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November 24, 2014
Is It The Beginning Of The End For Cable Or Just A New Beginning?
Posted by KMontgomery

Is It The Beginning Of The End For Cable Or Just A New Beginning?

In mid-October, HBO dropped a bombshell — albeit a long-rumored one — with the news that it would launch a standalone streaming service some time in 2015. The media and Game of Thrones fans everywhere immediately went into overdrive, analyzing every last one of the scarce details to death (What content will be included? How much will it cost? Should I cancel my Netflix subscription?!!).

CBS’s announcement of its own streaming service just a day later, followed by similar news from its flagship entertainment channel, Showtime, only fueled the frenzy and the general feeling that major changes are underway for pay TV.

Naturally, there were plenty of pundits and industry watchers who were quick to declare this latest development the beginning of the end of cable TV as we know it. And while only time will tell exactly how disruptive these services will be, I think it’s premature to sound the death knell. In fact, I see this as far from a catastrophe for cable; it’s a natural next step.

Over the last several years, we’ve seen companies like Netflix and Aereo start to chip away at the traditional cable model, leading to incremental change across the industry. These latest developments are a clear indicator that the pace of change is about to drastically speed up, and what was once a slow-moving evolution is getting a shot in the arm. Here’s a look what some of the ripple effects will be

A Positive for Pay TV 

Contrary to prevailing wisdom, there’s some compelling evidence to suggest that HBO and CBS’s streaming services might actually be a boon for pay TV. As Will Richmond of VideoNuze recently articulated, the simplicity and cost-effectiveness of traditional cable bundles could very well become more attractive to consumers in the face of proliferating streaming services whose fees will start to add up.

What’s more, this could help pave the way for the virtual pay TV services from the likes of Verizon and DISH by helping to raise awareness of other over-the-top (OTT) offerings. Rather than a binary future with cord-cutters on one end and cable subscribers on the other, we can start to see a continuum of behavior take shape, with a middle ground populated by individuals who subscribe to one or two streaming services, along with a lightweight cable package like the one that Comcast rolled out last year.

Intensify M&A Activity

There have already been plenty of deals and rumored deals in the cable industry over the last year or so, and this move is likely to add further fuel to the fire as various players look to consolidate their power.

Cable operators will be keen to strengthen their position going into carriage agreements with HBO, while smaller networks that are unlikely to survive outside of a traditional cable package may look to merge in order to stay viable as the industry moves toward more OTT offerings.

Raises Net-Neutrality Stakes 

Until now, content providers like HBO and CBS haven’t had to give much thought to net neutrality because the Internet wasn’t their primary mode of distribution. Now, however, they have a vested interest in ensuring that their streaming content reaches consumers quickly and smoothly and will likely pressure companies like Comcast and Time Warner to treat all network traffic equally.

Unlikely Bedfellows

By now most of us are familiar with Reed Hastings assertion that Netflix’s goal “is to become HBO faster than HBO can become us.” Now, finally, HBO has taken a huge step down the path that leads in Netflix’s direction, raising the question of what they’ll do to remain competitive, particularly when most would agree that HBO has the far superior content library.

One potential scenario is for Netflix to seek out partnerships with cable providers. Their content is already distributed via traditional cable packages overseas and to subscribers in some very small markets in the US, so now may be the time for them to start forging deals with the bigger players in order to straddle both worlds. (And indeed, they struck a small limited-run deal with Verizon FiOS late last month.)

There’s also reason to think that this may accelerate partnerships between cable operators and other popular streaming services like Hulu Plus and Amazon Prime.

Only time will tell how exactly these new streaming services will affect the TV landscape, but there can be little doubt that there are indeed major changes on the way. Even if HBO’s offering isn’t a success, which I highly doubt, the mere announcement has caught the attention and imagination of every other content provider, each of whom undoubtedly has an OTT blueprint in some stage of development tucked in their back pocket.

The floodgates have been officially opened, and it’s just a waiting game to see what happens next.

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