The owners of cable giants like Time Warner and Cable Vision began a very public feud this month, with each side accusing the other of corporate greed and disregard for their consumers. Columnist Dan Gross, of Slate and Newsweek, explains what's going on, and what it’ll mean for consumers (hint: nothing good).
Wrong Side of the Tracks
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BOB GARFIELD: Newspaper readers around the country this week were treated to a vivid display, via full-page display ads, of corporate pique. In separate confrontations, cable giant Time Warner battled with FOX and Cable Vision, squared off with HGTV and The Food Network. The point of contention was carriage fees demanded by the content providers from cable systems for having access to the programming. All the parties solicited consumer sympathy. The channels claimed the viewers were being unfairly denied their favorite programs, the cable operators claimed they were being shaken down by avaricious content providers. Columnist Dan Gross of Newsweek and Slate explains the showdown.
DAN GROSS: It’s a public game of chicken in which they are trying to elicit sympathy: Poor HGTV, poor Food Channel. We'd really love to be getting Emeril and Bobby Flay to you, but Cable Vision won't pay for it.
BOB GARFIELD: And, of course, the people at Time Warner and at Cable Vision are saying, look at these mercenary jerks. They're trying to shake us down, to extort money from us that is eventually going to be passed on to you.
DAN GROSS: Get a load of these folks holding a gun to our head and saying pay us 20 million, 50 million, 100 million dollars, or else no Emeril.
BOB GARFIELD: Okay [LAUGHS], point taken. Now, as you point out, it is certainly true that content providers do need a new revenue stream. They did quite well for quite a while, getting approximately half of the ad revenue, but as that shrinks it’s half a smaller pie. You can't blame them for wanting to monetize their content. And you can't blame the cable companies whose customers already hate them for not wanting to tack an extra fee per month to cover what they're going to have to pay to the content providers. Is there any chance that who’s going to pay for this in the end will be someone other than cable consumers?
DAN GROSS: No, and there are two reasons. One is there is a larger shift going on where content providers are making people pay more for content delivered in the ways they want it. The New York Times at the newsstand now costs two dollars. Magazine subscriptions are going up. You are seeing this across the board in different media. Out of desperation, all these media that were supported almost solely by advertising are now saying we've got to find another source, let's figure out a way to charge the user. The second reason is almost more profound, and that is that in this day and age while we see these battles between the cable systems and the content providers as kind of two warring factions, these are frequently components of the same company. Comcast has 24 million cable subscribers. It’s one of the biggest systems out there. So it would be pushing back against paying these fees. But Comcast is also [LAUGHS] a huge owner of content providers. It owns part of the E! Network. It just did this deal with NBC where it’s going to own NBC, CNBC, MSNBC, Bravo. So the discussion is not, in the future, going to be in public with these dueling websites saying, pay us or else you won't get this. It’s going to be within these companies, between the content division and the cable division about where the revenue is going to go. And when that discussion is internal, there’s only one outcome. They're going to push it onto the consumer.
BOB GARFIELD: Hmm, swell. Now, I want to pull back a little bit because I am myself obsessed with the chaos scenario, the coupling of mass media and mass marketing that is at the bottom of essentially the end of the media economy as we have always known it. I mean, we're losing an entire sector of our economy here. And I wonder to what extent you believe that this spitting match between FOX and Time Warner is evidence that the whole ecosystem is just collapsing beneath our feet.
DAN GROSS: Because there are two ways of looking at it, one, these are the sort of death throes of a dying regime. The second is that this is a response of some pretty smart, very large, well-capitalized companies to a rapidly changing environment. We've seen some components of the media sort of throw up their hands and say, the world has changed too much; we can't do this, i.e., Gourmet Magazine. But for every Gourmet there is a New York Times, which has, you know, recapitalized itself, cut back, made people pay more, built a really awesome website and will probably be charging people for that website in the near future. So I'm not as convinced that all these behemoths are simply going to go away. They've got too much money, too many embedded customers. And, by the way, the upstarts, the online publications, social networks, etc., they haven't exactly been tearing it up on a financial basis.
BOB GARFIELD: Hmm. I'm wondering, though, whether this spitting match between the content producers and the cable systems suggests that when people talk about the death of broadcast that the cable industry isn't a whole lot better situated, because its advertising market has collapsed. It is certainly no more TiVo-resistant than broadcast. And, by the way, the same co-ax that’s bringing your paid cable into the house is also bringing broadband in the house, with which any consumer now can get almost all the same programming online for free. Aren't they in some pretty substantial trouble in the medium term themselves?
DAN GROSS: Well, everything you described is bad news for the channels but it’s not such bad news for the systems operators, because they have that wire coming to your house. They're not just selling ads. They're selling reception to you. People have four or five televisions, so they're paying for each one of those boxes. In addition, cable has developed all these other services they can sell – DVRs, HBO, premium channels, sports packages, movies on demand, in addition to Internet access; a lot of people get their Internet access from the cable company, and telephone service. Talk about the so-called triple play, which is -
BOB GARFIELD: Four dollars in the first year, and a million dollars in the third.
DAN GROSS: [LAUGHS] But when I look at my monthly bill to Cable Vision it’s substantial, and it’s because it’s serving the media needs of both my wife and I, who work at home and have high-speed Internet access and our kids who have their own computer and who watch Disney On Demand. And we rent movies as a family over the Internet, and we use the DVR to record American Idol and So You Think You Can Dance. So they have a pretty good thing going with a lot of their customers.
BOB GARFIELD: Wait, wait, wait, someone in your household TiVos So You Think You Can Dance?
DAN GROSS: Totally.
BOB GARFIELD: Dan, thanks so much. [LAUGHS] I have no further use of you.
DAN GROSS: [LAUGHS] It’s a wholesome show. It’s great.
BOB GARFIELD: [LAUGHS] Daniel Gross is a columnist for Slate and Newsweek. Thanks for joining us.
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