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Cable fights to stay relevant in online world

Executives from cable operators and video programmers say they plan to stay competitive by offering more content on more devices. But can they work out their business models to make that happen?

Executives from cable companies and programmers at the NCTA's Cable Show in Chicago sit down for a chat with FOX Business Network anchor Liz Claman.
Marguerite Reardon/CNET

CHICAGO--Cable operators and executives from their video content providers say they're doing all they can to avoid falling into the same trap as the music industry.

That's why executives from three of the largest cable operators in the U.S.--Comcast, Time Warner Cable, and Cox--along with some heavy hitters from the content business--Time Warner, News Corp. and Viacom--took the stage today to explain how they're embracing online technology. In a panel discussion here on the first day of the National Cable & Telecommunications Association's Cable Show led by Liz Claman, FOX Business Network anchor, the executives made their case for how they plan to keep cable services relevant to consumers.

"We need to embrace all of the screens," said Glenn Britt, CEO of Time Warner Cable. "There's no such thing as a TV anymore."

While most of the execs agree that they want to provide more programming on more devices, they disagree how to make money from it.

Staying profitable
Time Warner CEO Jeff Bewkes, who has been at the forefront of the "TV Everywhere" initiative, believes programming should be free.

"Put the TV on all the Internet devices, don't change the business model and don't charge people to do it."

But other content execs were less willing to say that the content should be made available on any device for free. Viacom CEO Philippe Dauman and News Corp. COO Chase Carey were cautious about how to approach the business model.

Carey said it was important to offer programming on various devices, but he said delivering content anywhere isn't free. And he emphasized that consumers are willing to pay for content. Specifically, he believes that consumers should have to pay for streaming content delivered to the Apple iPad and other tablets. "The consumer is willing to pay for something that excites them," he said.

But Carey also admitted that it may be taking the industry too long to figure out the business model.

"We've talked about authentication for two years and we're still talking," he said. "We have to recognize others are doing things and we're held up."

But he said that there does need to be a structure in place to ensure that content owners and rights holders still get paid. He said that it couldn't be the "wild West."

"We've got to put the content out there on demand on any device," he said. "And we've got to make it a good interface."
--Time Warner CEO Jeff Bewkes

"We create content. That's what we do," he said. "We've got to work with distributors to create content in new and interesting ways. We have to work on agreements and how it's exploited and deployed, according to agreements we have in play."

FOX Business Network anchor Claman, who was moderating the session, suggested that cable may find itself in the same place as the music industry if cable operators and programmers don't work these business issues out in a timely fashion. But Bewkes said that won't happen.

"This is not the music industry this is the cable industry," he said.

Bewkes said the main difference is that cable has built the infrastructure on which its future competitors deliver video. Aside from owning and creating an innovative infrastructure, he said that cable has also been creating the best quality video content available. The next challenge for the industry is make that content accessible to consumers in the way they want to view it.

"We've got to put the content out there on demand on any device," he said. "And we've got to make it a good interface."

New competitors
Bewkes suggested that it may not be Netflix and other online video distribution channels that cable needs to fear, but technology companies such as Apple and Google.

"(Consumers) need to have the same control and feeling they have with Internet devices for our content," he said.

Comcast President Neil Smit seemed to agree. He said that what consumers really want is to get the content on handheld devices. He said that the number of customers who get rid of cable subscriptions for video service they can get over a broadband connection is so small, the company can't really measure it.

But he suggested that the ones who may be cutting the cord, are the ones who are looking to access content in a way that the cable operators aren't enabling yet.

"Let's never give our customer a reason to cord cut," he said. "Whether it's an iPad or TV screen or mobile, let's let them view it the way they want to view it."

Along with Time Warner, Comcast has also been at the forefront of the TV Everywhere initiative. The company was one of the first to offer an iPad app for streaming live video throughout the house. And earlier today it announced a partnership with Skype to deliver home video conferencing to TVs. The company also plans to use new gear from Motorola to provide other in-home video streaming to other Wi-Fi enabled devices.

Smit added that Comcast sees a lot of its mobile customers using its app to do things such as manage their DVRs or use their iPads as TV remotes.

Still, there is a question of affordability. Cable operators have blamed the big losses in TV subscribers during the recession to the economy. And with services, such as Netflix, Hulu, and Amazon on Demand offered at much cheaper subscription rates, it could potentially be a competitor for consumers who are not willing or able to pay the hefty price of cable TV service.

Time Warner's Britt said operators should offer cheaper basic cable packages to address this market. Time Warner has already been testing a scaled-back and less expensive package in certain markets called "TV Essentials."

"There clearly is a growing underclass of consumers that can't afford (cable service) and they want it," he said.

Cox Communications President Pat Esser also said he is concerned about the segment of the U.S. population that can't afford cable.

"While the cost of service has increased, there are segments of the population where disposable income has remained flat," he said. "We have to be sensitive to this."