Why Comcast Should Have Held Firm Against Fox

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In the last few days, Fox was able to strong-arm a better deal with Comcast, likely upping the price paid to the broadcaster for each subscriber (likely in the middle of the $1 Fox demanded and the $0.30 Comcast offered). On the surface this seems ridiculous for a number of reasons - namely, (i) most subscribers should be able to get Fox for free over the air if they have the antenna and converter box and (ii) Fox somehow makes enough ad money to support local broadcasting stations all over the country, which can't be cheap. There's a good case to be made that by "standing firm" Fox is actually putting another nail in its coffin - or at least in the coffin of its current business model.

(This posts gets a little away from the accessibility core of this blog, but I'll wrap up with little blurb connecting it in.)

A building tsunami is set to wreck the current business models of the networks. Since the dawn of television, the networks have enjoyed a psuedo-monopoly on content delivery - it was just too darn expensive for small folks to deliver their own content. Cable has been ever-so-gradually chipping away at that advantage with the introduction of new channels, but they've locked us all in with packages that still only deliver less than 100 channels for a reasonable price. Those channels are also still burdened with having to deliver 24 hours of content every single day.  What happens when there are millions of channels available, that may pop into or out of existence as they have content to deliver, for lower cost that the expensive packages we have now?

Before addressing that question, lets first ask what exactly Fox (and the other networks) offer us? On the one hand, they're the only ones big enough to afford to buy the rights to broadcast big events - sports, the Olympics, etc, and to some extent they're the only ones who can develop high budget sitcoms and dramas. But because of how networks work, those shows need to target a really broad audience and still make a strong showing among certain age categories that really drive ad revenues). How can the junk on YouTube compete?  But then, if people were free to watch whatever they wanted, and not limited by the networks - how long would it be before the NFL decides they'd rather take the bigger piece of the pie by broadcasting games online on their own?

There will always be people, groups and organizations willing to support the creation of content - sports leagues of course, as well as someone to make the Bachelor and even (regretfully) the Real Housewives of Wherever Is Next.  The biggest question remaining is whether the networks are needed in the middle. There's definitely a role for something like networks, but it's not clear you need the big dogs that the networks have become. You need someone to produce, market, and bankroll -- but you no longer need the final channel out to people.

That channel is quickly becoming the Internet - with MythTV, AppleTV, SlingBox, Boxee, and Netflix it's not clear you need the networks or cable television. Hulu is the network's attempt to remain in control, but it's simultaneously wets the appetite of more people for free, instantly available content and remains remarkably inadequate - too few shows and no live events. If the other networks follow suit, working out stronger deals with the cable companies, more people will disconnect their cable.

While the networks will remain, their importance will diminish. What will replace them are thousands of smaller "networks" that will help people make the sense of all the new content that they now have access to - something the networks used to do and something that non-networks can and will eagerly do. Putting content up is one thing, but the main functionality still lacking is a "playlist," something to help folks who just want to turn on the tube find interesting shows and not have to get up every 30 minutes to find something else.  That is, I hypothesize that channels won't go away just because the networks have.

In summary, as the networks seek to capitalize on their own sense of self-importance, they are dooming themselves. Until a viable alternative to cable Internet comes along, the cable companies themselves have little to worry about - I have no doubt that they will find a way to offset declining revenues from the droves dropping cable television with new fees or services to help people watch Internet television. The networks will be the losers, and will be losers of their own creations.

Of course, all of this is speculation.  I'm hoping to begin investigating the hypotheses suggested in this article soon.

Finally, I promised to connect this back to access. History has shown that large shifts in popular technology used to consume information often comes with access problems. The networks represented a small set of companies on which to focus complaints, and as powerful corporations public opinion could easily help bring legislation offering requirements. If millions of smaller entities replace the networks, it will be harder to regulate - who will provide captions? This is already a problem on YouTube and other video sharing sites.

But, the earlier we think about such issues, the better chance we have of heading them off before they become too big of problems to readily address.
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This page contains a single entry by Jeff published on January 2, 2010 12:21 PM.

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