Let Them Bleed
Tech wants to recreate television. Again. Hollywood wants to wait. Again. And so we’ll wait. Again.
Ever since it has been clear that the cable bundle is diminishing in power, the powers that be in tech have been champing at the bit to convince the media guys to join up to create a new world order. Most notably, this has included Apple because they’re the ones who did this for the music industry in the midst of the Napster revolution. While the song is not exactly the same, it’s similar enough, and so that’s exactly how they sing it to Hollywood.
And yet. Here we are almost seven years after Steve Jobs’ “I finally cracked it” line in his biography. Nothing about television is “cracked” except the post-cable distribution model. We’re all now subscribing to “skinny” bundle after skinny bundle in order to get what we want. Which is less than what we had.
The latest tech player to make a move only to be rejected by the media players is Amazon. From a report by Jessica Toonkel and Lisa Richwine for Reuters about the stalled talks to create a more robust “Amazon TV” service:
The world’s largest online retailer has also been unable to convince key broadcast and basic cable networks to break with decades-old business models and join its a la carte Amazon Channels service, the sources said and has backed away from talks with them.
If this sounds familiar, it’s because we’ve read this story about Google, Microsoft, Verizon, and again, Apple — multiple times — over the years. And that’s just to name a few of the players here. Tech goes in arrogant. Hollywood goes in stubborn. And both sides emerge at an impasse.
Sources familiar with the talks said Amazon has run up against the same obstacle that has stymied firms such as Apple and Verizon in their efforts to launch TV services: the traditional cable bundle.
Twenty-First Century Fox, Viacom, and other media firms typically require cable companies or other partners to take their weaker channels along with their stronger ones, to prevent the weaker ones withering on the vine.
Amazon did not want to do that. It also asked networks for provisions that are foreign to the entertainment business, including discounts based on the volume of subscribers it brings in. “That might be standard in selling, but it is not how it works with content,” said one industry source.
In a few months, another tech player will try, or one of those ones mentioned above will try again. Here, the song will remain the same. They will fail.
Because that’s clearly the strategy here. It’s right there in the Reuters piece:
The Seattle-based company, known for taking a long-term view of businesses, is willing to wait, sources told Reuters. It is working on the assumption that as pay-TV subscriptions decline over time, more TV networks will be tempted to go direct to consumers online and therefore be available for Amazon Channels, they said.
In other words, all of the tech players are willing to let the media players bleed until they pass out and absolutely need saving, just like the music industry in the early 2000s.
And to be honest, the strategy will probably work — to an extent.
The problem is that there are now so many players on the tech side that have gotten really, really good at this, and know exactly what they want and can afford to pay for it. iTunes, despite its name, is a good video distribution channel. YouTube TV is very well done. Amazon’s Prime Video is going through a bit of a rough patch, but still has some good content — with more coming. Ditto Hulu. And the king remains Netflix — which seemingly does not want to get into more “traditional” television — but we’ll see down the road…
And so if and when the powers that be in Hollywood realize that the cable bundle is over,¹ there will be this crazy new arms race amongst the tech folks to recreate the bundle.
That’s undoubtedly good — well, better — news for the media folks, since they’ll have more than one suitor to bail them out. But it’s unclear what it will mean for consumers. Is it just the skinny bundle problem we’re now seeing, but on steroids? Or will you truly be able to choose between Apple, Amazon, Google, etc to get what you want, because they’ll all have the same stuff?
There’s almost no way that latter pipe dream will be true. Again, the tech players have gotten pretty good at this. They’re all — even Apple — realizing they need to have they’re own, differentiated content to contend for the future. They also could, and probably will move to differentiate via hardware as well.² The new cable box, if you will.³ But content is and will remain king.
It’s also not clear how long all of this will take. Cable subscriptions continue to plunge, but because it’s such a unique — and uniquely good — method of advertising, the rates keep rising, postponing the demise. So I fear our skinny bundles nightmare will become our big bundles nightmare — and worse, it will happen ever so slowly as big media bleeds out before it sells out.
¹ Or, at least, realize that it’s now just a sports bundle.
² Apple TV/HomePod, Chromecast/Google Home, Echo/Alexa, etc
³ By the way, to state the obvious, they all have a lot of money. Far more than any of the media players have ever had.
