AOL Keyword “Doomed”: What the former Internet giant portends about the future of cable

Last week, the long national nightmare faced by Dish subscribers finally ended when the company settled its differences with Cablevision, which owns AMC and a few other channels. Thus ended AMC’s embarrassing “NOT AVAILABLE ON DISH” taunts in commercials for its programming, which gilded the lily with a bold red strikethrough over the Dish logo—as if customers of other cable providers should feel victorious.

Or loyal. What cable/satellite companies don’t get is that their customers feel, at most, trace amounts of loyalty to them. In 2012, all they can offer is convenience. For a hefty fee every month, these companies deliver the broadcast world to customers who would otherwise have to stream it from various sources or download it illegally.

In that sense, today’s cable providers (for simplicity’s sake, this includes satellite companies) resemble AOL during its mid-’90s heyday. Back when AOL was called America Online and, with 30 million subscribers worldwide, the undisputed ruler of Internet-service providers, its customers also paid for convenience. Especially for people who weren’t web-savvy, AOL’s “walled garden” provided a sort of Internet Lite where channels on the AOL landing page created an Internet within the Internet, and customers used AOL “keywords” to search for specific items. It was a sanitized microcosm of the World Wide Web that worked until broadband rendered dial-up obsolete and users became savvy enough not to need it.

And that should scare the cable-TV industry. A decade ago, there were no options for streaming content, and the barriers to piracy were more significant. When piracy initially kneecapped the music industry at the beginning of the millennium, fans had only two choices—buy music like normal or pirate it—but people looking for video in 2012 have a slew of legal options that circumvent cable companies, such as Hulu, Netflix, YouTube, iTunes, and Amazon. Each is its own “walled garden” in a way, because users must set up accounts and, in most cases, pay to use them, but Hulu offers content for free.

Netflix, Hulu Plus, and Amazon Prime offer the closest approximation of cable, because customers pay a monthly or yearly fee for access to content, but Amazon, iTunes, and YouTube offer single-use options, the equivalent of a rental fee to watch a movie or an episode of a TV show. The latter remains the Holy Grail for so-called cable “cord-cutters”: the ability to download an episode of Game Of Thrones when it airs on HBO, for example. Right now, fans can only do that on iTunes or Amazon (not Netflix) long after they’ve aired on television, usually when the DVDs are released. For instance, only the first season of Game Of Thrones is available on any streaming service, and its final episode aired in June of 2011.

Of course, no one has to wait, and they don’t: As Sean O’Neal pointed out, Game Of Thrones’ April 30 episode was illegally downloaded 2.5 million times in a single day. HBO co-president Eric Kessler blamed the tanking economy, saying customers will return to cable once they have the money. He has to say such blatantly illogical things, because HBO rakes in $4 billion a year thanks in large part to its contracts with cable companies. Even if HBO switched to a pay-per-view model, it would come nowhere close to making that kind of money or grow its audience. Not making enough money means not creating the kind of high-quality programming that sends people running to torrent sites in the first place, as Todd VanDerWerff noted in “Patience and piracy: Why helping yourself hurts good TV.”

But that $4 billion figure is only going to shrink as more viewers abandon cable for a patchwork of streaming services. HBO eludes that by only allowing streaming via its awesome HBO Go service/app, which collects a massive amount of its films and original programming for streaming but requires a cable subscription to use—and even then, some providers refuse to cooperate, or limit what devices subscribers can use to utilize the service. (Comcast, Time Warner, and DirectTV, for example, do not support HBO Go on a Roku player.)

That speaks to the frenemy relationship between media companies and cable providers, whose mutual interest seems balanced by a mutual distrust. Cablevision vs. Dish Network is only the latest in a long line of dustups between the two sides—really, any logo could’ve ended up under AMC’s red strikethrough. In July, a disagreement over programming fees led to Viacom pulling 17 channels from DirecTV. When DirecTV suggested customers go online to watch programs such as The Daily Show, Viacom took them offline. (It restored them a few days later, coincidentally after Jon Stewart took both sides to task on his show.)

These service interruptions are only going to become more common. In a story called “Prisoners Of Cable” in the November issue of The Atlantic, Comcast vice president Marcien Jenckes said his most pressing concern was the “rising cost of programming.” Author Derek Thompson noted that ESPN paid $2 billion for Monday Night Football last year, a 73-percent increase over the deal it made six years prior. Those costs naturally get passed along to consumers. DirecTV defended its standoff with Viacom by claiming it was protecting customers from the media company’s price gouging. DirecTV reportedly won that war and paid less than Viacom wanted, but both sides lose in the end. These incidents push away the very subscribers both sides need to survive.

If people really wanted to watch The Walking Dead while Dish and Cablevision argued, they figured out a way to do it. If that entailed downloading the show illegally and relatively easily, then the incentive to keep paying decreases. Viewer loyalty is tenuous and myopic; it doesn’t take much to lose it (as The Walking Dead discovered during its interminable second season), and it doesn’t extend far beyond the show itself—AMC may earn a little, but people probably don’t think about their cable provider much.

That’s why some previously monolithic companies are scrambling to show some flexibility: DirecTV recently launched DirecTV Everywhere, which allows subscribers to watch content on laptops, tablets, and phones. Its website clearly identifies its intended target: “Why pay extra for Netflix?” DirecTV Everywhere is a nice feature, but it’s not exactly a good sign when a cable company is just now catching up with something Netflix has done for four years.

It’ll take much longer than that to defeat what Adweek’s Mike Shields called “the TV cartel,” and in the meantime, more people will realize they don’t need a fire hose when all they want is a sip of water. Way back in the mid-’90s, people paid AOL up to $20 per month for crappy dial-up service and an ostensibly more convenient web experience. Today, cable customers pay much more than that for something that isn’t great and whose convenience is increasingly less of a selling point. We didn’t realize how crappy dial-up was until broadband arrived. In 15 years we may say the same thing about cable TV.