Should cable operators pay less for content?


bijan:

It’s no secret that cable operators pay billions of dollars to content owners.

NBC gets big bucks from Comcast, Time Warner et al for CNBC and their other cable properties. Even bigger fees goto the king of cable programming - ESPN. Those content owners get a dual revenue stream: subscription fees and ad dollars. That revenue stream from MSOs is what led to the famous line from NBC chief, Jeff Zucker, famous line about moving from analog dollars (cable) to digital pennies (web).

But the reality is that the MSO’s don’t pay those fees out of pocket. They pay a wholesale fee to the content owner. Then they package it up and resell it to the end user.

So in our modern day world where you can get fantastic online, the question is whether this analog model model makes sense anymore or in the near future.

I think great content will always be paid for. But who pays who?

I’ve been having this debate with several business associates for some time. At some point, MSOs won’t keep paying the escalating rates for programming.

Saul Hansell at the NYT highlights this issue in his last column. Here’s the punchline:

Over all, these companies are doing quite well, making more money than ever, with lower capital investment. But if there was one weak spot jumping out of the numbers, it was not their Internet business but their traditional TV service, where the cost of paying for content to put on all those channels is rising faster than subscription fees.

I get all of my financial news from the web. Seeking Alpha, Twitter, Covestor, google finance and the new york times. I get my sports content online as well thanks to the MLB.com, espn, twitter and blogs.

So at what point does Brian Roberts at Comcast tell NBC, “Hey, Jeff, I know you love those analog dollars. We do too. But we can’t pay you that much anymore. Our users are getting financial news elsewhere”.

I think it’s sooner than later.

In that case, content owners need to get there content everywhere and not limit it to a few select points of distribution.

Because the analog business model isn’t going to hold up forever.

(photo from flickr)