Cable Internet sector will not rescue Hollywood

by Paul William Tenny

I'd love nothing more than to be able to link to this transcript (after reading it myself) so that I could give better context to this post, but the only reference I found for it was on Deadline Hollywood, so you'll have to settle for mostly out-of-context quotes for the time being. A company called Bernstein Research held a little get together about "web video" which is a deceivingly simplistic and confusing way to talk about movies and TV shows produced through the traditional studio system being broadcast online, as opposed to what you might find on YouTube.

This is all about highly rated and expensive-to-produce network television shows and blockbuster feature films being made available either streaming from websites, or more importantly through direct-download services like iTunes where you buy-to-own.
My problem is this (paraphrased by DHD):

Cable operators will slow the migration to Web video by ditching the flat monthly Internet fee and charging people for how much they use.

There are so many problems with this statement that it's hard to know where to begin. When it comes to Internet access in the United States, the cable companies are the dominant players but by no means do they have any sort of monopoly on access. To ignore the big telecommunications providers offering DSL service -- AT&T's service is backed by fiber-to-the-node which makes it extremely fast -- is either naive or intentionally dishonest, and it's a game changer of an error.

Cable companies have a traditional video business to protect when it comes to their Internet offerings but the telcos do not. If not for that reason alone, cable companies will not adopt metered Internet service plans because their competition (DSL from telcos and the increasing threat of fiber-to-the-home from Verizon and state and local municipal coops) almost certainly will not, which would place them at a severe and untenable competitive disadvantage.

Moreover, it assumes that online video is the number one use for cable Internet service (some real research is beginning to indicate that this might actually be the case for "mobile", celluar-based Internet usage) and would the the driving factor in future business decisions related to that sector, which is anything but proven.

It's also contradicted by recent evidence to the contrary, where Time Warner began trials in select states where all of their Internet plans were converted to "pay for what you use" which resulted in such a fierce public backlash that the project was scrapped within weeks and permanently shelved.

What made it even worse is that Time Warner, being a publicly traded company, is required to file reports with the SEC about where their earnings and expenditures come from. Ars Technica found that the cost of providing Internet service for Time Warner was dropping year-to-year even while revenues were increasing, making the claim that metered plans were required by out of control Internet usage that the company couldn't afford to keep up with a rather blatant and insulting lie.

[Note: Here is a story showing most of the major Internet service providers making good money from that sector even during this recession, including Cablevision, which just got done implementing "precisely the setup that Time Warner Cable said might ruin it without switching to a capped data model".]

The possibility of cable companies or any significant ISP segment switching to a metered service plan for all of their customers is laughable at face value, but to think that they'd do it simply to protect Hollywood's traditional distribution mediums of television and theaters is downright idiotic.

If anything, it would seem to me that the entertainment industry is getting exactly what it's paying for: the things it wants to hear.

While I don't disagree that replacing broadcast television (cable, satellite, and over-the-air) with the Internet is a bad idea on many different levels, it's simply not reasonable to expect or predict that Internet service providers are going to make a major change in their businesses just to placate an industry that is quickly losing control over its product much the same way that the music industry did.

Hollywood needs to embrace the online experience because that's increasingly where people are demanding their content be available, not the pirates, but actual consumers who are willing to pay for some of this stuff. And not because I say so, but because the cable companies aren't going to bail them out of a paradigm shift in information availability. The music industry dragged its feet and paid the price, and now Hollywood is doing exactly the same thing.

I hate to break it to Bernstein, but the bandwidth caps being floated by some companies (unsurprisingly, companies with some of the worst reputations for customer service in all of corporate America) have more to do with greed than what Hollywood wants or thinks it needs.

They'll do what's in their best interests and if that means sticking with high monthly caps but not "pay as you use" service, that's exactly what they'll do, Hollywood be damned.
in Digital Media, Internet


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