February 2010

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.

It was the morning after President Obama's first State of the Union, which typically wouldn't mean much for daytime television shows and their menu of celebrity interviews, cooking tips and fashion segments. But the hosts of the ABC gabfest "The View" had a different agenda: dissecting the president's highly anticipated address. There was a time when talking politics on daytime TV would have been verboten -- too polarizing for the lifestyle shows aimed at stay-at-home moms and other female viewers. But after the vivid partisan wrangling on "The View" during the 2008 presidential race became water-cooler fodder, producers realized they had hit a rich vein. Since then, the show has unflinchingly tackled political issues and, in the process, upended traditional ideas about what women want to watch.

ABC's affiliates are not only in a battle with the network over retransmission fees, but they are also boiling mad that corporate sibling ESPN is being handed live sports events they were initially supposed to carry.

The most recent move came in January when ESPN announced it planned to take eight NASCAR races this fall off ABC for the coming season to run on ESPN. Even before that, though, ABC coughed up the Rose Bowl beginning in 2011 and golf's British Open in 2010 to ESPN, which is majority-owned by Walt Disney, the full owner of ABC. Station executives argued that losing live sports events will not only cost them significant ad revenue and take away a negotiating chip with media buyers, but will also hamper their ability to promote other programming to male audiences. The latter is particularly true among ABC's Southern affiliates, where Nascar viewing is passionate. ESPN has the ability to cherry-pick sports from (or occasionally move sports to) ABC, because in 2006 ESPN in effect took control of ABC Sports. All sports programming on ABC is now produced by "ESPN on ABC," as the onscreen logo reads.

[Commentary] Two unrelated news stories coming out of Iran last week reveal inherent tensions in how authoritarian governments view the Internet.

As the prospect of another wave of anti-government protests - scheduled for February 11 - looms large, it appears that the Iranian authorities decided not to take any risks with new models of Internet censorship. The cable cut in southern Iran has left roughly 30% of the country without access to the Internet. According to Bloomberg News, Moussavi's camp immediately accused Iranian authorities of deliberately obstructing Internet activities of the opposition (ironically, they did it via the Internet - through Moussavi's web-site). This seems like a plausible explanation even to my skeptical eyes: while cutting cables may be more expensive than conventional Internet filtering, but it's certainly more effective (no proxy server can go around cut cables!).

But that's not all: the Guardian reports than an Iranian technology company - owned by the government - has launched the country's first online supermarket. The e-supermarket currently offers 2,500 grocery and household items at competitive prices and operates only in Tehran (also, it wouldn't work on Fridays, the Islamic day of rest). According to the Guardian, the site is launched by Rouyesh Technical Centre, a technology group linked to Jahad-e Daneshgahi, a quasi-state institution that has been heavily promoting a host of other technologies (including cloning) in Iran.

The launch of the online supermarket prompted an interesting reaction from The Next Web blog: "You can't tweet or poke but you can buy fresh tomatoes!" This, I think, does a good job at summarizing the authoritarian approach to the Internet: let users drown in online consumerism and Internet entertainment but prevent them from getting involved in any unsanctioned political activities.