Commentary

Maybe TV Networks Themselves Will Be The Biggest Cord-Cutters

by Wayne Friedman , Staff Writer, April 21, 2014

Does Netflix want to look like a cable network? Or do HBO -- and maybe even ESPN -- want to look more like Netflix?

Netflix continues to grow and be popular. It’s something HBO and Showtime must be ruminating over, especially given Netflix’s somewhat minimum attachments to TV/media pipe owners -- even considering the recent Netflix-Comcast direct Internet access deal.

Netflix gets around $10 per month from customers. HBO and Showtime get a bit more, with a big piece going to pay TV distributors. Consumers typically pay $16 a month for HBO, with HBO getting $8 and distributors getting $8.

HBO Go surely has advantages as a popular video app. But what about wholesale change? Perhaps the big push for unbundling won’t come from cable operators, satellite distributors, telcos, or even consumers. Maybe it’ll come from TV networks themselves.

ESPN would be a different case. Distributors continue to pay over $5 per subscriber monthly to the big sports network. They also continue to complain about it.

None other the Chet Kanojia, founder/chief executive officer of Aereo, says it won’t be too long before someone figures out how to bundle broadcast stations with the likes of a big cable network such as ESPN or HBO -- starting what many industry executives believe will be a cable unbundling process.

I’m not too sure what the financial formula for ESPN would be, nor whether other Disney/ABC networks would also be packaged in that deal. But you can count on what Kanojia told Gigaom: “Any industry compounding at 7% is just unsustainable…. A change is inevitable.”

Networks would only opt out of the traditional pay TV distribution system if they could get more dollars -- or free up some of their business constraints.

No surprise there. If HBO or ESPN can figure out how to get more consumers paying more for their networks -- while possibly keeping some or most of their existing business arrangements -- they’ll surely take the leap.

And then all the strings will come loose around those bundles.

6 comments about "Maybe TV Networks Themselves Will Be The Biggest Cord-Cutters".

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Jim Rice from Piiku, April 21, 2014 at 3:48 p.m.
Time Warner is moving more content to their TWC TV App., “TWC Expands In-Home TV Streaming Lineup – Adds 26 Channels to TWC TV App, Including BlueHighways TV.” Multichannel News. Jeff Baumgartner. April 15, 2014. In short, what we are seeing is multichannel operators being marginalized by the proliferation of content OTT which bypasses them as distributors. This will satisfy consumers who for over a decade want content then, where and on what divide they want. And, they are willing to pay for more broadband to achieve that. With more OTT content being made available, the cord-cutting trend will likely accelerate. The new business model with OTT is high margin broadband, the core enabler of the disintermediation of the other. Not bad if you have both which most cable and IPTV services have. Its just a different business model and likely a higher margin one at that. Not sure what satellite will do under this scenario.
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Jim Rice from Piiku, April 21, 2014 at 4:03 p.m.

And BTW, what happens when HBO finds it can be paid $10 or even $12 directly by consumers? I am absolutely positively certain that there is a clear point where cord-cutting crosses the line (OTT subs vs Mutlichannel subs) and the economics shift to offer directly to consumers in addition to multichannel service providers. Resisting giving consumers what they want, invites the likes of Amazon, Netflix, Yahoo and others to create their own content and serve it to the OTT subs directly. We are seeing that. The music industry learned a hard lesson by holding out giving the consumers what they wanted. Technology finally sparked a revolution albeit illegal. The rest is history. Video content has a much stronger and well intrenched set of distribution channels and DRM that are not going away soon. But consumers are working overtime to get what they want and the more innovative ones are succeeding with OTT. Make is easy, and more will flock in that direction.

Doug Garnett from Protonik, LLC, April 21, 2014 at 5 p.m.

So far, as a consumer, I'm not loving any of the models. We have a regular weekly movie night for my family. Problem is...where do you find movie X? Amazon? Netflix? iTunes? Comcast on Demand? HBO Go? It's a complete mess. Can take an hour to search - an hour we'd all much rather spend relaxing & enjoying ourselves. So all this cogitation is great - but the consumer will end up highly dis-satisfied if everybody breaks off into their own kingdom.

Paula Lynn from Who Else Unlimited, April 21, 2014 at 6:44 p.m.

Yes, Doug, it is a hot mess out there and it looks like it can get hotter and messier. Not only will the consumer be swirling around in a vortex, but infrastructure and salaries for each breaking apart is going to be expensive. Guess who they will want to pay for it ?

Edmund Singleton from Winstion Communications, April 23, 2014 at 4:43 a.m.

If I was HBO I would farm out to any and everyone who can and will pay a fee to received the product, be independent and not attached to any other media operation...

AMARIS SOPH'E ADARA from ASA ENTERTAINMENT, May 1, 2014 at 7:09 p.m.

Honestly, More networks are buying up Online media and IP-TV potentials than ever. I will assume some got the memo ,Where television is already at Today !

Example NBA/NFL have gone to TV Apps (enough said)