Greenfield, a very sharp media analyst at BTIG, says that 2012 will be the first time we’ll see a true “virtual” cable-company offering in the U.S., where consumers can subscribe to TV delivered over the Web. This is different than the on-demand services that currently exist, like Netflix and Hulu, which offer up programming that’s already been on TV. This will give you access to “real” TV, in real time.
His summary: “While [quality] will not match what you are accustomed to from your traditional [cable provider] (due to Internet congestion), virtual MSO pricing to the consumer will be substantially lower, subscribers will receive a significantly better user-interface/navigation across a wide-array of IP-enabled devices in the home and service will be accessible anywhere in the US, rather than being stuck in a certain region.”
Who/what/where/when? Greenfield’s prediction post (registration required) doesn’t commit to any of that. But it does sketch out the basic “how” framework:
- The “virtual” cable company will have to cut distribution deals with all or most of the big TV channels/programmers, just like the satellite TV guys did in the ’90s. It’s possible that some of the programmers won’t want to play along, for fear of upsetting their existing deals with the cable guys. But just like in the ’90s, as long as the “virtual” company is paying market rates (and likely higher) for the programming, the cable guys can’t really do much about it. (And if they do, they’ll have a lot of explaining to do in Washington: Note that when the Feds blessed the Comcast/NBC deal this year, they required the company to make its programming available to this kind of competitor.)
- All those deals mean that this won’t be “a la carte” cable, where you can get ESPN but not the Disney channel, or vice versa — these will be all-or-none deals.
- And all of the above means that you won’t be getting these channels for next to nothing. Greenfield figures the pricing will be “substantially lower” than what the cable guys currently charge. But since he assumes that the “virtual” cable guys will have to pay at least $40 a month per subscriber for the programming, it’s going to cost at least that much for consumers — he envisions the new guys selling this stuff at “razor-thin” margins, but not at a loss.
- Getting your TV programming from a “virtual” cable company doesn’t mean you’ll be able to tell Comcast or Time Warner Cable, etc., to pound sand — you’ll still be paying them, or someone, for broadband. Greenfield thinks this could actually be a good thing for the cable guys in the long run, because the margins on broadband are much better than in the TV business. And they’ll probably be able to force many customers to upgrade their broadband subscriptions to a higher tier, so they can stream all of that video.
Greenfield runs through a laundry list of every potential player, including Amazon, Apple, Google and Microsoft, even Wal-Mart. I assume that the most logical step would be for someone who’s already in the video business, but with a limited footprint — like Verizon or Dish Network — to try this out.
But over the phone this morning, Greenfield said he thinks the first player will be someone who’s not in there already, but wants to build another platform that gives them direct access to millions of consumers. Start speculating now!