"The middle tier of cable networks" may be hurt by shifts in viewing preferences and business structure, according to Howard Homonoff, principal and managing director of Homonoff Media Groups.
His comment came amidst a wide-ranging discussion about the role of á là carte, network neutrality, spectrum allocation, Aereo's fate and new competitive factors during Friday's "Future of Video Policy and Business Models" think-tank seminar run by the Technology Policy Institute in Washington.
Although Homonoff did not specify which "mid-tier" cable networks were endangered in an on-demand and over-the-top video world, he observed that "networks that rely on reruns" were especially vulnerable. Well, that's a pretty wide swath of services, including top-ranked USA Network, as well as TBS and TNT, all of which feature a fair amount of original fare, plus dozens of other popular and specialty channels. At a post-panel interview, Homonoff did not confirm the channels he considers vulnerable. In a separate riff during the panel discussion, Homonoff said that all of changes in the current marketplace do not have a specific "tipping point," but rather are facing a "bending point" that will shift industry practices.
The programming observation came during a brief but broad discussion that examined how 'net neutrality and regulatory decisions could impact viewing options. During an examination about 'net neutrality's impact on cable operators' carriage decisions, panelist Paul Gallant raised the prospect for quality of service (QoS) requirements in future agreements with cable programmers -- especially as infrastructure moves to an all-Internet Protocol environment.
"The future round of cable carriage deals may include wording [that] 'We don't want any monkey business about QoS,'" referring to how preferred content is delivered, said Gallant, managing director and telecom policy analyst at Guggenheim Partners (and a former top FCC advisor). He put that outlook into the potential problems of "voluntary and non-voluntary" decisions by MSOs if á là carte content becomes available.
As the fast-moving discussion shifted to regulatory and legislative issues, Gallant cited the recent court ruling that sent 'net neutrality discussions back to the FCC.
"Cable and phone companies are in a much better position than they were a couple weeks ago," he observed. Gallant added that he does not expect "carriers to do anything to play into the fears of 'net neutrality advocates" by showing favoritism to specific content.
But he noted that Netflix -- assumed by many analysts to be a main beneficiary of easing 'net neutrality restrictions -- "may have enough power to protect itself, so it doesn't need the government" restraints.
When the panel turned to spectrum auctions for broadcasters' bandwidth, Gallant cited a potential shift in power. He believes that Congress will be "receptive" to broadcast industry pleas for protect if they are forced to put spectrum up for auction. But he cautioned that retransmission consent could weave into future developments -- especially given the Aereo situation.
If broadcast networks (which are also large group owners of TV stations) follow through on threats (such as Fox's) to convert feeds into cable channels, then the FCC could deem the airwaves as less essential to broadcasters and accelerate efforts to take away spectrum.
Gallant also noted that it is "worth watching" the FCC, Federal Trade Commission and Department of Justice, all of which are examining in various ways the practices of "network bundling" -- that is, the ways in which cable programming conglomerates structure affiliate deals for multiple channels.
In response to a question about Sen. Jay Rockefeller's (D-WV) proposed online video legislation, Gallant said that the proposal is "hard to pass" in its current form, but that pieces of it "could be put into another bill" and, more importantly, it "sends a signal to the FCC about what's important," such as promoting over-the-top video.
The panel, which also included Jeffrey Prince, an Indiana University associate professor, was led by TPI's research vice president Scott Wallsten.
Gary Arlen waxes on digital developments from Arlen Communications (www.Arlencom.com).