Believe it or not, I was disappointed that Cablevision (NYSE:CVC) settled with Fox (NASDAQ:NWS), albeit grumpily, agreeing to pay retransmission fees for its signals. It’s not surprising: Baseball fans wanted their World Series; the FCC was hankering to intervene (without the power); and one really couldn’t imagine going without Fox forever … not yet. So Cablevision caved. Some say this is a sign that content remains king. I think it’s more a case of Humpty-Dumpty teetering.
Hanging tough against Fox was a first shot in the next media battle: the unraveling of TV, the separation of programs from channels. Old TV channels have become an unnecessary layer of curation. It’s the shows we want, not the networks. Networks are and always have been meaningless brands. They provided services: distribution, promotion, monetization. But as in the rest of media — as with news publishers, book publishers, radio stations, book stores — those functions can now be taken away from the middlemen and done more efficiently elsewhere.
The problem for Cablevision is that the unraveling has to start at home. It can’t unbundle Glee and the World Series from Fox until it unbundles its huge packages of utterly unwanted channels that cable companies force us to pay for though we never watch them. Physician, heal thyself.
Of course, this unbundling will be painful for cable companies. They gather huge revenue selling those bundles to trapped customers who have no choice but to pay for Fuse if they want Food. It won’t be an easy transition. But once choice arrives, we will demand our freedom from bundles.
And this unbundling will be quite painful — no, fatal — for many channels. No longer subsidized by being sold with Food, Fuse may die.
Producers and stars will also have trouble with the transition, though I think they’ll come out on top as kings of content. Today, they have to share revenue with many middlemen but at least they know how to use the system. It gets better for them, though, when they’re on the other side of the transition, building direct relationships with fans and not sharing revenue with so many middlemen. They’ll be more efficient — maybe smaller but also possibly more profitable with more control and less risk. Yes, it’ll be harder to make blockbusters but that’s getting harder anyway as we get more fragmentation (read: choice) in media.
What it will take to start disrupting the old ways is for a big star or show to start distributing directly on the internet. The big star’s name will be sufficient for promotion. Distribution is all but free. There needs to be a structure for monetization: selling ads (Google? (NASDAQ:GOOG) AOL?) and/or subscriptions (Amazon? (NASDAQ:AMZN)). Note well that in entertainment, as opposed to commodity news, I believe pay walls will work. I’ll pay for Weeds — I already have — but won’t pay for one of 5,000 news stories about the same event I could watch myself.
So when we reach the promised land of entertainment, we get rid of the old, value-extracting middlemen: channels. Will cable companies still be around? Possibly. Probably. Someone will still deliver the internet to our devices. That could still be the cable company if it learns how to start adding value rather than just extracting it with bundles and fees and restrictions on what we can do with our own TVs.
There is a new role for curators who add value by helping us find the entertainment we’d like. Enter Google TV among many hopefuls for that job. There are new opportunities to make money with data and targeting (cue privacy fretting). We the audience are no longer hostage to Burbank programmers’ schedules, so entertainment can change form; it can be something other than 22 or 44 minutes long; it can be collaborative, with someone becoming a host and a platform for our creativity (YouTube?); it can last for as many episodes as it should rather than as many as The Office is making.
As with so much else in entertainment and technology, the FCC could screw this up. They’re about to try by asking for more authority to intervene in the retransmission negotiations like those Cablevision and Fox just went through. The problem with that — as with so much else the FCC and FTC and meddling in — is that they would act to support the incumbents and prevent disruption, against our own interests, propping up old pricing structures and old models of entertainment and keeping disruptive newcomers out. No, FCC, no.
Here’s the problem with retransmission: Fox succeeded in making Cablevision pay for the right to transmit its broadcast signals. Except those broadcast signals — transmitted on airwaves we, the people, own and gave to channels — are supposed to be free. But now Cablevision is paying for them and those fees will be passed onto its customers. So we, the viewers, will pay for Fox twice — once as an opportunity cost in revenue lost to taxpayers by not selling TV spectrum and now twice in new fees to Cablevision and other cable companies. Thank you very much, FCC and Congress. Way to go. Whom are you serving again?
Once we get socked with more and more fees thanks to retransmission blackmail by channels, I’ll just bet we’ll start protesting to the FCC and it will have reason at last to pressure cable networks to unbundle. Once that’s done, we also need the right to unbundle broadcast channels; I don’t plan to pay for the CW, whatever the hell that is anyway. And once that happens, retransmission becomes as irrelevant as rabbit ears.
Now the next problem is that channels will give up their exclusive rights to programs over their dead bodies. But it has been happening, starting when ABC (NYSE:DIS) streamed Desperate Housewives online and as shows show up on Hulu (NYSE:SNE). But now that, too, is getting ugly as Fox tried to block Cablevision users coming to Hulu (until it found it was screwing non-Cablevision viewers, too). And now ABC, CBS, Fox, and Hulu are blocking Google TV, which is insane, for they’re only blocking viewers who want to find their shows. Thus arise all kinds of new (and, for me, unanticipated) network neutrality issues, blocking content based on how you come to the internet or what search vehicle you use. Insane.
Listen, people, TV should be simple. It will be simple, damn it: We want to watch the shows we want to watch whenever and wherever we want to watch them. We’ll watch ads with them or we’ll pay for them. We won’t give a damn whether we watch them on a channel or on a web site or in an app or via Facebook; via a TV or a computer or a phone or a tablet; streaming from the cloud or from our hard drive; found via search or friends’ recommendations on Facebook or Twitter. Channels that stop us from watching them [Fox, are you listening?] are hastening their own deaths. Stars, producers, and studios will, like water, find their way around you as will we, the viewers. You middlemen are doomed. It’s only a matter of time.
So don’t think that Fox won this war. It only won this round. Fox’s parent, News Corp., is turning into the last of the great control freaks of content, building pay walls around its newspapers; blackmailing cable providers — not exactly a sympathetic bunch — into paying retransmission fees for content that is otherwise broadcast free over our airwaves; and pulling links off Google. News Corp. is turning into the uninternet. So fine. we’ll watch how they do as TV and media unravel around them. Can’t wait.