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I spent a half hour this weekend standing in line at the Comcast office in Pinole California, waiting to return the HD DVR box that my cable TV provider had issued me a couple of years ago. I had stopped using it more than six months ago, but was only getting around to returning it now that Comcast had finally seen fit to bill be $400 for the missing hardware. I’m amused by the coincidence of this event which occurred the same weekend that a fascinating argument broke out online between Mark Cuban and the founder of Boxee, Avner Ronen. Turns out that billing isn’t the only thing the cable people are slow about. The position that Cuban takes about the role that the internet will play in the future consumption of TV content demonstrates a surprising lack of foresight for someone who has a so much history invested in internet content distribution.

I really recommend reading through the exchange that is now reprinted on the Boxee blog, as well as the associated comments. I’ll not reiterate all the points or give deep background on the players here, but suffice it to say: Boxee is a software/service that provides consumers access to streaming video content in different formats, including making it possible to watch that content on your living room TV. Cuban owns a cable TV network and takes the position that Cable providers are better suited to provide consumer access to content than the internet for a myriad of business and technical reasons. 

This would probably have been written off as just a high-level academic discussion about technology and business trends, except for the events surrounding Boxee just a month ago when Hulu was forced by content providers to remove access from the Boxee interface. That incident demonstrates that the TV industry is facing a crisis not unlike that which has overtaken newspapers recently. As with newspapers’ inability to transfer their ad-based business models to the online world, TV is getting a glimpse at a world where consumers, in their desire for more control over their programming, have less need for ‘channels’ to act as a middleman. 

The Hulu/Boxee incident indicates that content providers like NBC and FOX, despite getting their toe wet in the internet waters, have no intention of allowing their traditional distribution model (affiliates, broadcast and cable) to be replaced by an internet-based one that cuts out the middleman and lets consumers pick their own programs. Presumably they don’t think they can make as much money online as they do on the air. Cuban latches on to this very point in his weekend rant when he claims that current internet TV programming is subsidized by broadcast and cable revenue, and that consumers will never pay the actual price it would cost for this programming if the cable money-stream evaporated. 

This argument makes no sense to me whatsoever, and Hulu is a perfect example of it. They show commercials on Hulu programming. Why is my attention less valuable to an advertiser if I’m watching their ad on my TV screen via an internet stream versus a cable line? In many respects it should be more valuable to them since software like Hulu and Boxee make it cumbersome to skip past the commercials which is one of the main services provided by TiVo and other DVRs that companies like Comcast now sell directly. In a grotesque twist of logic, Cuban even leans on the proliferation of DVRs as supporting evidence of the superiority of cable-based distribution.

One of the frustrating stances that Cuban takes, is that consumers don’t want to be exposed to a raw stream of content, and need to rely on the wisdom of cable and network providers to weed the wheat from the chaff. 

“The concept of “users always want choice” really really sounds nice. It makes for a great panel argument. But the reality is that its not true. Ultimate choice requires work. Consumers like to think they have choice, but their consumption habits say they prefer easy.”

I don’t doubt that it’s true that users want ease of use, but he’s using behavior within the current distribution model as a justification for that model. I think the newspaper debacle indicates that users want more control over the content they consume. The fact that he cannot imagine a way that this could be made ‘easy’ just demonstrates a lack of creativity. The internet has shown a unique talent for crafting all kinds of weeding mechaisms for the firehose of content that is out there (hello Digg, Twitter). Furthermore, I seem to remember that the music industry made this same argument ten years ago. How’d that work out for them? I don’t know about you, but I’m consuming a wider range of better music now than when I was dependant on FM radio for exposure.

One of the main gripes that many have about the current system is that Cable service sucks because I have to pay to subsidize 400 channels of crap I don’t watch, just to get the 5 I do. This is the very reason I dumped Cable TV six months ago in favor of an over the air HD antenna and Apple TV. In response to this position, Cuban offers perhaps his least compelling argument. It goes something like this: As consumers, we would never stand for al a cart internet service, so we would likewise never stand for al a cart TV service. 

“I only go to maybe 10 sites regularly. I get RSS feeds for another 50. Why should I have to pay for the resources required to provide access to the other 10zillion sites that consume resources ? Why shouldn’t I only pay for the 10 I go to ?”

“If al a Carte is the way of the future, then it should apply to the internet as well, right ?No one wants to pay the cost of the websites they don’t use, or the bandwidth they dont consume, right ?”

The reason this makes no sense also exposes the bias of his thinking. He is comparing ‘internet service’ with ‘tv service’. I have no doubt that cable guys think the product they are selling is ‘tv service’. But the fact is, consumers are not buying ‘tv service’. They are buying ‘tv shows’. And it makes no sense to compare the sale of finite products to a service. Consumers never talk about ‘movie services’ or ‘news services’. They buy ‘movies’ and buy ‘news’. This shows that Cuban is concerned about what is good for his business, not consumers. 

In his follow-up post on the matter, Cuban sort of makes this point himself and in doing I find I must regretfully agree. I think what he is saying is that internet people tend to be blinded by the idealized future that their technology promises and forget that there are many additional factors that will shape how things ultimately play out. I posted this response on his blog:

“We should never underestimate the ability of business to suppress technological advancement or deny consumers what they want in the name of protecting their own entrenched revenue models.”

Today, I see that others are weighing in. Notably this guy comes to Cuban’s defense by basically saying that ads can’t work in an al a cart system because advertisers rely on random spill over attention from lazy  channel surfers. If that is the backbone of the industry, then they are just as doomed as the newspapers are. Advertisers have to get much smarter about what they do because if the internet excels at anything it’s punishing inefficiency.

I think this quote from one of Ronen’s responses sums it up well:

“i would love for my Cable/Telco providers to focus on being great network providers rather than try to decide what content i should or should not have access to, what application i should or should not run, invent new standards for Interactive TV, Enhanced TV, whatever TV. all with the goal of trying to maintain control, so they don’t lose a grip of their lucrative business model.”

I’ll go one further. I think the newspapers are suffering from a lack of foresight and creativity very similar to what we are starting to see from the cable industry. I wish some entrepreneur would start a new telco called ‘Dumb Pipe, Inc’ focus on great service, and get out of the content business all together. That’s the kind of business I might wait in line for.

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  1. […] are reeling, the recording industry has succumbed to the inevitable, and TV providers are getting nervous. Likewise, the industries that rely on gaming consumer attention, namely Advertising and PR, are […]

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