InAppliCable: Legacy Media and Disruptive Technology

Cable systems pay a fee per subscriber for the right to carry channels like ESPN, TBS, TNT, USA Network and many more, on their systems. But does that right extend to putting those channels on iPads?

Time Warner iPad App Prototype

Back on March 15, 2011, TimeWarner Cable introduced an app that allows subscribers to view cable channels on their iPads, workable only with subscribers’ wireless home networking and Internet access. No sooner was that app introduced than some cable channels, including those owned by Fox—like FX, Fox News and Fox Sports—and Scripps—like Food Network and HGTV—ordered TimeWarner to remove them from that app, saying that it was prohibited under their carriage agreements.

Though TimeWarner Cable still, as of this writing, has some three dozen channels on their iPad app, the Los Angeles Times compares the scenario that the cable company is facing to one in which you buy peanut butter from a store, put it in a Tupperware container, refrigerate it, and then have the peanut butter manufacturer tell you that you have to pay extra for doing so.

On the other hand, Cablevision Systems, which is available in parts of the New York City area, created an app that features 300 channels and 2000 video-on-demand titles. Because Cablevision’s app requires wireless home networking but not Internet access, they say their app is covered by existing contracts.

Time Warner Center

Many legacy media, such television content providers and producers, as well as printed material publishers and major record labels, have had this fear of the Internet because it has become what has been described as a “disruptive technology.” Disruptive in many ways, sure, such as the advent of Amazon causing Borders bookstores to close up many of its shops, and Netflix’s success all but causing many Blockbuster Video stores to practically go bust and shut down as that chain is seeking bids on what’s left of it.

It’s also disrupting the revenue models that other legacy media have thrived on. This not only explains the concerns cable channels have about their content being put on iPads, but also why long-standing printed publications like the New York Times and Wall Street Journal have been putting up much of their content behind paywalls.

And the Internet’s presence has also disrupted advertising expenditures, to the point where online advertising, at least in the United States, is now projected to overtake the printed press and become perhaps the second largest category of ad revenues, behind only  television [broadcast, plus cable].  And yet newspapers would still suffer because even the online ad revenues might not be enough to offset losses in print subscriptions, which would still force newspapers to cut staff, reduce printing of copies, use paywalls, or all of the above.

It’s that disruption which prompted now-former NBC executive Jeff Zucker to remark back in 2008 that his company and its contemporaries “can’t trade analog dollars for digital pennies.”  It has often been said businesses which are faced with disruptive technology have to adapt or die, but when businesses that specialize in the production and distribution of TV content decide to block service providers who pay for that content from giving subscribers a new and convenient platform to watch it on, those who want to use such a platform end up losers.

The idea of putting TV content on iPads would have to be a win-win situation for both service and content providers.  It’s only a matter of getting to where it will be that.

Do you think watching TV on an iPad is a good idea, or are you better off watching it the old-fashioned way?