Tech Beefs Up Outlook for Cable

Apr 11, 2005  •  Post A Comment

Comcast Chief Operating Officer Stephen Burke opened the National Cable & Telecommunications Association’s annual convention last week in San Francisco by urging attendees to be “less focused on making deals and more focused on thinking about the future.”

It probably was appropriate that the show was held in San Francisco, just down the road from the Silicon Valley, because most of those thoughts about the future dealt with ways that cable’s broadband infrastructure could accommodate additional digital applications.

Even after spending $95 billion on upgrading its digital plant, cable faces competition from satellite, phone companies and others. But the industry’s leaders projected a can-do mentality. “Fiber-optics is not going to win, it’s what you do with it,” said Brian Roberts, CEO of Comcast, the largest cable operator. “If we innovate, I think it’s ours to win.”

The industry gathering exuded an upbeat vibe. Some exhibitors called this year’s National Show a comeback show. Though the NCTA did not have final figures, attendance appeared to be up slightly from last year. And with a new, shorter, 21/2-day schedule, traffic on the floor was busy on Monday and livelier than in recent memory on opening day, Sunday, and closing day, Tuesday.

Operators had high hopes for making money on video-on-demand, broadband, IP telephony, networked gaming and other services, with many of the new offerings designed to give consumers more choice over what they watch. “What they want, where they want it and when they want it,” was the mantra, said Jim Robbins, president and CEO of Cox Communications.

But while many of those services create opportunities for media companies, they also provoke worries.

“High definition is a cost, video-on-demand we don’t get paid for, launching new networks is a cost, DVRs annoy our advertisers,” said Peter Chernin, president and chief operating officer of News Corp.

“We are living in a world in which consumers are being given enormous technological gifts, many of which are disruptive to us. They are also being given technological gifts which create enormous opportunities for us,” Mr. Chernin said. “The challenge for any of us in the media business and the strategic challenges are we better find a way to grow the opportunities faster than the disruptions hurt us.”

Eventually, new technologies could be big business, but right now, VOD, for example, doesn’t put any “food on the table,” said Bob Wright, CEO of NBC Universal. “We’ve got a long way to go to get there. We’ve got to agree how we’re going to do it. We have to agree to determine what kind of participation various owners of the content will have and other uses and licenses. It’s probably more complicated than anyone wants to deal with right now. But I think it clearly has a big future.”

`The E-Word’

But as far as cable execs are concerned, the keys to building new digital businesses are execution and user-friendliness.

“That’s the e-word: execution. And we think our business is pretty damn good at that,” Mr. Robbins said.

Glenn Britt, chairman and CEO of Time Warner, said technology alone isn’t enough to build a business. “There are a lot of devices on the floor. All of them were invented by engineers and a lot maybe try to do too many things. So that’s confusing. What happens is consumers tell us what they want, so we can provide a service that gets more and more usable.”

This year’s cable show was also notable because of the inclusion of speakers from companies that at one time might have been seen as competitors to the MSOs, such as Yahoo!, Electronic Arts and RealNetworks.

When it was starting to build a subscription base, RealNetworks bypassed the cable operators. “Signing up subscribers one at a time, which was our model prior to getting together with Comcast and others, is an arduous task,” said Rob Glaser, chairman and CEO of RealNetworks. “We did it because it was the only way to bootstrap. But long term, the smart companies like ours realize that partnership-win-win collaborations on an economic basis, on a brand basis-is the way to go.

“The cable industry has two-thirds of the relationships with broadband consumers in the U.S. and a company like ours would be foolish not to work in a very collaborative way to bring these services in.”

Similarly, Jerry Yang, Yahoo co-founder and chief yahoo, said, “I wouldn’t be here if I didn’t want to do a lot more business with the cable industry.”

Bing Gordon, executive VP and chief creative officer of Electronic Arts, challenged cable operators to come up with enough bandwidth to satisfy the growing number of game players who are going online to play networked games. He estimated that about 15 percent of video gamers with consoles attached to their TVs now use broadband to play games. By 2008, that figure will be 30 percent. And by 2012, they’ll need enough bandwidth to download games that provide “Finding Nemo”-quality graphics in real time.

“My message to all of you is good news, you just finished buildout 1.0. In the year 2010 we need broadband 2.0, and if the cable business doesn’t give it to us it’s going to be wireless or phone,” he said.

Tom Rutledge, chief operating officer at Cablevision Systems, said there’s plenty of bandwidth without huge additional capital outlays.”Our network and its capacity is so great and I think we already have 2.0 in the bag in terms of our ability to upgrade that network,” Mr. Rutledge said. “In fact, we’re looking for applications that are fat enough to use our network in ways that our competitors can’t.”

Bob Iger, chief operating officer of The Walt Disney Co., recalled that as recently as three years ago people said no one would ever want to watch video on a 2-inch-by-2-inch screen, let alone a cellphone screen. Now, “That’s already not true,” he said. “So I think anything is possible. The consumer will decide. The world is a collection of screens. Some of them are going to be this small, some are going to be as large as the ones behind us. It makes me feel that we should get our product onto every one of those screens and not really pigeonhole ourselves in one technological direction or in one platform direction.”

But one device that media executives seemed to have little use for is the personal video recorder. “This is a technology that doesn’t help any of us, quite frankly,” said Mr. Wright of NBCU. “It’s a technology that’s driven by the fact that one particular distribution company decided to give them away for free, so everyone else has copied them. It doesn’t do anything positive for those of us who are in the content business-the creating it, distributing it, the packaging of it.”