While the Giant Slumbers, An Opportunity for Online Video Producers

The annual cable convention hosted by the National Cable & Telecommunications Association (NCTA) has traditionally been a glossy event where past and present moguls from the Vanity Fair 100 list rub shoulders and compare their respective company’s most recent mega-media conquests.

But faced with disruptive new technologies and competition from online video and streaming services, the mood at Cable Show 2011, held earlier this month in Chicago, was far less certain—despite the show’s “Let’s Not Panic Here, Folks” theme.

This was certainly evident during an opening day panel discussion when executives from three of the biggest U.S. cable operators—Comcast, Cox, and Time Warner Cable—gathered onstage with top content honchos from Time Warner, News Corp. and Viacom to discuss the industry’s plans to stay vital in the face of rapidly developing online technologies and viewers’ increasing comfort with other platforms to view programming.

While most of the execs agreed with the idea of more programming on more devices, they disagreed about how best to create a business around it. “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.” Britt’s boss, Time Warner CEO Jeff Bewkes, agreed. “Put the TV on all the Internet devices, don’t change the business model and don’t charge people to do it,” he said, later adding, “we’ve got to put the content out there on-demand, on any device.”

But Viacom CEO Philippe Dauman and News Corp COO Chase Carey weren’t willing to go as far as making their programming freely available on any device, with Carey stating that consumers should have to pay for streaming content delivered to the Apple iPad and other tablets. But Carey also admitted that it might be taking the industry too long to figure out the business model. “We have to recognize others are doing things and we get hung up,” he said.

And there, in a nutshell, has been cable’s problem for the past several years; an industry clearly cognizant that entertainment is headed in a multi-device direction, but at loggerheads over how to deliver the content and split up the revenues among all the players. The resulting slower pace of innovation, unfortunately, comes during a time when precisely the opposite is required.

Will Cost Become a Bigger Issue?

Also making news at the show, Byron Allen, CEO of Entertainment Studio Networks hit a nerve when he took the cable nets to task for failing to contain costs that get passed on to subscribers, suggesting additional viewer migration to cheaper forms of entertainment.

He wasn’t alone. Cox President Pat Esser admitted that he’s also concerned about those that can’t afford cable from his company. “While the cost of service has increased, there are segments of the population where disposable income has remained flat. We have to be sensitive to this.  Still, most on the cable content side lean toward News Corp. CEO Carey’s contention that new devices should mean new fees for viewers “I think the consumer is willing to pay fair value for a good experience.” Carey said during the panel discussion when asked about the debate over rights to distribute live programming to the iPad.

The question for Carey and other execs looking to tap into the approximately 25 million iPads sold to date: Have they asked the tablet owners that question? And what about the younger viewer unaccustomed to paying additional fees for their online entertainment?

Fiddling While Younger Viewers Drift Online

At the same convention meanwhile, Epix, the cable TV channel and online movie service jointly owned by Paramount, Lionsgate, and MGM, released a report that reinforced the contention that younger viewers are leaving the cable fold for online viewing.

The study, conducted by global consumer research firm Ipsos OTX Media CT, found that viewers between the ages of 25 to 34 are significantly more likely to use video-capable iPods (24%), iPads and other tablets (21%), smartphones (21%) and netbooks (15%) to watch movies than viewers between 35 to 64 years old.

Offering further proof that demand for content on mobile electronic devices will be a key element of the next generation’s viewing lifestyle, the study also confirmed that personal computers are now almost as popular as television sets for movie viewing, with seven out of eight respondents indicating that they now watch movies on computers.

So while the execs debate and re-debate how to distribute their company’s high-priced content online, my own kids and millions of others find themselves watching more and more web-only shows like this and like this from content producers who likely fall far below the radar of the executives on the Cable Show panel—and who just as likely haven’t the foggiest notion or concern for the corporate debates and constraints of big money cable entertainment.

Rather, the main concern for online video producers—and for many the only concern—is to create real entertainment that touches the most relevant possible audience using all of the tools, devices, and formats available to them. Their audience meanwhile, frequently younger viewers comfortable watching on whichever device they happen to have with them, are finding their way to new online content sources outside of the cable universe.

Panel moderator and Fox Business News anchor Liz Claman pushed down this path of questioning right out of the gate, asking, “You know, what starts with just me and maybe the nine year-old kid with a smart phone turns into the rest of the nation. We saw that with the music industry and Napster. They [the music labels] ignored it, and suddenly they lost complete control of their industry. How do you prevent that from happening?”

Far from expressing any sense of urgency though, the group dismissed fears of cord cutting as overblown, and the competition online as insignificant. “Let’s cheer up,” Bewkes responded, “this isn’t the music industry.”

Perhaps not, but while he and his colleagues dicker over distribution rights, models and contracts, the opportunity remains for creative, hungry online video creators to step into the picture.

And so, online video producers, take note: This moment—while the giant is slumbering, pre-occupied and otherwise incapable of swift response—is one of those golden-ticket instances where the nimble and niche-obsessed can break through for a chance to become iconic programmers in the minds of their specific target audience. During disruptive moments such as this, “small” and “passionate”—two characteristics that frequently accompany those who understand their brand’s entertainment potential—can be an online content producer’s biggest strengths.

But be aware that this moment won’t last forever. Like the mythical Eye of Sauron depicted in Peter Jackson’s rendition of Lord of the Rings, the cable industry will soon turn its full, powerful gaze upon the online video marketplace. And when that happens—when the giant is awake and focused—don’t expect the same open-door opportunity to capture the hearts and minds of your niche online viewing audience.