The complex sphere of content economics is being fractured by continuous conflict and experimentation by bundling cable operators and other content aggregators at one end of the spectrum and iTunes and Netflix paid downloads on the other.
The ability to sidestep gatekeepers using the Internet bypass and cloud computing, promises even more industry disruption and consumer choice.
Even as consumers demonstrate their preference for more select, relevant content options, several Wall Street analysts are making the case why, at least for now, bundling remains economically sound.
Unbundled business models would threaten $25.4 billion in annual affiliate retransmission fees paid by cable TV operators to programmers, according to Barclays Capital's Anthony DiClemente. Even as traditional TV advertising and DVD sales decline, nascent digital ad and pay-to-play revenues remain too small to make up the difference.
Unbundling programs would be a logistical and costly nightmare for cable and satellite operators. It threatens the demise of smaller niche networks, which would no longer be "subsidized" by being carried by major networks. As long as available online video content is limited, TV cord-cutting is not a risk; consumers generally opt for flat -rate pricing viewing a monthly average of more than 140 hours of television.
Needham analyst Laura Martin goes further: She forecasts that the gradual rebundling of music at lower price points and customized selection will pave the way for more innovative and experimental arrangements for TV and film.
Music is "the canary in the coal mine" for monetizing TV and film over digital platforms and devices, Martin said. She estimates the market cap of the TV ecosystem potentially at risk is more than $300 billion. As a result of botching the migration from physical to digital distribution, music industry total revenues have been halved from a peak of about $14 billion in 1999-2000 to $7 billion last year, she said.
That's one reason why content producers and distributors will increasingly break ranks to experiment with revenue-generating options. Recent examples include Disney's earlier than usual DVD release of the new "Alice in Wonderland," Viacom yanked its popular "Colbert" and "Daily Show" video streams from Hulu so it can retain all of the revenue from related online ads by hosting the programs on its own sites.
Some moves by distributors have been even more intriguing.
Cablevision is providing subscribers with their own TV channel to access content directly from the Web, while Hulu plans to charge its 44 million viewers for some streaming online video. (Hulu is the dominant ad-supported online video site co-owned by NBC Universal, News Corp.'s Fox and Disney's ABC.)
TiVo's new Premiere service makes it a one-stop content aggregator, even as Apple seeks to leapfrog its rivals by negotiating with TV and film producers for access rights to their content from the "cloud." Disney is experimenting with its own Keychest cloud technology, which will allow consumers permanent access to and ubiquitous use of any TV or film.
Bernstein Research analysts Craig Moffett and Michael Nathanson observe that the development of online video will be "halting at best" until blue-chip media players such as Disney, NBCU, News Corp., Viacom and Time Warner find economically viable new content business models. By the looks of things, we could be getting closer to that time. More about Diane Mermigas consulting and speaking opportunities at Mermigas on Media; more analysis at BNET and Seeking Alpha.