A few months back in November I wrote a post titled The Cable Bubble Through the lens of Media's Dominant Trend
Back then the new iPad had not been announced and the notion of Price had been, as always, a tightly controlled feature of modern TV programming unexposed to the chaotic forces of a truly free market. The value proposition offered by cable TV in the 1970's and 80's was simple. Free TV, plus programming not available otherwise, and the best picture possible, all the time. A small fee for such a service seemed reasonable in an age when chimneys were all adorned with TV antennas in need of frequent attention. We witnessed the birth of "premium channels" and in lieu of going to the movies (as often) we began recycling movies using this secondary distribution platform that was immediately in tune with a generation willing to relive the past over and over. Cable companies had a virtual monopoly for a long time and even with the advent of satellite TV, the critical urban markets were in little danger of fragmentation.
The notion of "ala-carte" pricing of cable TV packages has never been seriously considered because managers know well that revenue would probably decline if people got to Choose. Lacking competition, the idea has been dismissed over and over.
Enter the iPad which may as well be called the "iPay". Cable companies get $5 a month for an addressable box that offers a universe of on-demand choices. Apple somehow generated a tsunami of promotion over a $400 box that allows you to pay for content on the go. They deserve an award for two reasons: First, they are being congratulated for creating a portable cable set top box-Kindle and got incredible amounts of free promotion for the launch as if was an innovation that would change our lives. Second, they may well have pierced the cable bubble's hold on pricing of content experienced previously by the record labels, newspapers, magazines, radio stations, and broadcast TV. In lieu of this development, ala carte pricing cannot be far off for consumers of TV content in the Era of Choice and the popping of the cable bubble may not be such a long wait because the cable itself may become an antique soon in urban areas.
I've read some thought provoking ideas on this new market dynamic recently and from this perspective, the main ingredient of what I call the industrial revolution of media is the removal of barriers to competition that all media are experiencing in this digital age. Cable company's stranglehold on consumers in terms of pricing power has been exerted despite dramatic waves of technology enabled deflation in other segments of the media industry. Up till now cable execs on both the distribution side and production side have felt confident of their control on the market and yet, in the blink of an eye, Choice is being introduced to the market for content otherwise limited to cable TV.
I've admittedly been surprised initially at how much Apple seems willing to charge for TV shows in iPad. It feels a little outrageous but the dutch auction has only just begun and will play out over multiple business cycles where the market will bear out the true costs of delivering programming (with and without advertising) to desired markets. Moreover, the app market that has grown strong with Apple's iPhone is likely to expand, eventually, into multi-platform coding that forces competition even upon Apple's iTunes. This may not be the case right now but this is the direction of competition out on the digital frontier.(open source is a giant force that will not go away)
The era of Choice is media's dominant trend in the US right now. The second key trend to monitor is how generational dynamics are rolling over and how that will dictate changing values in all areas of American life. Finally, there is the idea of social mood, (a very macro social dynamic) that expresses itself amongst us and each of these three dynamics will shape the ongoing evolution of media in the US because it is a primary social tool to all Americans.
The next shoe to drop in the revolutionary phase of this evolution is the Cable bubble. Like most bubbles, it developed so large that it became the new reality. In a few years time it will be like those scary styles of the 70's and 80's. True market bubbles unwind faster than they grow. This may be best described as a damn being removed from the river of competition to sell video content to consumers. Viacom's suit of Google's You Tube was the tip off that this development was overdue. Besides a virtual pricing monopoly for content in the market for cable TV, there is also the trend related to IP (intellectual property). Eventually this trend will be viewed from a very different perspective too and when that happens, the real revolution will have begun. For right now, however, I place my bet on how Google (and other search competitors) will be the surprise players in the leveling of the pricing field for video content. Free markets create change through Choice and that bestows benefits to the markets (people) they serve. Barriers to entry, like government sponsored monopoly, regulatory indifference to vertical consolidation, and patentable software do the exact opposite.
Senator Franken comes out swinging against Comcast NBC deal (another worthy read in this area)
