“The Faster, Better, More Entertaining Future” might not be too radically different from today, with programmers and distributors in constant conflict, and upstart companies like Netflix upsetting the market.
The “Faster, Better” panel included Time Warner Cable CEO Rob Marcus and Suddenlink CEO Jerry Kent from the operator side, and on the programmer side were A+E Networks CEO Nancy Dubuc, TBS CEO John Martin, and ESPN president John Skipper.
Moderator Betty Liu of Bloomberg Television asked about the biggest threats to the industry, which she identified as companies like Google, Amazon and Netflix, but Kent was having none of it, and immediately cited programming costs growing at double-digit rates, though he allowed that other people coming into the business and technological change were, indeed, challenges.
Marcus chimed in to say that over the top companies underline the value of the broadband connection. “There’s the potential for competition on the video side, which isn’t bad. It drives us to do better.”
Skipper maintained that cable simply has a better product, “and shame on us if we don’t protect or turf and work together” to ensure customers realize that.
Liu didn’t let him skate with that however, noting that Skipper and ESPN are sitting pretty providing live sports. Skipper allowed that broadcasting live sports does put ESPN “in the catbird seat.”
Martin said that broadband is expanding avenues of distribution, which he said will spur innovation and “cement the value proposition” of cable. Consumers will be the winners, he said.
Liu pushed back, quoting an unnamed media executive saying that “Netflix is a perfect poster child of failure of cable industry to innovate.”
Marcus took immediate umbrage. “That someone figured out how to aggregate and resell other people’s content over broadband is in no way a failure of the cable industry.”
Dubuc objected as well, keying the fact that Netflix isn’t sharing its viewer statistics.
Kent insisted Netflix wouldn’t even exist if the cable industry didn’t build broadband infrastructure. “We spent a lot of time and capital to do that.”
Skipper said that the key is cable’s response. “We have to figure out together how to make authenticated television work and allow people to get the content they want on every device with an easy mechanism, because we can compete there. We have the superior product.”
Martin followed saying that authentication is a barrier to usage. He said he has three homes, three providers, and they’ve all given him passwords and IDs that he doesn’t remember. “I don’t have TV Everywhere because I can’t figure out how to use them.”
The best thing the industry could do was to make video on demand better.
Dubuc noted that A+E’s app was downloaded 11 million times, but that the authentication experience was “not great,” so many viewers aren’t using it. “We have to do better.”
Skipper agreed, “we need an easier process for authentication.”
Marcus also agreed, but he noted that the response so far to TV Everywhere apps is encouraging. TWC has its app on a wide variety of devices, on IOS products, Androids, Xbox, Samsung Smart TVs, Roku, and FanTV, he said, and “Last month we had over a million people access video on something other than a STB.”
Liu countered that technology companies have been faster to figure out how to deliver video efficiently.
Dubuc responded that “Without content, the tech companies are just building platforms.” She talked over Liu when Liu countered that over the top companies were getting their own programming.
Marcus picked up by noting that TWC does in fact work with many of those companies. “We’re making our video product available through devices that we don’t control. Tech companies versus cable providers versus programmers is a false split.”
Liu, as aware as anyone what the splits are, went straight for the throat, and asked Skipper “when you going to stop gouging Jerry and Rob?”
“Stop doubting them?” Skipper said. “There’s no question we’ve created the product with the most value, and it is priced accordingly. We create value. We were first with authentication, first with HD, first with 3D. The single greatest buttresser of the pay TV package is ESPN.
“There’s also this canard that there’s only a few people who watch sports and everyone else is paying for product they don’t want. Not the case. There are 115 million people watching ESPN. Everyone’s watching it, no matter how many times Barry Diller says it.”
Liu wasn’t put off, reminding Marcus that his predecessor, Glenn Britt, had warned constantly of rising program costs.
Marcus had to agree. “There’s no question that the model where the cost of goods sold is growing at a rate greater than the market will bear at retail, is problematic for the overall sustainability of the ecosystem. We have to figure out a business model where our willingness to pay for [content] is more than customers are willing to pay.” He noted that the programmers have cost problems as well.
Skipper said the problem wasn’t a matter of discussion when the cable business was a growing pie. “We need to figure out how to grow the pie”
Marcus tried to smooth it over. Cost is a real problem, he allowed, but it’s incumbent on the cable industry to tell everyone what a great value cable is. “Affordability is a real issue, and we have to design products to meet those needs. We have lite products that maybe don’t provide all the capabilities, but still meet customer needs.
Kent, who started in with rising programming costs at the top of the panel, chimed in, saying “I fear we’re going to price some households out of the market.” The industry has to figure out a way to control costs and pricing, he insisted.
Liu asked if a la carte was the way to go, but the panelists found the option distasteful.
Kent said he couldn’t imagine a situation in which customer service representatives would walk customers through menus of 300 channels to choose amongst. But if the industry doesn’f figure out something, it may end up like Canada, with the government getting involved and dicatating something like a la carte.
Netflix, Dubuc observed, is a form of a la carte, “and people still subscribe to us. They want ESPN.”
Kent was adamant though, insisting that if programming costs don’t get controlled somehow, cable operators might have to start dropping channels, and people might stop subscribing, anyway.
Liu changed the subject. How to find the next Duck Dynasty?
Dubuc said finding programming is getting harder and harder, and it’s art and not science. “It’s the taste-driven, instinctual part of the business. You have to have good relationships with show runners and writers,” she said.
“I worry where the next generation of creators is going to come from. I see small companies selling for astronomical prices and cashing out. And then the younger generation is moving to YouTube. We worry a lot about that.”
Martin agreed. “We have to find those voices. We at Turner spend $4B a year on content acquisition. You do have to have those relationships. But the most amazing thing is that the most popular show on TV is on cable. It’s Walking Dead. A few years ago, people would have said it was structurally impossible for that to happen.”
The distinction between broadcast and cable, “I think that will be blown up, and become irrelevant.”
At the top of the session, Liu played off the news of the week for her first two questions. On Monday, Comcast said that if it pulls off its proposed acquisition of Time Warner Cable, then Comcast will swap some systems with Charter Communications and in the process transfer several million subscribers to Charter.
Liu asked Rob Marcus what he’ll be doing if the deal goes through, a question Marcus shrugged off saying he’s still busy running TWC.
Liu immediately turned to Kent and asked if Suddenlink is a buyer or a seller, now that consolidation seems to be back.
“Tell me what the price is,” Kent said, deftly dodging. He said the company is always looking to add value, and that it’s a great time to buy. “We’ll kiss a lot of frogs to find a prince,” he said.
From left to right:
Betty Liu, Editor-at-Large & Anchor, “In the Loop”, Bloomberg Television
Nancy Dubuc, President & CEO, A+E Networks
Jerald Kent, Chairman & CEO, Suddenlink Communications
Rob Marcus, Chairman & CEO, Time Warner Cable Inc.
John Martin, Chief Executive Officer, Turner Broadcasting System, Inc.
John Skipper, President, ESPN, Inc. & Co-Chairman, Disney Media Networks