Lee Aase | Social Media University, Global (SMUG)

The End of Cable TV as We Know It?

Cable TV companies resist a la carte offerings of channels because they want subscribers to buy tiers of service. If we could opt to receive only the dozen or so channels we regularly watch and not pay for others, that would be good for us as consumers, but not for the cable companies or the cable networks. They would rather have a smaller charge spread over the mass of subscribers instead of a higher charge for those who really want a particular channel.

So even if I don’t want my MTV, I still have to pay for it.

Interestingly, as the New York Times reports, the cable companies use the opposite logic to avoid adding the Big Ten network and other sports networks to their basic service or even extended basic. They want to add a separate sports tier that only the hard-core sports fans will get. They don’t want to pass along the dollar-per-subscriber the Big Ten network is demanding, for instance, to every subscriber’s cable bill.

The reality, though, is the cable companies don’t want to pay the $1/subscriber. If it was 25 cents per subscriber instead, they would signing all of us up for it.

But whether they like it or not, a la carte is coming. Joost, for example, has been heralded as providing a way for users to share super high-quality video, and as people see that they can get access to most of the video they want simply through their broadband internet, they will be increasingly likely to dump cable altogether and just get their video through the web. Instead of being limited to several dozen or even a few hundred channels, consumers will have literally unlimited choices for video viewing.

In the future, instead of buying internet service as an add-on for your cable TV service, you’ll just have high-speed internet, and cable as we know it today won’t matter much. It isn’t that cable TV companies will all go bankrupt, but their business model will have to change.

And it’s interesting that even Joost, which has such disruptive potential for cable TV, may itself be facing disruptive competition before it even gets out of beta. TechCruch had an interesting post Friday, entitled The Clock is Ticking for Joost. When Flash 9 becomes widely available, the quality of all web video will double, reducing the advantage Joost has today. And users won’t need a special software player to receive this quality: it will be available through an ordinary web browser.

This all will work really well for pre-recorded programs, but what about the cable news networks and live sports? I think what’s most likely is some people will subscribe to the news and sports networks they want (like mlb.com, nfl.com, nba.com) and get the video streamed over the web. They’ll get rid of their cable TV altogether, much as families like mine have abandoned their landlines for phone service.

This in turn will put pressure on the cable companies that the federal regulators haven’t. Faced with the reality that consumers do have choices of how to get their video (since they could use DSL or satellite dish to get their broadband), the cable companies will eventually open up to a la carte.

What do you think? How long will it be before the reality of broadband video access forces cable TV companies to allow subscribers to pick which channels and networks they want? If you have cable TV now, what’s the one channel or type of programming you can’t do without? What’s keeping you a cable subscriber?

Technorati: Joost, cable TV, DSL, web video, Flash 9, Big Ten network

What technology will disrupt your industry?

Businessweek outlines the problems facing the music industry, and some potential industry responses, in an article published online yesterday.

The Internet has wreaked all sorts of havoc on the traditional recorded-music model. For decades labels have been signing bands, paying for their first record and video, moving the music to radio and retailers, organizing concert tours, and helping to peddle merchandise. But for many fans and artists, that model has become grossly anachronistic. If the music is flowing digitally, why allow a corporation to get between an artist and the audience? “It’s a new world now, and people are thinking of new ways to reach the people, and that’s always been my aim,” said Paul McCartney in March, 2007, when he joined Starbucks’ (SBUX) new music label, HearMusic, ditching his longtime home at EMI.

It doesn’t help that the same companies have been antagonizing music consumers for years with pricey CDs, rights-management restrictions, and file-sharing lawsuits. “They can’t even make a product you can open,” says Brandon Kessler, founder of Messenger Records, a small New York City label. “Can you imagine going to the store and buying a carton of milk you can’t get open? It’s infuriating. There’s such a lack of knowledge of their customer.”

As I said earlier this week, the record companies do have some strengths, which the Businessweek article also outlines:

Despite the challenges, record labels still perform some tasks extremely well. The Big Four turn out recordings that are technically pristine, meeting the exacting standards of radio, television, and film that are out of reach for most kids with computers. The labels also can transport these CDs worldwide, stock them at retailers, market them reasonably effectively, organize concert tours, and manage various business functions for artists under contract. “They’re very good at selling a Bruce Springsteen album and getting it everywhere at once,” says Dale Anderson, a Buffalo [N.Y.] journalist who produced independent folk singer Ani DiFranco’s first two records.

But clearly the CD market is in decline, and it’s just good to see that some at least among the Big Four are recognizing that and looking for other ways to replace the revenue that will inevitably go away as digital distribution becomes the norm. Read the rest of the Businessweek article to see some of the strategies they’re considering.

Then think about your industry. The RIAA has been roundly and rightly criticized for being slow to recognize how its world was changing. What’s happening in your industry that could be as disruptive as digital distribution has been for the music industry? And what are you doing to not just respond, but to proactively participate in shaping your industry’s future?

Update: see the news about Madonna and her non-traditional distribution/promotion deal here. More competition for the record industry.

Technorati: Music, Businessweek, EMI, CD, RIAA

Priceline Music

Sometimes the juxtaposition of news events is, as one of the major credit card companies says, “Priceless.” This is one of those times.

In TechCrunch, Erick Schonfeld put it well when he said “Court Victory for Music Labels Won’t Save Their Industry” in regard to the RIAA winning its first copyright infringement case to go to trial, and getting a $220,000 jury verdict against a Minnesota woman.

Over the past four years, the RIAA has sued 26,000 of its customers, but it won’t get the same windfall from all of those cases, since most settle for about $4,000. This was the first to go to trial. So the verdict (if it is not reduced on appeal) sets an important precedent. All the music industry needs to do now is win another 52,000 lawsuits with the same size penalty to match its revenues of $11.5 billion last year.

Someone should create some software for the RIAA that automates the serving of subpoenas, because they really have to step up their efforts if they want to save their industry. Or, the industry can spend its time and money trying to find new business models that encourage and profit from the way people actually listen to music today—on their ipods, streaming from the Web, shared among friends and peers. As music goes digital, it becomes more fungible. People are going to do with it what they want because they can. The law may be on the RIAA’s side, but the market is against it.

But while the RIAA anchors its hopes on the deterrent effect of lawsuits, recording artists are dropping the record labels like, well, an anchor. Two days after Schonfeld’s post, the UK Sunday Times Online reported that Radiohead had developed a Priceline-esque “name your own price” model for its newest album.

Having waited four years for their heroes to finish another record, Radiohead fans were understandably excited last week to learn that the band’s seventh album, In Rainbows, will finally be released on Wednesday. But what really rocked the fanbase – and heightened the air of gloom enveloping the global record industry – was the news that In Rainbows could be preordered and downloaded perfectly legally for as little as 1p at Radio-head.com.

Currently out of contract and thus entitled to dispose of their recordings as they see fit, one of the most popular bands in the world had decided to let the fans decide how much their latest album was worth. An MP3 file of In Rainbows would have no price tag. Honesty boxes, it seemed, were the new rock’n’roll.

And the very next day TechCrunch reported that the record industry’s coffin is being sealed Nine Inch Nails.

Nine Inch Nail’s Trent Reznor wrote on the NIN site that the writing is on the wall for the traditional music distribution model, saying that the music business has radically mutated from one thing to something inherently very different today and that “it gives me great pleasure to be able to finally have a direct relationship with the audience as i see fit and appropriate.”

As the incremental cost of providing the goods or services approaches zero, free can actually be a compelling business model. Especially if the fixed costs aren’t that high.

That’s why bands are ditching the record labels’ scarcity model and going for a more direct relationship with their fans. Once they’ve recorded a song and converted to mp3, the cost of letting people download it is almost zero. So they can put their fans on the honor system with a “name your own price” proposition. And that way, they create more goodwill and find more fans, because the promotional value of having their songs widely distributed far outweighs what they can get by restricting access and attempting to charge premium prices.

It’s much better to attract bigger crowds for concert, to sell more souvenir T-shirts and otherwise profit from an expanding fan base.

The music label model worked when fans had few options for hearing new music (FCC-limited radio station licenses.) Now, with the web enabling anyone to distribute music directly to consumers, the value added by the labels is declining. Sure, they have promotional power, just as the mainstream media do. Both mainstream media and music labels are still the biggest things going. Most artists would love to have a recording contract with a label, and mainstream media enable you to reach a mass audience to which only the most contagious viral phenomena can spread.

But just as the mainstream media have lost their oligopoly and therefore are seeing continual declines in audience and circulation, so will the music labels see their market share dwindle in the new world of democratized media.
Technorati: Nine Inch Nails, RIAA, music, music labels, Radiohead, Priceline

Fred Vogelstein Facebook Essay in LA Times

Fred Vogelstein of Wired magazine has an interesting essay on Facebook in yesterday’s Los Angeles Times. Here’s an excerpt:

You can’t change the look and feel of your Facebook page as much as you can on MySpace, but since May you can do something much cooler: choose from a giant list of free, non-Facebook-produced programs that will run inside your page the same way Microsoft Word and Excel run on your PC. There are more than 5,000 to choose from. Zuckerberg and Facebook don’t have to anticipate all the things Facebook users want to do with their pages, but instead will let them bubble up from the global marketplace of ideas. Two of the most popular — iLike and Movies — allow users to know what music, concerts and movies their friends like best. Another, Causes, makes it easy to tell your friends the causes you care most about and solicit donations.

It all sounds way too complicated for mortals to understand until you hear Zuckerberg explain it. Boiled down, it goes like this: Humans get their information from two places — from mainstream media or some other centralized organization such as a church, and from their network of family, friends, neighbors and colleagues. We’ve already digitized the first. Almost every news organization has a website now. What Zuckerberg is trying to do with Facebook is digitize the second.

Think about what this means. Right now, the interactions among friends, neighbors and colleagues — a.k.a. word of mouth — is still analog. You go to a cocktail party, and a friend tells you about this incredible pediatrician he’s found. You ask a few other friends to confirm that data and eventually two things happen: You switch doctors, and the physician becomes a favorite in town. Now imagine that information automatically pushed out to all your friends, tested, verified and returned to you in 24 hours, and you have Zuckerberg’s vision for Facebook.

You can read the whole essay here. I think Vogelstein does a great job of capturing the essence of why Facebook is a landmark application. There have been other social networking sites, but Facebook’s combination of (mostly) true identities and an open platform upon which third parties can contribute applications is something completely new. Of course not all of the 5,000+ applications are useful. Some are just silly. But just as Windows has both Solitaire and Minesweeper (or so I’m told) as well as productivity applications, so with Facebook’s platform.

I will grant that most of Facebook’s applications to date have not been industrial strength or business focused. But as the user base continues to grow and spread like E. Coli on Topps Meat (but with much lower toxicity), and as the promised grouping of friends into different levels of familiarity (personal vs. professional vs. family) becomes a reality, the business applications of Facebook will become powerful indeed.

Hat tip: Mari Smith via (you guessed it) Facebook.

Technorati: Facebook, Fred Vogelstein, Wired, Social Networking, MySpace, Zuckerberg