On The Mounting Problems for Cable Networks

Yesterday, news came out via Les Moonves, CEO of CBS, that CBS had recently turned down a streaming television offer from Apple due to a proposed ad revenue split model. Considering the (recently renewed) speculation regarding an Apple television, Moonves' statement suggests that Apple may be in the process of negotiating deals with large television networks (Google appears to be doing the same thing, albeit in a different manner).

Faced with the rising popularity of streaming media, large cable networks are characterized as the vanguards of a broken system. Based on antiquated technology, and aging business models, cable companies seem content with vacuuming up consumer money, while doing little to modernize their products. It would be wholeheartedly foolish to think the modern consumer is not wising up to this fact.

As such, Moonves' nonchalant admission that CBS had turned down an offer based on the ad split appears remarkably shortsighted. If Steve Jobs did, in fact, crack the television question, then given the opportunity to be aboard as the next technology turn arrives, it would seem reasonable to consider it rather seriously. If your industry is going to be disrupted in a very high profile way, would you not want to be shown as the forward-thinking network that cooperated, and facilitated the change, or would you be happy being shown as the stubborn, elderly person in the corner? Given the amount of excitement over an as-yet-unannounced Apple product, the atmosphere is reminiscent of the months leading up to the iPad's launch. Of course many dismissed the iPad as being non-threatening to their business, but look where we are now. 

The tide is turning on cable networks. As I've written before, Netflix is likely to bounce back from its irrefutably awful summer, Hulu is growing, and similar competitors are appearing on the horizon. The streaming model works. Once you've experienced the joy of watching what you want, when you want, it's difficult to go back to regular television consumption. And yet, here we are, listening to another CEO stick his fingers in his ears and hope to God his business stays on track.

In a very timely announcement, several hours after Moonves', Louis C.K. -- the American comedian -- announced that his next standup show would be available exclusively on his website for $5, avoiding any cable fees. When asked his motive for this shift in strategy, Mr. C.K. had this to say:

Why should I go through a cable network when I can just give it directly to the people who want to see it? It’s so much easier, and it’s an interesting experiment.

While he goes on to critique Netflix and iTunes, his argument aimed at cable networks is poignant. Hampered by politics, allegiances, and general bureaucracy, cable networks have hamstrung themselves into an inability to make quick, marketable decisions.

You can control your DVR with your tablet? Wonderful. That's not to say your cable network has modernized -- it has simply added an extra interface for an overpriced service in order to appease the average user. This method will not work for too much longer, and if members of the media, such as Mr. C.K., are willing to align themselves with the consumer, the fall of cable networks (as we know them) may come far sooner than you think.