The cable industry is bracing for a bitter slugfest, the two sides of a once-united house -- content (the channels that produce shows) and distribution (the cable systems that distribute the fare) -- scrapping over an innocuous app that delivers cable shows to the iPad.
In one corner: Time Warner Cable, which unwrapped its new app to turn an iPad in a subscriber's home into an extra TV. In the other: Tinseltown Titans such as Viacom, Discovery, Scripps and more. They argue the iPad app isn't a mere extension of cable TV, it's a new broadband platform -- and you'd better pay up for it.
The real deal: This app flap is a clear sign that, after two decades of assurances that content is king, the king now is getting commoditized. And Hollywood, reeling from dread and denial, is responding in precisely the wrong way. We talked about this on Fox Business Network yesterday.
Time Warner Cable had first cited iPad plans last summer, and in January at the Consumer Electronics Show in Las Vegas, the cable giant said it would beam shows to Samsung tablets. "Nobody complained then," says one industry wag.
Then on March 15th TWC pulled a fast one, unwrapping the new iPad app without so much as a courtesy call to the channels it carries. The cable guy, apparently, knows it's always easier to beg forgiveness than it is to ask permission.
"The entire content community is hopping mad," says one senior executive on that side of the business. "Time Warner sandbagged everyone. The technology behind this has been in the works for months, possibly years, but they didn't tell anyone." He adds: "It's not consistent with honest dealing or, for that matter, confidence in their competitive position."
Actually, Time Warner Cable is feeling cocky these days. Its stock price is up 185% since it was spun off two years ago by Time Warner Inc. -- itself up less than half that in the same time.
TWC says it's only giving consumers what they want -- to watch what they want, on whichever home screen they prefer, at one easy price. "If the music industry taught us anything, it's that if you just say no to customers, they will go around you," a TWC spokesman says. "It's like water, you can dam it up but ultimately it will find a way."
More clashes of this kind are coming soon to a screen near you. The digital wave, having already washed over the music business, newspapers & magazines and book publishing, now threatens to overwhelm films and TV shows.
For 20 years of wrenching change and rapid technological advance, we've been told that content is king, special and irreplaceable, and distribution is dull, an uninspiring, utilitarian commodity. Now it's looking like the King is getting his comeuppance.
Examples abound. Instead of paying $5 to watch one of a few dozen newer films on cable pay-per-view, you now can Net-stream as many flicks as you like -- for $8 a month. Thank you, Netflix. Walt Disney Co.'s new home release of Toy Story 3 charges a single $16 price for what had been multiple revenue lines: the DVD, the Blu-ray, a streaming version and a Net download a la iTunes. E-books sell at wholesale for 30% to 40% less than hardcovers.
And a hot single from rap star Fifty Cent sells for 99 cents -- the same price you pay for a flop from an unknown band that never made it out of the garage.
The distribution side of the house has spent years enduring commoditization and its thin margins, declining prices and expanding features. Now it's the content guys' turn.
What should they do?
So far they are blowing it. This iPad clash is one more sign that Hollywood doesn't get it, that it will make the same mistakes the music business made. If the content creators do go down that path, investors must reassess whether better growth lies on the distribution side of Show Biz.
The right approach is jujitsu not karate. The big music labels tried karate, punching and kicking and blocking and using force to shut down Napster, take Grokster all the way to the U.S. Supreme Court and even sue their own customers.
Didn't work, did it?
Jujitsu instead harnesses the wave that threatens to overwhelm you and tries to redirect it. iTunes from Apple is jujitsu: You wanna download a song instead of buying the CD in a store? Okay here's a simple way for only 99 cents.
In the Internet Age, to borrow from the 1980s hairband .38 Special, ya gotta "Hold On Loosely." Hold back, and you could end up fading away entirely.
Dennis Kneale, a former CNBC anchor and ex-managing editor of Forbes, now is senior correspondent at Fox Business Network.
BTW, with no cable or satellite distributor to pay for it, how do you suppose producers will fund these programming efforts? Advertising alone? I don't think so, unless production costs are drastically reduced. Subscriptions? Isn't that just a new kind of cable? A la carte pricing like iTunes? That gets costly, depending on how much you view. And how will viewers discover anything new?
Cable's not going anywhere for a while.
With Microsoft Silverlight, the exact same software Netflix uses, they can set up their own direct distribution.
All the content creators can.
The questions is how much and how fast.
Too soon and you kill the golden egg laying cable goose.
Too late and you become the music industry.
Apple, Amazon, Sony's Crackle and HULU (Owned By NBC, Fox and Disney) Plus are just the first of a flood of Netfilx competitors that will be getting into the streaming business.
And of course Google's YouTube only has to throw a switch.
In the end the one holding the short straw will be Broadcast TV Stations.
I don't see them viably making it to 2020.
The challenge for the Kings of Content isn't that content will become a commodity. The challenge is that the people they hire (e.g. Bad Robot, Imagine, Scott Free, etc) to make the great content can go a lot more places than just "the studios," and "the networks" to create the great films, shows and webisodes of the future. United Artists started the entertainment industry down that path back when Griffith, Chaplan, Pickford, and Fairbanks challenged the studio system.
For almost 100 years free market capitalism has been peeling the onion over and over. Deconstructing in order to reconstruct. Ain't it grand!?
@DanFarfan
"The Next 10 Amendments"
BUT they are from last season for the most part.
Time Warner offers cable, phone and internet service. They make the programming available.
So, what's the big deal? If you're hanging out in a room with no TV, you're not consuming. So, this app makes it possible for customers to increase their television viewing, which certainly includes advertising, the lifeblood of the industry.
So what's the beef?
You would think they would love this. Instead, they hate it. But executives tend to hate anything new, especially tech.
I look forward to the day when I cancel my cable once and for all.
I cut the cord on cable months ago and haven't looked back.