Wednesday, December 30, 2009

May Fox and Time Warner Usher in a New Era

If you haven't been following the news, you might not be aware that News Corporation, owner of Fox, and Time Warner Cable have been in a rather ugly shouting match that will likely result in Fox pulling its programming and channels from TWC on New Year's Day.

Let me explain: In the beginning, TV broadcasters put their programming out for free to viewers. If you had a TV and an antenna, you could tune in to NBC. Networks paid locally-owned TV stations to become network affiliates. Advertisers paid networks (and local affiliates) to support free delivery of TV. This was great, unless you lived in some remote area or in a deep mountain valley and couldn't pick up a signal. Thus, the invention of community antenna TV (aka "cable").

All was well. This was a pastoral era where man loved his fellow man, the Russians were the predictable-style bad guys. Life made sense.

Then, it all went to hell. Quickly.

See, cable was something you had to pay for. And that meant you could also subscribe to new "pay channels" like HBO. HBO would charge cable companies a few cents per subscriber to make money since they sold no ads.

As you know, there are upsides to this. If you require subscribers, you can show whatever you want: swearing, commercial-free sports, bare breasts (!) and the like. You can even produce your own shows that don't have to fill a traditional broadcast season... your goal isn't ratings to justify ad dollars. Your goal is to gain subscribers who get you more money.

Like anything else, cable channels realized they could charge a few cents more per subscriber as time went on. Thus began a new tradition of pay channels increasing their rates and having cable companies pass it right on to the consumer.

Today, we have almost 1,000 options for programming on a given cable channel. That's 1,000 channels asking your cable or satellite provider for money to carry programming. Add it up and you know why your bill is so high.

So... News Corp wants to charge TWC a fee to carry Fox programming that TWC thinks is exorbitant. It should be noted, News Corporation owns DirecTV, so Fox has a motive of getting people to ditch TWC for DirecTV.

I predict Fox will, at least temporarily, pull its programming. But what I'm interested in is the larger ramifications... and those might actually benefit us, the TV watchers.

Consider that you most likely already pay for your "free" TV channels. If you have cable or satellite, you pay a flat fee for a basic tier of programming, always including your local channels. So... what if networks and local affiliates, already running in the red because of fallen ad revenue, decide they're no longer free? They'd now ask for a fee, too. That sounds bad on the surface, but let's come back to the fee in a second.

Freed from obligation to advertisers, TV networks could still sell sponsorships, but they wouldn't have to build programming to fit it in. I'm talking a bout commercial-free sports, sponsored by Budweiser with on-screen graphics. I'm talking about your favorite Prime Time shows not needing to force out 22 episodes a year, of which only 12 are good. Writers could act like they do on HBO... write a good story, tell it in as many episodes as you need and be done for the year.

Now, about that fee...

Right now, I have DirecTV and I have hundreds of channels I never watch. Yet, I pay for them out of my flat fee.

What if, with every channel a pay channel, I could sit down and choose my own package... I'd only pick the channels I want and I would pay the price for them. Sure, there could still be package deals. But imagine that. And to go another step... with my personalized list of programming, and digital delivery, I can conceivably be targeted with some new form of advertising specifically tailored to my interests. The prospects are tantalizing.

And... done correctly, everyone can make money in the process of sending me my programming.

So, I'm rooting for Fox to stick it to TWC this weekend. Not because I wish ill on TWC (though, as a former customer of theirs, I can't say they don't deserve it a bit). I'm for hastening the shift from one model of TV entertainment delivery to another.

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