NYC and Philly Held Hostage, Day 13
The siege between News Corp and Cablevision drags through its second week. With New York and Philadelphia not getting their local Fox stations and in New York's case, their News Corp owned MyTV affiliate as well, the two media titans are slugging it out in a fashion that would make the Transformers in full metorpolitan destruction mode cringe. Sadder still, the havoc their battle is wreaking on viewers damages their brand in ways that at least one of them cannot sustain.
At stake tonight is Game 1 of the World Series, scheduled for Fox and likely to be unavailable to Cablevision subscribers in the metropolitan areas of New York and Philadelphia. The issue would be at a fever pitch if the Yankees and Phillies advanced to the Series, which I suspect was the leverage Fox wanted to use to gain concessions from Cablevision.
Cablevision, however, is hardly in a position to hold out on programming to its subscribers. They lack the brand loyalty that programming on Fox has earned. Viewers recognize this. Witness the fury of soon to be former Cablevision subscriber Joe Pawlikowski, Baseball writer and media watcher extraordinaire:
Tweet 1: "Cablevision is forcing customers to pay for channels they are not receiving. How do they expect to keep customers?"
Tweet 2: "If I don't have Fox by Wednesday night I am dumping Cablevision."
Tweet 3: "I will also encourage everyone I know to switch off Cablevision. There is no reason for consumers to be treated this way."
Joe makes a very good point. In their quest to win, Cablevision is damaging their brand in horrible ways. Fox is insulated from this in many ways by exposing the fundamental flaw of the current method of television delivery. Viewers want the product that Fox provides, they don't care much about the company that serves to deliver the product. That reality alone makes Cablevision's position entirely untenable and explains their eagerness for remediation.
Fox understands their customers are their advertisers, not their viewers. Television programming is a by-product of advertising distribution. As such, garnering more fees from their distribution is merely revenue enhancement and business diversification. As long as their programming can draw viewers, their advertisers won't flinch, even with the temporary loss of parts of markets like Philadelphia and New York.
The programming still draws viewers. Baseball fans like Joe and I may not like Joe Buck and Tim McCarver calling baseball games, but we like baseball games, and these games are the most important games of the year. So we watch. The product, even with its flaws still accommodates our yen for the greatest game played. Similarly, shows like Glee, Fringe and American Idol when it returns have strong audiences. And then there is the NFL, the 600 pound gorilla in the room.
Cablevision by contrast provides a service. They deliver Fox' programming to people's homes. People don't like buying services. They prefer buying results. If they contract a company to deliver television programming, it better do so. Cablevision's value added is convenience. And when their actions prove inconvenient, their viewers seek alternatives.
For many years, when cable companies operated as monopolies, the alternatives were few. While they need not compete with other local cable companies, they do deal with competition from telecommunications providers like AT&T (and their U-verse service) and Verizon (FIOS) as well as Satellite companies like DirecTV and Dish Network.
More worrisome for cable companies is the potential for disintermediation via the Internet. MLB.tv was the first instance of a league selling broadcasts direct to fans. Sites like Hulu (co-owned by News Corp and NBC Universal) can deliver television programming direct to consumers bypassing the cable companies and their competitors. In addition Apple, Netflix and Amazon offer streaming options that can be viewed with set top boxes or video game systems. Roku's set-top boxes which stream Netflix, Amazon as well as MLB.tv, will soon add Hulu, and the full disintermediation will have begun.
As a result of the weakness of their position, Cablevision holds out hope that mediation will settle the issue. Fox, for its part, has no desire to seek mediation, as a mediator will force both parties to accept concessions, concessions Fox feels they need not make.
This move by Fox to gain a greater piece of subscriber fees is geared towards using the cable companies to finance building an infrastructure to go direct. By continuing this fight, Cablevision is antagonizing their suppliers and their customers. Never a particularly good recipe for staying in business.
Using sporting events -- especially the World Series -- to gain leverage shows how little Fox actually needs any cable company. The delivery of sporting events to consumers will be transformed in the next decade. This is but the first skirmish in what will prove to be a technological revolution.
Joe Tetreault is Managing Editor of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He can be contacted here through The Biz of Baseball
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