Commentary

What Can TV Networks Learn From Tesla?

by Wayne Friedman , Staff Writer, May 6, 2014

Tesla, the upscale all-electric car brand, sells its cars directly to the public. It doesn’t have an independent dealership systemas part of its business model -- and that’s a problem in New Jersey, Texas, and Arizona, for example, where it’s the law to have separate automotive distributors.

Why? Some of these states laws are written under the assumption that dealers help customers by creating competitive pricing as well as offering special consumer guarantees and protection.

Would TV networks say the same about their distribution companies: cable operators, satellite and telco companies? Have they been holding down customer fees for TV programming? Oh yeah, we know how successful that’s been over the last decade.

Frequent carriage and retransmission fee battles show just how uneasy TV relationships are. Price inflation for pay TV service keeps climbing.

Like Tesla, TV networks want new or at least complementary business models, and some are dipping their toes in the digital water to see whether this works for them.

Still, we know where the bread is buttered: Broadcast TV networks, for one, have TV stations and increasingly pay TV providers that they count on heavily. And many cable networks get about half their revenue from pay TV providers’ subscribers fees.

In the 1980s, budding cable networks -- wannabe national TV channels -- needed the big distribution system to get off the ground. Multiple system cable operators were born, then satellite companies, then telco companies. But things are changing. Now, just like the broadcast networks, cable networks are looking at other digital platform outlets for growth.

Imagine if all TV networks were forced to have middleman -- like car dealerships. What would be the business plan then?

2 comments about "What Can TV Networks Learn From Tesla?".

Check to receive email when comments are posted.

Edmund Singleton from Winstion Communications, May 7, 2014 at 6:31 a.m.
Look around television viewers are changing, if they want to watch a program, if is available on the internet, that is the place to view it without a second or third party, and that my friend is the future of television viewing...
Reply

John Bjorn from Anne Arundel Broadband, May 7, 2014 at 11:27 a.m.

Programmers continue to mislead the public about why cable companies increase their rates. I am a CEO for a small cable company and this year like every year our rate increase did not cover the increase we received from programmers. The fact is, we would not be raising our customers prices if we didn't recieve increases from programmers. For Mr. Friedman to ask "Have they been holding down customer fees for TV programming?", is laughable. Programmers control the rates cable companies charge for their programming. Recently, Viacom hit small operators with an increase that was 40 times the rate of inflation for channels that actually lost viewership! Viacom and other programmers generate additional revenue by grouping popular channels with unpopular channels and forcing cable operators to buy the group of channels. In other words, programmer force cable operators to buy channels that consumer don't want to watch. Another interesting fact, while Viacom complains about their rising costs, its two top executives have averaged over $60Mil a year in compensation for the last 4 years.
In reality, the only thing stopping programmers from crushing consumers with even higher price increases IS cable operators. Think about it, if a consumer wants to watch ESPN and there is only one source for ESPN and programmers can’t group unpopular channels with ESPN to subsidize the costs the unpopular channels; what is going to happen to the price of ESPN?