Wednesday, August 17, 2011

Dumb Pipes -- Maybe Not So Dumb After All?

The brave new world of television and movie distribution -- across the Internet and direct to your mobile device. Over-the-top (OTT) king-pin Netflix is the new reality's poster child. And, conventional wisdom is that Netflix and others of that ilk (Hulu anyone?) will ultimately push aside the traditional business models and video distribution systems of the cable and satellite giants. That big cable's role in the overall video eco-system will be marginalized. That the cable companies will become nothing more than the broadband "dumb pipes" through which the video content of others will flow.

Sounds pretty scary if you are a major cable company or satellite provider, right?

Well, maybe not so scary after all.

In a fairly remarkable interview with The Wall Street Journal, Time Warner Cable's CEO, Glenn Britt, faced these threats head on and -- surprise, surprise -- calmly focused on the growing strategic importance of its broadband business over its video business. And, get this, he doesn't sound scared at all! He accepts the transformational forces and threats Time Warner faces and sounds almost like he is actually embracing them! "How can this be," you ask? Well, here's the thing -- although Time Warner continues to shed pay TV subscribers (as are essentially all cable companies), it offsets those losses with significant gains in broadband subscribers. After all, you need broadband to enjoy the rich premium video content of others. And, get this -- margins for the broadband biz are BETTER than margins for its pay TV biz ... significantly better! (Ryan Lawler of Gigaom points this out as well -- click here to read.)

So, despite all the understandable sturm and drang voiced by many cable and satellite execs -- and despite ongoing cable-sponsored "TV Everywhere" distribution initiatives to counteract the Netflix-ian threats -- maybe content enablement will ultimately be cable's saving grace.

Maybe ... just maybe ... those "dumb" pipes aren't so dumb after all ...

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