Cable Resparks Retail Play, But Cedes Control
While this new approach will give those MSOs a coveted "button" alongside highly recognizable retail content names such as Netflix Inc. (Nasdaq: NFLX), Amazon.com Inc. (Nasdaq: AMZN) and Pandora Media Inc. , the deals announced at last week's International CES represented a tectonic shift in cable's new (and much more CE-friendly) attitude.
For starters, cable starts to take on the look of an app rather than a full-fledged subscription service. And cable no longer controls everything soup-to-nuts in the new model, highlighted last week by Comcast's and TW Cable's arrangements with Samsung Corp. , and TW Cable's additional deal with Sony Corp. (NYSE: SNE). (See CES 2011: Samsung Puts MSOs in the Picture and CES 2011: TW Cable, Sony Make IPTV Connection.)
No longer are TV makers required to bend to the will of the cable industry, sign off on cable-controlled technology licenses, enlist expensive CableCARD interfaces and security modules, and rely on fragmented pools of tru2way middleware.
This more elegant, IP-based way of doing things requires cable to make some important concessions to gain a presence on new broadband-connected TVs, a step that some MSOs appear willing to take now that they are under the threat of over-the-top video services and the budding trend of cord-cutting.
In these new TV-set-centric scenarios, the cable operators no longer own the screen as they do on their set-top boxes. Instead, they are now a logo among a sea of them that represents the content choices supported by these new broadband-fed devices. Click the image below for a brief slideshow on how Samsung and Sony represented the MSO apps in floor demos at last week's show:
While some in cable might consider this loss of control a disadvantage, the strategy offers plenty of upside, too. Instead of being bogged down by archaic, grid-locked IPGs on set-tops that take weeks to change or upgrade, the new approach, which will also creep into new breed of multimedia gateways, lets cable keep everything in the cloud and allow for on-the-fly changes. This tactic will also let MSOs develop and deploy fancier, more-intuitive navigation interfaces such as those that are starting to grace the iPad and, soon, Android-powered tablets such as the Samsung Galaxy Tab.
And this vector to retail gives cable a way to offer both on-demand and live, linear content -- something that Netflix can only hope to do at this point as it gets ready to pay through the nose to get the content it will need to remain competitive long-term.
But, alas, last week's cable-CE partnerships merely scratch the surface on what cable must do if it's to truly become a force at retail. It's playing from behind with Netflix, which has already secured beachheads on dozens of TVs and specialized broadband video devices. Later this year, Netflix will take yet another step by having its own button on a wide range of remote controls. (See Netflix Clicks With Remote Controls.)
If cable's to make a difference, it will have to offer direct-to-consumer IP services and apps on TVs from Panasonic Corp. (NYSE: PC) and Vizio Inc. , among others, and start to make some similar headway with companies such as Roku Inc. , TiVo Inc. (Nasdaq: TIVO) and Boxee . And such deals might actually get done relatively quickly because cable isn't calling all the shots and has some competitive incentive to play nice with others.
But cable will need more than just Comcast and TW Cable to step up. The industry also needs Cablevision Systems Corp. (NYSE: CVC), Cox Communications Inc. and Charter Communications Inc. to play along, too.
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