• by Diane Mermigas , January 6, 2012

Playing well with others is imperative if you want to play in the digital media sandbox. Some get it, some don’t. Knowing how to use clout to get what you want in a way that creates value for all concerned is a rare skill. And there’s still time to learn from the master: John Malone.

In a week when Time Warner Cable pulled the plug on 2.8 million subscribers to Cablevision’s MSG network live sports over an onerous 53% fee increase and Comcast and Walt Disney Co. made nice with a precedent-setting mobile live video carriage deal, it is tempting to ask: What would John Malone do?

Malone, a consummate dealmaker, used his financial wizardry to forge the cable industry, typically gaining enough of an equity foothold in valuable properties to leverage it for what he wanted. He rescued Ted Turner’s Turner Broadcasting, Cablevision and even Time Warner in exchange for sizeable stakes in the companies and hefty premiums.

Today, his Liberty Media owns strategic stakes in Sprint Nextel, Expedia and the Atlanta Braves. He took control of QVC, paying $8 billion (or nearly half its estimated value) and unwinding a longstanding partnership with Barry Diller’s InterActiveCorp while rescuing Sirius XM from bankruptcy -- with a $530 million investment. In the end, Malone made sure all parties profited in some way, while altering industry expectations and standards.

Time Warner Cable and Cablevision are engaged in an old-fashioned fee stranglehold that feels dysfunctional in these times of over-the-top streaming video and ubiquitous access on mobile connected devices. If East Coast sports fans can’t find their way around the blackout this time, they will have alternative means of access licked the next. MSG’s solution is urging customers to switch to Verizon’s FiOS or DirecTV for access to its networks, controlled by Cablevision’s Dolan family, which also owns Madison Square Garden arena.

Time Warner, like Apple, is playing the walled garden card even as it advocates for its conditional TV Anywhere access for subscribers. Time Warner also recently doubled the months the renters will have to wait for new film releases on Netflix and Blockbuster.

But the biggest cable operators are gradually discovering they cannot have it both ways. The Time Warner-MSG conflict further makes the case that a la carte pricing for premium content, such as live sports, becomes a real option on some level.

Time Warner Cable CEO Glenn Britt has suggested that the sports networks be sold separately from basic cable to lower bills for indifferent customers.  

Ultimately, consumers should cherry-pick what they want. “People will pay on a per-view or on some kind of subscription basis for content on the Internet if the quality is there and there’s convenience,” Malone forecast years ago.

That’s why the Comcast-Disney deal is an important blueprint for accelerating mobile video distribution hamstrung by Apple’s controlling access to its iPads and iPhones, even for content as wildly popular as ESPN lives sports and Disney children’s channel.

Comcast pays Disney $39 million in retrans fees in 2012 in exchange for retaining some of its waning video subscribers by vaulting TV Everywhere. There’s also the underlying element of simply succumbing to the marketplace. Enough consumers are constantly relying on mobile devices that such access has become expected.

Nearly 10% of subscribers have cancelled their pay TV subscriptions, and about 11% are thinking about cutting the cord on pay TV, according to a new Deloitte report in its "State of the Media" survey. Survey respondents cite the ability to watch programming online as a key reason to cancel pay TV subscriptions.

Time Warner Cable executives believe they can stem that tide by holding the line on where and when their subscribers access live sports coming through their funnel. That will change.

Comcast gets it -- and so does John Malone. They have demonstrated ways to play into the trends and still create value for themselves and others. It’s an approach recently advocated by Motorola Mobility CEO Sanjay Jha, suggesting that cable operators obtain rights to distribute pay TV programming to mobile subscribers in an effort to "change (their) interaction model with the consumer."  Fox, Viacom and other programmers have resisted such efforts, but the video field is crowded with providers angling to siphon any of the more than $200 billion in annual revenue that the cable industry generates from content subscriptions and advertising.

The cable pipeline is challenged on many fronts. Microsoft is selling media buyers ads on national TV networks over the Xbox 360, which allows users to guide action with voice commands and hand gestures to interact with programming and commercials.

Like the interactive sports apps offered by Cablevision, DirecTV and Dish -- as well as the cloud-based interactive programming app developed by Comcast -- cable and satellite operators are attempting to move out of their comfort zone. We’ve even seen new distributors like Netflix suffer the same angst. Attitude is everything.

Every time a rights contract expires, we’ll see content and distribution providers rethinking their value proposition for connected consumers.  The deeper they dig in with each other, the farther they move from that objective.

Like Malone once told me in an interview: “Cable will continue to be under a margin squeeze on the video side and needs to innovate so it can participate in the over-the-top business. It will need to be able to play on both sides of the fence and see the world from the other side of the table to achieve the win-win in any transaction.”