Cutting the cord on expensive cable TV service is a rosy proposition for many, and since the FCC just voted to uphold Net Neutrality, why not? Still, it may not ultimately end up being much of a bargain, according to this in-depth piece by Ben Thompson at Stratechery.
Thompson explores the structure of the TV business in the U.S., from content creation to delivery to the way affiliate fees have been handled, and argues that while the industry has been through technological shakeups before, they’ve largely resulted in money moving around between its major players without resulting in significantly reduced costs to the consumer. Cord-cutting via a service like the new Apple Web TV, (with a reported $30-40 per month subscription fee) will likely be no different. Especially not if you want your HBO and Amazon Prime along with it.
And maybe that isn’t a bad thing. It’s cable TV and the affiliate fee model (where companies paid networks like ESPN for the privilege of carrying their channel) that created an environment that’s enabled the growth of television’s golden age. As Thompson writes:
The advertising-only model of the 60s and 70s resulted in blah, lowest-common-denominator content; the affiliate fee model, on the other hand, meant content creators had to have must-see content for some fraction of subscribers—that was their leverage for jacking up affiliate fees. Some, like ESPN, have bought that must-see status with exclusive sports rights deals, while others, like AMC, have earned it with compelling content like Mad Men or Breaking Bad.
Thompson, who worked at both Apple and Microsoft, leaves less licit means of television consumption out of the cord-cutting equation entirely, though it seems like they should be worthy of at least a mention. How many shared Netflix accounts are out there? HBO Go? That’s not even to get into the touchy question of torrents, TV streaming sites, and region-unblocking VPN services. Perhaps those take up too small of a slice of the pie, but pretending that these methods don’t exist as a free way for consumers to cut the cord seems like a strange omission.
Still, between convenience and control of content, it’s hard to imagine that the cable companies or their partners are going away any time soon, he argues.
The fact of the matter is that the Internet has made the cable companies even more powerful than they were in the days when TV dominated. All of the investment required for supporting hundreds of high definition channels lent itself wonderfully to supporting the fastest—and in many locations, only—broadband access to the Internet. Moreover, while Congress regulated just how much rent cable companies could collect on television, the latest net neutrality regulations largely give broadband providers free rein as long as they treat all content equally … I would argue that the future for Comcast—even as a dump pipe—is quite bright.
For the consumer, ultimately that means “be prepared to pay the same, if not more, than you pay today,” he writes.
[via Stratechery]