Will Cable Nets Kill Their Golden Goose?

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I’ve been dismayed, though not
entirely surprised, by reactions from
cable TV networks over the launch of
Time Warner Cable’s new
iPad app (see Cover Story): That it is an
unauthorized use of their
content, per their interpretations
of their affiliation

That may well be the
case, and TWC may well
be pushing the edge of the
envelope in this implementation
of its larger TV
Everywhere goals. However,
in my opinion, the
bigger question that cable
network heads should be asking is,
by resisting initiatives such as these,
do they want to risk contributing to
killing their golden goose?

Ask any media executive whose
business model they most envy and
invariably they will respond: “cable-
TV networks.” Why? Because cable
networks enjoy a “dual” revenue
stream — both monthly affiliate fees
received from distributors like TWC
and advertising.

Affiliate fees are consistently important
and highly sought after, totaling
$25 to $30 billion annually
in the U.S., according to most estimates.
Peruse the quarterly financial
performance of any publicly
traded media company that owns
cable TV networks, and you’re guaranteed
to find these among their
best-performing assets.

Having built hugely successful
businesses, cable networks are
rightly justified to be guarded about
the implications of delivery to any
new device or over any new platform.
Th at brings us to TWC’s iPad
app. The financial health of cable
networks is, of course, inextricably
tied to that of their pay TV distributors.
Distributors are in a battle for
the hearts and minds of their subscribers
and face a formidable set of
competitors, led primarily
by Netflix, which is upping
the ante at every turn.

Cable networks need
to find a balance between
protect ing their rights
and supporting their affiliates.
No doubt there were
months of behind-thescenes
haggling by TWC to
formalize its rights to distribute
cable network programming
via its iPad app
(which is available only in
subscribers’ homes). Some
networks are likely holding out for
additional payments. Some likely
want further tests. Some likely want
more assurances that viewing will
be accurately measured, so it can be
monetized fully. The problem is that
while all these “wants” take time to
get addressed, consumers and the
market relentlessly move forward.

This is today’s new reality, and reactions
to TWC’s iPad app once again
show that cable networks, with some
notable exceptions, have not yet fully
grasped this. Internet companies
have long known that it is better to
release an imperfect product quickly
to gain some momentum. The online
video era will not offer cable
networks the near-perfection of their
traditional operating environment.

The sooner networks realize this
and get on with things, the higher
the likelihood that they will help preserve
the health of the golden goose
so that it may in turn continue laying
its precious monthly affiliate-fee
golden eggs.

Will Richmond is president of Broadband
Directions LLC and publisher of
website Videonuze.