Good thing I don't care much about the Oscars, because we here on Long Island have become cannon fodder in the latest battle between old media and new. Out here in the land of over-taxed suburban bliss, my cable service and that of 3.1 million of my neighbors is provided by Cablevision. For the few weeks leading up to the Oscars (apparently one of the few valuable properties still controlled by the broadcast TV industry), ABC has been in a contentious battle with Cablevision over what Cablevision should pay them to carry their channel.Cablevision is something of a renegade in the cable industry; we were among the first in the country to have cable modem services and voice over cable. They also received approval for network-based DVR service after an appeals process that went all the way to the Supreme Court; I expect I'll be getting a bill stuffer about that soon. The company was founded by cable pioneer Chuck Dolan, who also founded HBO, and several members of the Dolan family are now involved with the family business that includes Newsday (one of the more successful local newspapers in the country), the New York Knicks (once a successful NBA franchise but currently 21-41), the NY Rangers (NHL), and the NY Liberty (WNBA).
To generate entertainment revenue, both content and distribution are required, however those two elements are no longer in the hands of a single entity as they were in the heyday of the broadcast industry. In those times of little competition for home entertainment, the sole source of revenue was advertising, and all programming was controlled by the big-three: ABC, CBS, and NBC. Do you remember when one of the most closely watched rituals in American business was the announcement of the evening broadcast schedule for the fall season?
Broadcast television was by far the most important entertainment franchise in the country (certainly on weeknights), and access to that viewership with its resulting advertising revenues was the key element in marketing to consumers. That investment bought us a lot of pretty mediocre programming, but it also launched professional sports into the stratosphere and established the networks as a trusted source for news and information.
Today there are two revenue streams, advertising and subscription fees, and this has created a system of deals between providers and distributors that is conducted out of the view of the TV-watching public. To supplement those subscription fees, the distribution companies flocked to Internet and voice services. For their core entertainment business however, the distribution industry is built on a framework of deals and side deals the nature of which is rarely disclosed to the viewing public, the consumers of that content and hence the source of the revenue stream that flows to all involved.
Of course, a distribution network is worthless without programming to pump down it. For cable and the other distribution alternatives, there are now countless sources for that content. The distributor assembles a smorgasbord of programming, and packages it into incomprehensible bundles with different prices; typically there are one or two desirable channels in each successively more expensive package.
However, broadcast content was like the free rolls that come with your dinner; nobody expects to pay for rolls. It seems that now the broadcast industry feels they are entitled to a larger slice of the distribution revenues. Unfortunately, like stale rolls, the broadcast TV content doesn't command much value.
This is an industry that was a cornerstone of the American economy since the 1940s, but is now producing a product that nobody wants and is trying to sell it with a business model that no longer works. They still have the evening news, Jeopardy (the one thing on ABC I would have missed), and a good slice of the sports market. After that, we're looking at those cheap-to-produce reality shows and talk shows whose primary purpose is promote movies you won't be seeing on broadcast TV for a couple of years at least. You can tell that the evening news is in trouble because all of the ads are for prescription drugs to treat high cholesterol and erectile dysfunction. The only demographic that might have poorer long-term prospects than that are frequent callers to the suicide hotline.
What we are witnessing is the death of a once proud industry, and we can anticipate that the type of altercations we've been having will continue to flare up around the country. Cablevision seems to be taking the point role for the distribution industry in these battles. Earlier this year, they yanked Scripps Networks Interactive, whose channels include the Food Network and HGTV. We missed "Diners, Drive-ins and Dives" for a while, but they're back now though the details of the deal are undisclosed. In 2002, they got into a similar ruckus with the Yes Network, who carries the New York Yankees with the result was that Cablevision subscribers didn't get to see the Yankees for that season. Late last year, Time Warner Cable had a similar toe-to-toe with Fox.
We know that new media is killing old media, but it appears we might now be reaching the point in this epic battle where the gloves are coming off--customers be damned. I was at a party during the fracas between Time Warner and Fox and wound up talking to one of my friend s kids who works in Web advertising, and he was baffled by the conflict. I asked him, "How's business?" "Great!" he said. "I know," I replied, "you re putting Fox out of business."
In the meantime, the consumers (you remember, the people who are key to the revue stream that drives all of this) are becoming pawns in a game over which they have virtually no control. At midnight on Sunday, ABC disappeared from Cablevision to be replaced with an annoying ad excoriating the rapacious ABC; reality as seen through the eyes of the equally rapacious Dolans. Late in the afternoon, Cablevision offered everyone on the system free on demand movies for the rest of the day. Of course, their PPV system had nowhere near the capacity to support that level of usage, so very few people actually got to see a free movie.
As Oscar panic swept across Long Island, electronics stores sold out of digital converter boxes (so much for the "if you can't beat 'em, join 'em" strategy). I spent the early part of the evening describing streaming options to various friends and the basics of connecting a laptop to a TV. Miraculously, ABC reappeared right as the Oscars began, but we came close to crashing the local phone network as my wife and her friends started calling each other with the news.
So if you have any doubt, let me assure you this is all about money, and we are going through the painful process of determining how that money will be made and allocated in the age of new media. What's more, this crazy amalgam of free and paid content, Web streaming, time and place shifting is only getting started. Wait until the walls between PCs and TVs disappear and we can add our mobile device to the place switching options at our disposal. Don't expect this to be a smooth road.
PS: While I was asleep long before it was announced (it's on the TiVo), I was very happy to hear that the Oscar for best picture went to a movie that reminds us all very powerfully about the sacrifices our people in uniform make on our behalf, and the toll that it can take on them and their families. Excellent choice!
