Opinions

The War We Started Is Heating Up

Posted by Matt Rosenberg on October 19th, 2010 at 11:22 am

This weekend, Fox stations began to disappear from the NY-based Cablevision system, which provides service to about 3 million homes. The rhetoric is about News Corp’s greed or about Cablevision’s unwillingness to fairly compensate News Corp for the value of their programming. That’s the battle, but not the war.

We are seeing more and more disputes between cable operators and networks over carriage fees. The reason for this is that ad-supported networks are preparing for the day when they can’t support the cost of programming through ad revenue. In fact, they already rely on carriage fees. But as more and more viewers look at cable only as a pipe filled with shows and live viewing dwindles, the audience is skipping the ads. As advertisers realize that so many of the impressions they are buying are being delivered but not seen, the advertising income line on a network’s balance sheet will soften. That loss will need to be made up somewhere else, and the most obvious else is carriage fees.

We have been studying the audience that is removing itself from interruptive advertising’s reach and it is a very large audience. They aren’t cutting the cord because the cord brings them the shows they want. But the DVR and the various streaming sources and non-television platforms allows them to watch 4 hours of shows in 3 hours by skipping the commercials. Very efficient. Good news for the cable providers, bad news for the ad-supported networks.

Look for these battles to become more frequent, but the war is over what bucket of money pays for the programming that comes through the pipe. The viewer started this war, so while we may feel like innocent victims when we can't watch the MLB Playoffs or the Oscars we have to acknowledge that this is a war of our making if not our fighting. Perhaps another way to support programming will emerge. A la cart cable subscriptions, micro-payments for shows... who knows? But at the end of it we will likely have fewer commercials in our lives but higher out of pocket fees if we want that pipe. And if we get off the pipe entirely and there's no more revenue from either ads or carriage fees supporting the programming, then "what's on" will change drastically. We started the war and we will finance it too, one way or another.

Leave a comment