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fred
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4 months ago
in Why Hulu Should Embrace Boxee on A VC
Hulu is the next iTunes music store and Boxee is the next iPod. Hulu (Fox and NBC) understand what they have and are advertising it. Its the cable companies that are freaked and they are looking alot like the record companies, pushing against their longterm interests trying to preserve their existing business model.
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This may go down as the "Heidi game" of internet TV.
George is right, the cable companies are freaked and they've been talking about it pretty openly. I suspect as well that the content guys are freaked because they are worried they may take a near term revenue hit if the cable guys force them to cut the price of cable channel fees as the audience shifts to online viewing.
Netflix Watch Instantly has to be a source of concern to the MSOs as well. A million people connected to the service via Xbox Live in its first 85 days of availability. The audience is routing around multichannel disitribution very rapidly (Boxee was more lubricant for this trend). The folks that are vested in the old model of distribution are getting very anxious.
Here is what Glenn Britt (CEO of Time Warner Cable) had to say on the last earnings call:
"On the online issue, I think just to clarify what I've been saying, the whole cable network industry, I mean all of the distributors, satellite and telco too, this whole economic ecosystem is dependent on subscription revenue and ad revenue and what I've really been saying is that as cable networks put more and more content online for free, that will over time start eroding the subscription revenue source. There isn't a whole lot that we can do about that. This is the program networks that are doing it. And the reality is, we are starting to see the beginnings of cord cutting where people, particularly young people are saying all I need is broadband. I don't need video and obviously they're already saying they don't need wire line phone, so the impact of that potentially over time is to reduce the number of customers.
So I'm saying all this because my remarks get misinterpreted. I'm not saying these things as a negotiating ploy. I'm really saying them to predict that people will choose not to buy subscription video if they can get the same stuff for free. In other words, free wins. And if we don't have a customer, then the programmers don't get paid for the customer that we don't have anymore and I think I'm right, that about half of the average cable network revenues are subscription and half are advertising.
So I think the danger here is that over time, the subscription revenue could erode."