The Latest Weapon in the Cable TV Battle: Local Content

ny1.jpgAs telephone companies move into the territory traditionally occupied by cable TV operators, local content is proving to be a differentiator for attracting and retaining customers.

According to the Wall Street Journal, Verizon Communications plans to launch a TV channel in New York City with local news and information to compete with the local news channels offered by Cablevision Systems and Time Warner Cable:

Both cable and phone companies are vigorously marketing features such as super-fast Web access and on-demand movies. But investing in local-TV programming, replete with news of school closings and community politics, helps distinguish the companies from rivals to boost customer loyalty — or steal away subscribers

As the pipes become a commodity, the value lies in what flows through them. Infrastructure companies become media companies.

The complete article is here:

 

6 thoughts on “The Latest Weapon in the Cable TV Battle: Local Content

  1. More and more I find myself going to the Internet for entertainment (Hulu, Joost, Pandora) and news (infinite RSS/Atom feeds) — probably the only thing I still use cable TV for is sports. For some reason, it’s hard for me to see how this strategy will be effective.

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  2. Thanks for the commentary, Hector.
    In a sense, I think you may be partially agreeing with the main thrust of my post, which is that content is more important than the transmission channel by which it’s delivered. If you’re a fan of, say, “Dollhouse” (just to pick a not-so-random example), you don’t care whether you see it Friday night on the local Fox affiliate, watch it on the weekend on Hulu, or download it from iTunes. It’s the content that interests you.
    Beyond the general “content matters” point, it is interesting to note the type of content that is the focus of these cable TV and telecom providers: live, local news. With these two attributes — local and live — I think they’ve found a sweet spot for cable TV content.
    Local content often gets the short shrift on the Internet. That’s not to say there aren’t many great local sites — there are. But because of its global reach — and the fact that numbers matter for most monetization schemes — the “gravitational pull” of Internet content is toward global audiences. The content may be niche, but because of the Web’s reach you can still garner a significant audience across the globe even for even arcane topics.
    Individual cable TV providers, on the other hand, reach a regional audience. As such, they are ideally suited for locally-focused content.
    Cable TV is also well adapted to present live broadcast content. While there have been a number of notable examples of real-time video over the Web, cable TV is (at present) a better technology for sending live content simultaneously to a large audience.
    This latter will, of course, eventually change. At some point, IP-based networks will be capable of multicasting high quality broadcast streams. Even then, the content is still potentially relevant to cable and telecom providers, since they’re also in the broadband business. But (here’s the rub) it may not be as monetizable.
    Technology aside, there is a key difference in how content is distributed over cable TV and the Internet. With cable TV, the content is typically bound to the distribution channel. Only Time Warner Cable subscribers, for example, receive NY1 programming. On the Internet, by contrast, most content is available to all regardless of the viewer’s ISP. Would it be worthwhile for Time Warner Cable to produce NY1 if Verizon customers could receive it as well?
    Perhaps not. At least not within the current monetization models. But things are changing. Time Warner’s scheme for “TV Everyone” plans to use the Internet to distribute premium cable content (like HBO), but only to HBO subscribers. While others have decried this plan, I’ve argued previously (“Time Warner’s Vision: TV Everywhere“) that this move makes sense for both consumers and content providers.
    Or, who knows, perhaps advertising-supported content on the Web will, by then, be sufficient to support the development of original productions (in a way that it currently isn’t).
    While the future monetization options are uncertain, I think this move to provide live, local content makes sense for cable and telecom providers in the short run. It may also provide additional value over time.

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  3. Hi Kendall,
    Great post. Having grown up with the Internet, I’ve grown accustomed to being a consumer of media in many forms. As you discussed earlier, it’s not about how I see my favorite show, it’s that I see it on my schedule and to my preference. But relating back to Verizon and others entering into the live, local media pool, I don’t think this is a wise move.
    For me, I generally stick to watching a single, local TV news station if I want my local news during a broadcast. While competition might be good for everyone, the local media pools are already saturated with too many choices for mostly the same content. For example, here in Philadelphia, I can choose to watch live, local news on ABC, CBS, NBC, FOX, myPHL, and others. Does Verizon (for example) really need penetration into the pool?
    Comcast provides CN8 which I rarely watched when I had Comcast. Why? It was because I already was used to my sources of live, local media. Since I was already watching the others, I would not know if there was a special program I might be interested (didn’t have a TV guide at the time). Maybe its a form of attachment, but the benefit of moving to a different news outlet didn’t quite appeal.
    I think there is a technological barrier that has existed up until this point in time as well. Live, local media via the Internet hasn’t truly matured up until now. Webcasting solutions and broadband connections haven’t been widely available. I think if a TV provider wanted to get into this market, webcasting and archiving streams might be better. I’d be able to watch it at home, on vacation, wherever and whenever.
    Specifically speaking to your comment and being from the Internet age, it’s interesting to note that my bias sways towards more open media. I would believe that it would be beneficial to have at least some open media. I’m envisioning teasers to get you to subscribe to more premium content or maybe added benefits to the media if you’re a subscriber.
    What do you think? Am I off-base in my thoughts?

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  4. Brian:
    Thanks for the comments. You’ve raised two interesting issues.
    First — now that you mention it — I have to admit that even though Comcast is my cable and broadband provider, I never watch CN8 either. And since I don’t live in New York with Time Warner Cable, I’ve never seen NY1. But I suspect that NY1 may have more interesting content than CN8.
    As a quick spot check, I just turned on CN8 to find… a Tony Robbins infomercial. Not exactly must-see TV. Had I encountered, say, a report about what’s happening this weekend at the Philadelphia Film Festival, I might have lingered longer.
    Like you, I watch the local news on one of the network affiliates, although I find their coverage lacking in both breadth and depth. There may be an opportunity for a competitive offering that provides more than 22 minutes of crime stories, quick weather and traffic updates, and “Baby’s First Birthday.”
    But you may be right. Perhaps this is a fool’s errand on the part of Verizon. Either way, what I found intriguing about the original Wall Street Journal piece is that Verizon — correctly or not — felt compelled introduce a competitive offering to retain customers.
    On your second point — about being able to watch what you want “at home, on vacation, wherever and whenever” — I think you’re on target. For free Internet content — and television and films that have migrated to the Internet (think: Hulu) — this is possible now.
    A more difficult issue is how to enable this type of service for premium content. Netflix, with their “Watch Instantly” service, does this through a subscription fee. In the case of Netflix, the cost doesn’t seem onerous because it’s bundled “for free” with your subscription DVD service.
    As I discussed earlier, Time Warner seems to have a similar scheme for its premium content with their plans for “TV Everywhere.” Although this approach troubles some observers as just another “walled garden” strategy (since you would need to be a subscriber to view the premium content), it strikes me as a much lower wall than the current one — which requires you to be at home connected to your cable service (or buy a Slingbox or similar contraption).
    Over time, more content will become “untethered,” so your access to the content won’t depend on your infrastructure provider. The challenge is how to do this without eroding the monetization necessary to support the production of new content. It would be unfortunate if premium cable programming, feature films, etc. suffered the same fate that newspapers are currently experiencing.

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  5. Interesting observations. In my town (Jackson, Michigan) we have what I believe is the only 100% truly hyper local channel (JTV). They are doing what the large cable companies are trying to do, but JTV has been doing it successfully for nearly 10 years. It appears they are responsible for Comcast having such huge penetration in this market… and Comcast doesn’t even own them. Actually I think Comcast charges them to be on their lineup. AT&T is just coming into this market so it will be interesting to see what happens. JTV streams everything online as well: http://www.jtv.tv I am a big fan of what the are doing and they seem to be the national leader in this new focus on hyper local.

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  6. Erik:
    Very interesting. Thanks.
    Understanding this market is difficult because we each see such a narrow slice of it. My earlier comments about the relative merits of Philadelphia’s CN8 versus New York’s NY1 were, admittedly, based more on supposition than direct observation (which is almost never a good thing).
    It’s great to gain the additional perspective readers like you can provide from other regions of the country.
    Thanks again.

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