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Media chiefs confront challenges facing cable TV industry

June 14, 2011 |  1:31 pm

CABLESSHOWS

A sense of urgency surrounds the annual National Cable & Telecommunications Assn. convention in Chicago this week as big media firms grapple with a host of business challenges that threaten their livelihood.

An onslaught of new technologies, devices and digital-content-delivering platforms and the nation's  growing wealth divide are challenging the cable television industry to no longer take for granted customers who shell out $70 to $100 a month for service.

Young consumers, in particular, do not seem to share their parents' affinity for their pricey cable and satellite TV packages, and are increasingly drawn to the Internet and to services including Netflix and Hulu for entertainment.

The health of the cable industry is crucial to the rest of the entertainment pipeline because it is cable and satellite operators who underwrite the high cost of television programming.

While industry leaders tried to put on a brave face, not everyone was buying it. Typically, question-and-answer sessions at industry conventions turn into fan-fests with softball questions, but Tuesday's opening panel, moderated by Fox Business News anchor Liz Claman, had a sharper tone. 

Claman suggested that cable leaders who said they weren't seeing evidence of cord-cutting -- or people who cancel their cable subscriptions in favor of lower-cost Internet options -- sounded a little too much like Wall Street bankers who, in early 2007, didn't believe the failure of a few subprime mortgages would be much of a problem. 

Viacom Chief Executive Philippe Dauman sought to downplay the threat. He said the cable industry not only survived but thrived during the recessions.  Millions of people didn't cancel their cable subscriptions despite stretched incomes, he said, because they regard their pay TV subscriptions as a good value.

"That's the story here," Dauman said.

But Time Warner Cable CEO Glenn Britt was more cautious. 

"There clearly is a growing underclass of people who can't afford the services they want.  It would behoove all of us to work together to meet the needs of that population," Britt said. "Most of the people want everything but not everyone can afford it. The economics of all of us [programmers and operators] make that difficult, and it would serve us well to worry about that group of people."

The audience broke into applause.

Patrick Esser, president of Cox Communications, said an increasing segment -- estimated at 40% of the U.S. population -- no longer have enough extra money, after the cost of food and housing, to continue to pay their rising TV bills.

"We have to be very sensitive that we serve customers," Esser said.  "They either have disposable income or they don't. I worry more about that than cord-cutting -- making sure we have the products and services, and their affordability."

The panel, which also included News Corp. Chief Operating Officer Chase Carey and Time Warner CEO Jeffrey Bewkes, stressed that the industry must figure out ways to support the cost of making entertainment and delivering it to consumers.

"Don't be afraid of your children," Bewkes said. "Put the TV on the Internet devices, and don't change the business model and don't charge people extra. Make it easy for them to use it."

This spring, Time Warner rolled out its HBO Go option for subscribers to watch HBO programming on their iPads and other mobile devices.  Bewkes said such user-friendly experiences were key.

And the cable industry, which also sells broadband Internet service packages, must improve data transfer speeds to deliver high-quality video.

"We really all have to remember this: It is this infrastructure, this industry, that allows for quality audio and visual display of material," Bewkes said. "We ought to keep rolling this out as quickly as we can so the consumers get a seamless adoption of better technological quality and access to what they want, when they want it. It's all in this room."

-- Meg James

Photo: The cable industry invades Chicago: Credit: NCTA.

 

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