “right” or “just” in this stand-off?  Of course not!  They are angry that what they had paid for was not being provided.  Do you think that increases good feelings toward Cablevision or Fox?  Of course not!

In a column I wrote here called “Raise Your Hand if You Love Your Cable Company” I spoke to the fact that when I have asked that questions to audiences all over North America, no one raises their hand and people guffaw out loud as they think that such a funny question.  Who could possibly love their cable company?  I have used this question to point out that since there is no positive emotional relationship between the consumer and the cable company, there is no loyalty and that the subscriptions to the TV side of the cable business would start to decline as technology disintermediates the cable TV model.  In this follow-up column here I was able to point to the beginning of this subscription decline.

So is this Fox-Cablevision stand-off just a battle of two large media companies who seem to care more about revenue than the public; short term greed versus long term customer relationship?  Of course it is, there is no other way to spin it.  Fox thought they could win.  Cablevision thought they could win.  In both cases the definition of win did not include the end users, the viewers.

We now live in a connected society.  This gives people power.  The power to choose not only what they watch, but when they watch, how they watch it, where they watch it and on what type of screen to watch it on..  Fox knows this enough to have temporarily blocked their programming on-line as well as via cable. A perfect tactic if you want the government to step in.  It is this type of available choice that will drive viewers – who have the control – to exercise that control.

A loose analogy here is Napster.  After spending a decade increasing prices of CDs from $12.95 to $17.95, forcing the consumer to buy all the songs on a CD whether they wanted all of them or not, was it any surprise that Napster was so quickly embraced?  The music industry was basically eviscerated in a three year period.  What did they do?  They sued the people who had been their customers!  Hey, that’s a really good strategy; sue your customers for not buying your product on your terms.  While they were busy suing their former customers, Apple launched iTunes and the music industry no longer controlled their destiny but had to bend to a reality not of their making..

The broadcasting business has been in a slow inexorable decline from its peak in the 1970-80s.  The MSO cable TV business is now beginning its’ slow inexorable decline.  Instead of fighting each other, they should be more worried about the disintermediation that is going on all around them.  The only long term solutions are to change how cable is sold to the consumer and to try to create an emotional connection with their customers.  Neither of these concepts were/are anywhere in the thinking of these two companies.

If broadcasters and cable MSOs continue with the legacy thinking that prompted this stand-off, they will in fact speed along their relative demise.  The consumers will move on, find other ways to watch, demand a different financial relationship, even find other things to watch if they have to keep paying for what they don’t or can’t watch.

Is that a rattle I hear?

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