Is Your Cable Out? Not Anytime Soon
Steven is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The internet is both a creative and destructive force. How that statement is received depends on who you are. It’s changed how we shop, the way we interact, and how we consume media. It’s only natural to extrapolate that almost everything will end up on the internet in due time – especially media. If you are in the cable business, that’s likely a problem.
Many have proclaimed the internet will kill cable, thanks to the introduction of Smart TVs and internet-connected receivers. It’s true the internet has the capacity to undermine cable’s stronghold, but cable companies are much smarter than meets the eye. The world tends to view these companies as a bunch of dinosaurs, stuck in prehistoric times. Anyone who has dealt with their customer service departments can attest to this hypothesis. While this may be true, the cable industry is prepared to protect the legacy it built. And they’re doing so in a powerful way.
A smarter TV than a Cable Box?
A Smart TV refers to a television that has the ability to connect to the internet. It marries television, internet steaming, and social media, with a modern app-like interface. Some Smart TVs have built-in apps such as Netflix’s (NASDAQ: NFLX) internet streaming. Those who are familiar with Netflix’s service will know their streaming library isn’t the most up to date. That’s because they have to purchase the rights from big media conglomerates who prefer to sell after a period of delay. It’s in big media’s best interest to first distribute to more profitable channels before dumping their content on lower-value platforms like Netflix. In retrospect, Netflix should have spent more on rights to newer content, and less on buying back shares. That investment would have likely had a better impact on subscriber growth.
A La Carte Demand
Apple’s (NASDAQ: AAPL) cleverly named digital media receiver, Apple TV, is essentially the guts of a Smart TV stuffed inside a miniature cable box. The only difference is that it offers on-demand-style rentals through the iTunes store. Anyone who has used an on-demand service would be immediately familiar with this. I like to think of the Apple TV as on-demand cable, minus the subscription cost. If I want to watch a movie, I pay once (usually $5) and move on. It has eliminated the need for recurring charges to have access to an on-demand library. But that’s essentially all I get – there is no ability to stream live TV in the same way you flip through channels. It’s not really a compelling alternative to cable, but it does offer one nifty feature: AirPlay. With AirPlay you can stream videos from your iDevice wirelessly. This feature is cool, but again, it doesn’t circumvent cable.
Google (NASDAQ: GOOG) TV is basically the same thing as the Apple TV, except that it integrates Chrome browser into the mix. Having a full internet browser onboard allows users to theoretically stream TV shows that the major networks host online. In reality, major networks have caught up to Google TV’s devious ways and have blocked its access to their content. It’s an odd behavior, considering you can hook up your laptop to your TV and be able to stream just fine. I suppose because it’s a box instead of a laptop, it scared the daylights out of them.
Content Kings
“He who controls the Spice controls the universe.” This quote is taken from the movie Dune from 1984. I think it’s appropriate a movie can be quoted to sum up the current state of the media. Who do you really holds the power here? Why do you think Comcast (NASDAQ: CMCSA) bought NBCUniversal? Do you really think it was merely a coincidence a cable company bought into a media company?
It’s the same reason Time Warner’s (NYSE: TWX) HBO Go service requires a subscription with a cable provider. Content owners still view the internet as a low-value channel – because it is. There are not as many opportunities to monetize the medium as there have been with television. With cable, there are advertising as well as subscription revenues. With the internet, there is only the former – and much less of it. And unless Apple, or Google, or someone else buys big into media to shake things up a bit, my bet is that things aren’t changing anytime soon.
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