July 28, 2010

Live From The Independent Show: What Does ‘Video Is Dead’ Really Mean?

Fasten your seatbelts; it’s going to be a bumpy flight. Some 18 months ago, outspoken analyst Laura Martin of Media Metrics LLC told NCTC/ACA members “capitalism is dead,” and they’re still talking about that panel. This time around, when asked her views regarding how the economic recovery is treating the cable industry, she said, “Video is dead; programmers have destroyed the video business.”

In explanation, she pointed to the amount of free content consumers now can access online. “There are some who think the Internet is a good way to distribute content, but take a look at the music and newspaper industries today,” she said. “If the Internet is a ‘general-purpose’ technology, it will become increasingly disruptive and the video product will be downgraded.” As such, she predicted mobile would drive new growth, and that cable operators should be looking at wireless backhaul and better modems.

Martin also had some harsh advice for any operator in the room considering paying a flat fee for ESPN3: don’t do it. Instead, she suggested, pay the $10 or so per subscriber who really wants to access ESPN’s online content and leave it at that.

She’s pushed the provision of more commercial services to boost new revenues, and she also remains somewhat positive on 3D along with the Comcast/Time Warner Cable’s proposal to make theatricals available on VOD for around $40 within six weeks of opening.

Martin’s partner on the panel, David Joyce of Miller Tabak & Co., wasn’t quite as incendiary, believing the economy isn’t going to get any worse – meaning no double dip – but it isn’t going to get better in a hurry. He countered Martin’s “video is dead” statement by noting video now is “a set of streams. The crux of the business going forward is broadband.”

The two then addressed cable valuations, with Joyce saying public cableco values have been compressed because of regulatory fear and consumer adoption of over-the-top services. Right now, values are at 6.5 times cash flow because of that fear. However, he did note that the credit market has been improving, and he admonished cable operators that are thinking about a sale to “be all digital and get EBIF’d” to get ready for interactive advertising. Home security, he added, is a natural service offshoot for smaller cable providers.

Martin took the recent Cablevision/Bresnan buy to task, saying Cablevision will get its “ass handed to” it in the smaller markets because “it can’t do what (NCTC/ACA members) can do.” She added Cablevision has been operating “in one of the wealthiest communities” in the United States, where subscribers don’t have the financial constraints of most Americans. As such, an expensive bundle won’t sell as well in smaller communities. On the other hand, Joyce said Cablevision was “buying growth” when it picked up Bresnan, and that it truly believes it can replicate the high penetration rates it gets for triple play in the New York area.

- Debra Baker