Melinda Witmer, Chief Programming Officer, Time Warner Cable:
"I don't know what a TV is anymore. It's kind of an anachronistic term."
I have been thinking about that quote since I read it in The Wall Street Journal last Friday. And it's probably because I want to marry Witmer as a result of it. She's slick. And, best of all, she's right.
Defending Time Warner's (TWX) app that allows Time Warner cable and Internet subscribers to watch the company's traditional television offerings on an iPad, Witmer argues that Time Warner is doing nothing wrong, despite protests from Viacom (VIA), Scripps Network Interactive (SNI) and other media giants. These competitors contend that Time Warner only has the right to broadcast the networks they carry - channels like MTV and HGTV - over "cable television." And they're right as well. They have just failed to step into the year 2011.
So I bought a .44 magnum it was solid steel cast
And in the blessed name of Elvis well I just let it blast
'Til my TV lay in pieces there at my feet
And they busted me for disturbin' the almighty peace Judge said
What you got in your defense son?
Fifty-seven channels and nothin' on
As the Boss predicted many years ago, you might as well just smash your television to pieces. Witmer's colleagues miss the point in the debate over "cable television." It's not about the hardware, it's about the content. Cable television is a type of content. You can elect to receive this content through a traditional television set or some other means. Over-the-air network channels, premium services like HBO and Cinemax, DirecTV (DTV) and Dish Network (DISH) satellite programming, or the video of your wife bearing your first child - all of this qualifies as content. You can choose to view it on any piece of hardware you wish, be it a traditional television set, Apple's (AAPL) iPad, your computer, or something else. That's at least how it should and eventually will be when the lawsuits settle.
Smart and savvy, forward-looking media executives like Witmer get this. Witmer's peers at Cablevision (CVC) do as well. According to the Journal article, Cablevision has "plans to launch an even broader service for in-home streaming to Internet-connected devices, including all of its traditional services such as video-on-demand, in coming weeks." Apparently, Time Warner has bigger plans to hatch as well.
The funniest part of the Journal's story comes from the mouths of unnamed "media executives" who "worry that encouraging viewers to watch on iPads could train a new generation to eschew TVs - and potentially never sign up for cable and satellite subscriptions." Guess what, stodgy, afraid of "disturbin' the almighty peace," uptight television executives? The young whippersnappers will abandon these things with or without you. Therefore, step out of your comfort zone, wave the big bucks in the faces of the Gen-Yers who work at Google (GOOG), Pandora and Twitter, and adapt, innovate, or die. It's really that simple.
As an investor, I will watch closely to see how this controversy unfolds. Regardless of how this particular dispute resolves, the old guard will end up losing. Consumers of content ultimately dictate how they will receive it. As things shake out, it's seems pretty simple to me - go long the companies that listen to what the new generation wants and go short the ones that fear and resist the inevitability of change.
Disclosure: I am long AAPL.