Is Apple's new e-book store a model for the television industry?
It is clear the existing TV arrangement, under which cable operators sell packages of channels on behalf of media companies, is fraying. Fights between the two sides over subscription fees are escalating—another such dust-up looms this year when Time Warner Cable's distribution agreement with Walt Disney's channels, including ABC and ESPN, comes up for renewal. Time Warner Cable CEO Glenn Britt noted last month that consumers were dissatisfied with the structure of cable-TV packages. He suggested operators and TV networks need to "offer a variety of packages, some of which might be slightly smaller." But a better approach might be for cable operators to get out of the business of packaging channels and simply sell access to their pipes, letting network owners market their programming directly to consumers. That is essentially how Apple's iPad bookstore will operate, as a storefront for book publishers to sell their books. Apple will take a 30% cut. It may be awhile before other media companies are as adventurous. Most generate big revenues from the fees they charge cable and satellite operators to carry their programming, including little-watched channels. A recent industry initiative to offer cable programming on the Internet is restricted to people who have a video subscription. But the current business model relies on forcing consumers to pay for large packages of channels, not all of which they necessarily want. Nielsen estimates households watched only 18 channels on average in 2008, out of the 130 they receive. SNL Kagan estimates monthly cable bills average $73, including premium channels.
