TimeWarner Cable vs. News Corp. vs. You

by David on January 2, 2010

To start the New Year and ring in 2010, TimeWarner Cable and News Corp. settled their dispute and Fox’s cable channels continue to be carried on TWC to 14 million American TV viewers (including the author).

Some questions

Does TWC has a right to carry these channels or does News Corp have a right to withhold these? Remember that Fox is the #2 or #3 network of the 4 major broadcast networks.

Do consumers have a right to get broadcast TV? We can always put up rabbit ears and get the 4 major networks for no charge.

What if…?

As I couldn’t sleep the other night the question came to me: What if TWC and News Corp. couldn’t reach a resolution? Let’s say that on January 1, 2010, TWC stopped carrying News Corp. channels and I couldn’t watch the Sugar Bowl from the comfort of my own couch.

I am sure that some consumers would have dropped TWC and moved to Verizon’s FiOS, AT&T or satellite. But that’s a short-term solution. News Corp. would take its victory (if that could be considered a win) and gone to every other carrier threatening that they would lose subscribers just like TWC if they didn’t pay the higher rates that News Corp. had been asking for. Would someone give? Would News Corp. have to back down at some point if no one said “Uncle Rupert”?

What if TWC paid the higher rate that News Corp. had been asking for? Then Disney and every other content provider would raise their rates… and pass on the additional costs to consumers.

Under either scenario I, the consumer, would have fewer channels to watch on my TV. Either TWC would choose which it didn’t want to pay for or I would. There’s no way I will watch my bill double to continue to receive content that I don’t consumer. Would TWC change its billing structure and finally let me pick a package of only the channels I (dare I write the blasphemy) want to get?!?

Invisible Hands

With the many invisible hands at work, what would be the effect on society? What would be the effect on business and media? We, the consumer, have already destroyed the near-monopoly of TV as our entertainment medium of choice in the home. Sure in the 1970′s most homes had radio, a daily local newspaper and a couple of magazines (either Time or Newsweek) but the limited TV that we received (limited in choice only by today’s standard) was the entertainment medium of choice for most Americans. Not so today.

Would a decision by these two media giants not to reach an accord help push consumers away from television?

Other choices

Of course, there are other choices even to receive TV content. I would not have been without my old friend Jack Bauer this year. I would have spent the hundred bucks for a device to properly connect my computer to my 52″ HDTV and streamed Jack whenever I like with only a single commercial at the beginning from Fox.com. Or maybe I would have said that I don’t mind waiting a few months or a year to watch on DVD. Not much additional revenue for Fox if I got it via Netflix.

How does News Corp. generate revenue from its programming? It seems that ad revenue is down so why not try to get more subscription revenue? Only if News Corp. pulls Fox and other networks from cable, that means that 14 million viewers won’t see any of the commercials (more if this were to happen with other cable / satellite providers) and News Corp. will have to charge lower rates for commercials. Hmmmm?

SED… that’s Deoptimization

News Corp. is the same company that last month decided to pull content for foxnews.com from Google. We all know the Pareto Principle (aka the 80/20 Rule). There is the Calacanis Corollary (aka the 80/19/1 Rule) that says that in social media, 1% creates the content, 19% consume the content and 80% bounce. If that applies to content sites and 1% return another time (with 19% reading at least 1 more page and 80% bouncing) I’d be OK with the math where millions of users come from Google each month. I’d probably try to figure out how to better entice readers to stay longer and sign up. Of course, the 80% may just not be interested. Or they may always come through Google. I find it hard to believe that they are worth nothing but Mr. Murdoch has done alright in the past without my advise.

End with a parable

Back to cable, I’m not sure who needs whom more. I think it might be the story of the scorpion and the frog. This is a wide river for them to cross and I think that they need to work together to get across. While the frog can survive without the scorpion, which is which in this case?

It’s going to be interesting to see how the content providers and carriers get along and who will call whose bluff. In the meantime, I’m going to go hook up my computer to my TV and join the rest of the country in tuning out.

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