The ongoing efforts of Hollywood TV and movie syndicators to extort more money out of distributors and their end customers reminds me a little of the French royalty in the late 18th century. For Marie Antoinette and her husband Louis XVI, things were going on swimmingly — until they weren’t.
If that analogy seems too obscure or overblown, think about the record industry cartel 15 years ago. The six major labels were able to charge whatever they wanted—and then their revenues fell by more than half. People didn’t stop listening to music — but a whole generation stopped pay for recorded music while spending shifted to live concerts (where the publishers can’t extract their vig).
So now Viacom is mad because it can’t get DirecTV to pay $144 million more annually ($7.30 per subscriber) to carry its 26 channels. To put pressure on DirecTV, Viacom set up a Facebook page with snappy clip art featuring its Nickolodeon, Comedy Central, MTV and other characters.
DirecTV set up its own webpage to attack Viacom and, in particular, its bundling strategy requring all or nothing from subscribers. When DirecTV page “Other Ways to Watch” linked to online versions of Viacom content, Viacom took down its Internet content for everyone. (At the risk of mixing metaphors, this reminds me of a hostage-taker who puts a knife to his own throat).
We all know how this is going to end: at some point, the cable and satellite TV distributors will be unable to charge a premium over Internet channels. This means that revenues from distributors will eventually be going down, not up. Content producers will need a new business model: the only way out I can see is that there will be embedded ads and product placement for the content no matter where it is consumed.
On the DirecTV website, CEO Mike White delivers an impassioned speech supporting his side. Or, as the text says
By holding firm in negotiations and disputes, we’ve held our price increases to half of the industry average. Some networks or TV stations are asking for as much as a 300% increase in their monthly rate. Imagine the impact to your bill if we just simply accepted those demands for one network, let alone the hundreds we offer you. There’s a reason DIRECTV has been able to offer our customers the lowest annual rate increase of 4% among all providers over the past two years. We’re always by your side.As a consumer, I think White isn’t aggressive enough (but if his rivals are accepting cost increases and passing them along, his options are limited).
For the past 10 years, our San Jose home has been served by Comcast basic cable at less than $20/month. When we move to our new home, we’ll take the Cox $25/month teaser rate until it expires, and then at that point drop the cable — possibly adding Dish or DirecTV. During the six month period, we also plan to evaluate whether we can get by with over-the-air supplemented by a monthly subscription to Amazon, Hulu, Netflix or Vudu. We may not even need to pay for the latter, as our teen prefers to watch YouTube video clips over 22-minute TV episodes.
So good luck Mr. White. You’re on the right side of history, even if shareholders may not give you the time to see this through. And a word to Jon Stewart, Stephen Colbert and their Viacom masters: be careful what you wish for, because the French people had a lot more freedom after the old order fell.