Cable guys do a poker tell: closed distribution is dead

Back in the dark ages of video, content owners could only get access to viewers through broadcasters and cable operators. With pervasive broadband, mass distribution is available to anyone with the ability to buy bandwidth, and the wholesale cost of bandwidth continues to fall with each passing day.

Time Warner’s poker tell came when it ditched its cable company. Sure the cable company controls the last mile for access, but the company had grossly overpaid based on obsolete subscriber TV models. All the company really needs to reach viewers via broadband is access to a content delivery provider, who can scale immediately to fit its needs. No investment in infrastructure required. And with broadband distribution it can reach a larger cusotmer base - with no additonal up front investment.

Comcast has signaled that it too has seen the future in acquiring majority stake in NBC Universal. It seems that the Comcastic crew knows that time’s up for doing business with bundles of channels delivered to proprietary boxes.

Comcast Corp. is buying control of NBC Universal from GE largely because Comcast wants to own more movies and TV shows. The point is to give it a position of strength if fewer people sign up for its cable TV services and watch more video online.

It’s
understandable why the strategy might seem dubious: Another media
company, Time Warner Inc., just gave up on that and spun off its cable
TV division.

Yet while Comcast seems to be taking a different approach — marrying entertainment content with the largest cable TV system in the nation — it and Time Warner have arrived at the same conclusion: The future is in content, and the pipes that carry it matter less.

That’s why Time Warner could jettison the business of selling subscription TV service and focus on the Warner Bros. movie studio, cable channels such as CNN and HBO and magazines such as People and Sports Illustrated. (Yahoo)