Gizmodo: Apple Could Kill The Cable Television Industry, The ‘Tastic: Uh… No

I just felt it was necessary to give a little commentary about a piece from yesterday on Gizmodo citing a piece on The Wall Street Journal regarding rumor and speculation about Apple’s plans following the resignation of Steve Jobs and the ascension of Tim Cook.  The plans specifically are regarding Apple’s next step into the Internet Video arena and the piece in the journal cites anonymous sources as suggesting that Apple is trying to “kill” the cable television industry.  Keep in mind that I posted a similar, albeit abbreviated version of these comments directly on Gizmodo, and surprise, surprise… they didn’t approve my comments.

From Gizmodo:

“Here’s something mysterious: amid the WSJ’s report on Tim Cook’s ascension, they say Apple’s “working on new technology to deliver video to televisions, and has been discussing whether to try to launch a subscription TV service.” That could be huge.”

Of course, everyone at WSJ that writes about tech is a complete hack which is proven every time they publish something (If you want tech news, stick to tech news sources, folks) which means that it’s up to Gizmodo to cite them and give them validity by not only running with the premise that Apple wants to kill cable television, but to actually suggest that it’s possible.  Now personally, I can’t confirm what the WSJ‘s Yukari Iwatani and Jessica Vascellero had to say beyond  the first three sentences because I don’t pay anyone for Internet news, sorry. So, even though Gizmodo is completely wrong with their analysis in general, I’m going to have to take for granted that what Sam Biddle (author of the Gizmodo piece) is reporting about the WSJ piece is spot-on simply because it makes perfect sense that the WSJ would support such tripe as legitimate.

My response to both Mr. Biddle and the WSJ:  Not gonna happen, nor does Apple want it to happen.

From Gizmodo:

Ergo, Apple TV. Ergo, iCloud. New ways to take video content and stick them where you want—completely bypassing your cable box (and company renting it to you)…

What this could mean is an offensive against the cable industry akin to Apple’s complete conquest over the music industry. A “subscription TV service,” given successful licensing wrangling (a herculean task, we admit) could give us what we want from traditional cable TV: the stations we want, and only those stations. Imagine your Apple TV completely replacing your cable box—scroll through a list of networks, select the ones you want, and pay for them monthly. Their programming available on demand. Their live broadcasts, streamed. True internet TV. All the convenience of a DVR, all the vastness of a regular cable box, and all the sophisticated pleasure of an Apple TV.

It’s a logical next step, and could kill cable—and who needs to fix what can be killed? But at the very least, it’ll put some much needed and long overdue pressure on the dinosaur cable companies to actually do something. Anything. Apple as a legitimate competitor, even without a full hand of licensing deals, could be the oomph needed for serious cable reform. And that would almost be just as good.

Let me preface this by saying that I have nothing against the industry in general, partly because I have had professional experience working with them (in telecom… I’ve also worked with DirecTV and have had generally positive experiences) and partly because as a consumer and a professional, I’ve been in cities with good cable companies and bad cable companies. I’ve had nothing but bad experiences with Time Warner Cable as a consumer in Rochester and Syracuse, NY and nothing but bad experiences with them on the industry side in Texas.  So yeah, I get why people hate TWC.  On the other hand, I have had nothing but good experiences with Cox Communications professionally and as a consumer here in Las Vegas.

Mr. Biddle lives in Brooklyn, NY.  His choices are Cablevision or TWC.  DUDE… I get it! That’s enough to make you want to move but it doesn’t mean that consumer experiences with cable providers nationwide are universal nor does it mean that an unscientific sampling and analysis of 1,000+ people (as noted in The Cable Customer’s Bill of Rights, a piece that Biddle cites) who responded to one of your surveys regarding cable television “horror stories” is indicative of anything substanitive (and of course, they made up that number because they simply don’t have the staff to read that many “horror stories.”)

The main issue that folks like Mr. Biddle and his other fellow cable provider haters over at Gizmodo (like Mat Honen, author of The Cable Customer’s Bill of Rights) always want to harp on as to one of the ways the consumer is being so “abused” by the evil cable television industry is the complaint about not being able to choose channels individually.  Well, this notion of à la carte channels, while seeming great on paper, would be absolutely disastrous for the consumer and simply suggesting the notion shows how ignorant on the subject of the cable television, network media and television industries the folks at Gizmodo are.  I don’t fault the average consumer for not understanding the complexities of the industry, but I simply have no patience for semi-respected, professional tech blogs who spout-off on a subject of which they have no particular insight into professionally nor have they done any research into academically.  Journalistic legitimacy requires more than citing one piece from the WSJ and tossing about a bunch of wild-eyed theories based on wishful thinking and a Utopian vision with no context.

Let’s be clear: à la carte is never going to happen and for damned good reason; the cost to the consumer would be outrageous.

MAKE! IT! STOP!

Consumers (and apparently tech bloggers) don’t understand how this works.  All of the networks are owned by a handful of conglomerates and network/media “superpowers,” as it were. They don’t sell the rights to the networks on an individual basis. They are sold as bulk packages in order to keep the prices as low as possible because it guarantees them the most exposure for all of their networks, ergo, all of their advertisers. The fact is that when it comes to a cable television lineup, the cable provider is generally at the mercy of the networks. With the licensing for these packages, the cable companies are REQUIRED under the terms of their contracts to provide all of these channels to everyone or NONE of these channels to anyone. The only breaking up that’s allowed is for tiered pricing packages (basic, standard, digital packages and of course with the à la carte premiums). The only way cable companies would be able to get à la carte for the consumer is by paying an exorbitant amount for each individual network to offset what the parent media companies would lose by not having total exposure on cable.

And who would these exorbitant costs paid by the cable providers for this utopian dream of à la carte channels be passed on to? Of course… the consumer! Get ready for sky-high prices like you’ve never seen and an elimination of probably 75% of the channels.   Sorry, but those channels that you like are being subsidized by channels that I like and vice versa. I’m a big supporter of Apple products and services but Apple has ZERO leverage with the networks as far as forcing them into à la carte pricing.  The industry doesn’t want to do it to begin with and Apple lacks the infrastructure and ability to distribute programming on their own (I’ll come back to that part in a bit).  Apple will get no licensing deals… period.

Seriously, if this idea of à la carte is such a great idea and the cable providers are just trying to screw the consumer then why isn’t DirecTV or Dish Network doing it?  The answer is simple:  they can’t.  “Herculean” doesn’t begin to describe the impossibility of Apple or anyone else being able to get the licensing to offer à la carte channels.  It’s pure Science Fiction that it could ever happen.  No – I take that back.  Science fiction actually has some basis in reality, this dream doesn’t.  Does it occur to these people that even the programming on Netflix, for example, is all provided through packaged content based on deals with the networks/studios?  Do they really think that Netflix is able to purchase program rights one program at a time?  How would Apple be able to accomplish this task?

To equate this with the music industry and iTunes is just foolish even on its face.  The music industry has always been à la carte even before the era of iTunes and until a decade ago there was only free, over-the-air access to it from a broadcast perspective (and even the most popular Internet music providers are still free and the pay radio services are floundering).  The cable television industry, on the other hand, has been in existence since 1948, and unlike the cable television industry, the music industry doesn’t control the means of distribution.  This is completely an apples-to-oranges comparison.

This is a short-sighted, analysis on a subject that these people know nothing about but think that they are experts on because they know how to use the features on their TV or iPod and tell the rest of the world why it’s so fantastic or why it’s garbage.  Hey… just because I know what makes a great car stereo it doesn’t mean that I know a thing about the auto industry, but on the other side of the coin, because this is a blog about television, I’ve made a point to get myself educated on all aspects of the business that relate to television programming and where it’s going.  It would be nice if other outlets would do the same.

Sweet!

Now, without a question, I do like what Apple is doing with their products and innovation (I’m particularly excited about iCloud) and I like what other companies such as Google, Yahoo! and, of course, Netflix are doing as well. Options are good for the consumer. Competition is good. These tech companies are forcing the cable industry to improve their products and services to keep up and control their prices. My cable bill actually went down when I recently moved and I added services not to mention that my services that I have as a customer at no extra charge continue to increase (Just found out that there are free 3D movies on HBO OnDemand and the other premium channels… how cool is that?).

I look at this type of tech and product from Apple and others as supplemental, though, and really, so should everyone else.  It’s not going to replace cable TV or satellite EVER, it’s just going to provide the option of low-cost video entertainment alternatives to people who want them for extra content or provide services to people who don’t subscribe to cable due to the cost. Win-win all the way around. But you have to keep this in mind, and I have discussed this before, the industry is not going to be streamrolled by upstarts in the Internet television racket when it’s the cable television providers that provide the vast majority of bandwidth for the these Internet video services.

What right does Apple or Netflix or any other company have to use the bandwidth and infrastructure of a cable company at no charge to sell their product and intentionally undercut the cable companies? The cable companies have spent billions of THEIR OWN money on infrastructure and the big problem that no one is discussing except for those of us that professionally have an inside track on these issues is the bandwidth problems that have already begun to start popping up due to Internet video services, and this is with a non-adversarial/non-competitive relationship between the industries.  This isn’t an issue of a few people using a lot of bandwidth due to P2P services and needing to be capped, it’s an issue of a consumer base that has multiple Internet video capable devices that is growing exponentially and the infrastructure not be able to accommodate the usage.

I’ve had long discussions about this with engineers in the industry and the problem is that there are geographical areas with weak bandwidth due to the excessive usage. It’s not a universal issue (yet) but it’s kind of like the thin spots in the Ozone layer.  To refer to Cox as an example, they are not capping bandwidth currently and my sources tell me that they have no intention of doing so but the reality is that they and other providers can’t currently keep up with an inevitable future that’s coming very quickly where Internet video services are so universal as to completely overload their infrastructure so what they are doing is addressing (see: Band Aid-ing) each individual customer problem as the the complaints occur… kinda like the dutch boy and the dam.  I don’t have any particular insight into what other providers are doing, however, it only makes sense that they are  doing the same thing, even if they are capping usage.

Apple, Netflix, Hulu, etc., are completely dependent on the cable industry for getting their product to their customers. The cable television industry isn’t stupid about this nor are the Internet video providers.  And before you even start talking about net neutrality as a way to strongarm cable providers into treating Internet video provider traffic equally, forget it.  It’s not going to happen because if it were to happen the industry has stated publicly that they will halt all capital investments into advances in technology and infrastructure which will slow down the Internet to a crawl.  Again, like the à la carte nonsense, this will only hurt the consumer.

The reality of what’s going to happen is that the Internet video providers and the cable television industry are going to work it out in a manner that’s mutually beneficial, I can guarantee you that. In fact I wouldn’t be surprised at all if the internet video services that are available on video game consoles, standalone media players such as the Roku, select Blu-Ray players and televisions will be available on digital cable boxes and DVR’s as well within the next five years.  Hulu Plus and Netflix are already available with a TiVo (yes, we know about the licensing problems regarding cable companies… that’s another discussion.) so there’s no reason to believe that cable and satellite providers won’t get in on this as well with the devices that they provide their customers.  But no one should be fooled into thinking Apple is going to, wants to or has the ability to replace cable or even offer à la carte channels. It’s just not going to happen. This is beyond “pie in the sky” speculation for Gizmodo and the tech hacks at the WSJ.

Our Ass...

Seriously, at least on our blog when we talk out of our collective asses with our wild speculations, we attempt to base it on facts and some knowledge about the subject we’re talking about.  Maybe some other well-established niche blogs and well-respected mainstream outlets might consider that approach as well instead of the frankly, lazy tabloid journalism approach that seems so popular today.