The end of cable TV is nigh - Aereo wins another round

Posted by Rob Enderle

I was around when cable first came to market, with the so-called "experts" arguing that no one would be stupid enough to pay for something you could get for free, namely advertising funded TV programs. And here we are decades later, pretty much proving them wrong, because, yes we are stupid enough.

However, Aereo is company that basically provides a centralized high performance antenna which you connect to for a small fee - offering access to these same advertising funded channels for $8 a month rather than the $40 to $80 you may be paying for the same thing.   

Apparently the service is pretty popular on the East Coast, although on the West Coast a similar service was shut down because our judges out here are…. Anyway on the East Coast Aereo just won an appeal and is still going strong.  But this is only one of several initiatives that are steadily advancing to shut down cable TV service as we know it. Let’s look at why.

Cable At Risk                                     

The reason cable is at risk is that it is based on a bundling pricing methodology. If you want to watch a particular channel, say like the Speed Channel, you have to buy a bundle. So I’m paying for the entire sports package but only wanted one channel which means I, and you, are generally paying a premium for content you will rarely if ever watch.

This is certainly a profitable situation for the cable and TV content industry which can latterly provide programs that no one will watch profitably. Nevertheless, it does provide opportunities for others to come in with more focused and vastly more attractively priced offerings if they can break what is basically monopoly pricing. Monopoly pricing is where you pay whatever price someone charges regardless of its worth, while competitive pricing can best be described as a scenario in which multiple companies drive down prices closer to the actual cost of a product.

Intel and Unbundling

One of the companies aggressively trying to break this cable money machine is Intel as it works on a service that would unbundle channels and let you watch what you want to watch when you want to watch it. Granted, it will use a more advanced set top box, where Intel will make its money, but annually the service should cost far less and give you much more than you currently get from your cable company. The cable companies aren’t amused and are attempting to reinforce exclusivity agreements which will lock Intel, and others, out of this market killing access and rendering efforts like Intel’s unviable.  

However, Intel is likely the leading technology expert on anti-trust, having been on the other side of challenges like this for over a decade and if any firm knows how to fight this fight, it has to be Intel. The group running this effort is led by folks who created England’s advanced on-demand service for the BBC and they are one of the most capable in the market. So watch this space.  

Apple, Microsoft, and Google

But they are hardly alone, as three of the most powerful companies in technology are also trying to break this market open. While all of these companies aren’t well coordinated in their efforts yet, they represent total hundreds of billions in assets and some of the strongest legal teams in the world. Each is looking for creative ways around the cable lock-out strategy and while the chance of all of them being successful is remote, the chance of one or more of them making it through is almost certain given their assets, lobbies and legal team.    

Wrapping Up:  World War C

I think we are seeing the beginning of the end for cable and their lock on the market, at least where broadband network connectivity is available.  We already have folks living off of Amazon, Hulu, and Netflix and the next generation of services will be even more comprehensive and still more value priced and on-demand than Cable is now.   

The future of TV is coming and firms like Aereo, Intel, Google, Apple and Microsoft are working to make sure it is cheaper and better than anything we have ever seen before and. Think about it this way: it will use methods that will likely assure popular programs  stay on the air, providing access to programing we would likely never have otherwise seen. Now that’s a TV future I can believe in.  

Of course, it won’t be just here and we are clearly entering the cable wars, or World War C.