Tuesday, May 5, 2009

No more fat pipes

If you live on either coast (not counting the Third Coast), then you may have noticed Cox, Comcast, and Time Warner "capping" the amount of data traffic you can have on your connection, even if you paid for an unlimited account. This is an attempt to wring the last penny out of a failing business model.

Time Warner's latest attempt to avoid becoming just a "fat pipe" from which users download valued content is to buy NBC Universal from General Electric (GE)- maybe. Time Warner, which owns HBO, TNT, CNN, and TBS, plus film studio Warner Bros., would benefit by having additional content-producing channels like USA, Bravo, Sci-Fi, and CNBC, though it would probably shutter Universal Pictures, currently owned by NBC.

GE has tried for years to drop the multi-billion dollar entertainment anchor from it's roster, but with no luck. Despite some hit shows and movies over the past decade, the company does not fit into GE's corporate focus, and diminishing ad revenues plus movie piracy and dwindling DVD sales have made NBC more risk than reward.

This actually makes some sense to me, just as it made sense for Apple to threaten to become it's own recording label if the the Big 4 did not coporate with it's one-size fits all pricing policy (though recently Apple relaxed it's stance a bit).

Cable, satellite, and phone companies transmit bits, but add very little value, other than bill consolidation, if you have your phone, TV, and Internet service with a single company. They are merely "fat pipes" to the Wild West Web, where consumers can pick and choose content exactly to their liking, and watch or listen to it exactly when and where they want.

Some providers have exclusive agreements with certain sports teams or other channels, but for the most part, they struggle to justify their high prices. But if cable companies buy up studios, which are struggling even more, then not only do they control distribution, but they also directly control content (except for piracy, of course).

That could stave off the creditors for a while, until they can think up a real business model.

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