Page 143 - DCAP408_WEB_PROGRAMMING

Unit 8: File I/O

much content, and under what terms and conditions. On top of all that, you have to Notes
determine what kind of viewing windows will allow you to best protect the basic product,
the channel.”
Instructive is the example given in the book of the 2011 deal between Viacom and Hulu, a
website that runs TV content for free to viewers after it has aired and profits from advertising,
and Hulu Plus, which offers a greater variety of programming and charges subscription
fees. “A key point in that deal was a 21-day window. Unique in that agreement was the
provision that Hulu Plus would wait 21 days after Viacom’s most popular shows, Jersey
Shore for example, are initially broadcast before making them available online. Nobody
yet knows if 21 days is the correct model, but it’s just another step in this evolutionary
process.”

With too many unknowns in the uncharted territory of newer platforms, mistakes can
happen by moving forward too quickly or by waiting too long, warns Roedy. A case he
cites is of Starz, a collection of pay TV channels, which licensed its programming to Netflix
in 2008 for three years for a total of $25 million, essentially giving it away. “In contrast, in
2010 the Viacom-led partnership with MGM and Lionsgate, Epix, licensed its 3,000-plus
movie titles to Netflix for five years for almost a billion dollars.”

Sustainability of Subscriber Base

What can be ominous to the cable TV industry is the threat posed by alternative delivery
systems to the sustainability of subscriber base. The industry loses business when the
consumer cancels his/her cable subscription to receive content through the Internet. Called
‘cord cutting,’ the impact of this phenomenon is evident from these numbers, from the US
market: “It’s not unusual for an American to be paying as much as $150 a month to the
cable company for the media triple play, cable TV, a broadband connection, and a phone
service. But by subscribing to Netflix for less than $10 monthly, paying separately for
broadband for less than $50, and using an Internet phone operator, that same consumer
can cut his or her costs by about half.”

Estimates given in the book speak of 14 per cent of televisions connected to the Internet in
2010; and of the percentage rising to 38 by 2014. “In the second quarter of 2010 the cable
industry lost 216,000 subscribers. They just went away. In the third quarter an additional
120,000 left.”
It may be heartening to the cable industry that the price advantage enjoyed by the
competition may eventually erode. “For example, Netflix’ $25 million deal with Starz
expires in 2012 – and renewing it will be very expensive, so Netflix’ cost of content is
going to rise rapidly, costs it will have to pass along to its customers. It’s possible that
Netflix one day will be as expensive as cable TV… But certainly, with advertising and
subscription revenues of $150 billion the cable TV industry will do everything possible to
protect its revenue stream.”

Three Priorities

And the cable industry has not been complacent, one learns, what with the series of
capability upgrades that have happened in the mature geographies, in the form of HD,
TVR, wireless, and VoD. “In addition, cable operators are increasingly broadband
connection providers: by the beginning of 2011, 54 per cent of Internet connections were
provided by those companies.”
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