NBC reorgs cable networks, or, where is the value in entertainment?

Cable providers, fresh off their media company acquisitions, are getting hit hard by COVID — advertising revenue is way down, and cord-cutting has joined the long list of transitions that were already happening but got accelerated by the pandemic. But just because a trend is accelerating, doesn’t mean that the incumbents have any idea what to do about that acceleration.

Cable companies make a lot of money, but they’re not particularly profitable. Much to their serious dismay, they’re just a “dumb pipe” — a utility to deliver cable TV, and increasingly broadband Internet service. After decades of fighting to find some way to higher margins, they finally realized that the money is in the content — which is why all of the major cable companies purchased major entertainment companies. AT&T bought Warner; Comcast bought NBCUniversal; and Charter is owned by Liberty which is a relationship too complicated to explain but includes owning Formula One Group, Sirius XM Satellite Radio, and the Atlanta Braves. It’s at least a little ironic then that NBCUniversal has announced that it’s “consolidating decision making” for its cable networks (“cable networks” are “TV Channels”, like Sci-Fy and Bravo, not to be confused with cable companies, which run wires to your house). Consolidating some things, like financial operations and IT, makes complete sense, but that was already done, years ago in most cases. Consolidating decision making on programming? That seems … questionable. And that’s what they’re doing: consolidating the decision making on which shows get made, and where those shows get run (and not just across their traditional networks, also across their online platforms (Peacock in the case of Comcast/NBCUniversal)).

The problem here is twofold. First, where do you go to discover the content you want to watch? Traditionally, the answer was the network. In the pre-cable-TV days, from year to year, sometimes you’d be an ABC watcher, sometimes NBC, and sometimes CBS — not out of any particular brand loyalty, but just based on who had the best content. It took them 30 years to get there, but by the twenty-teens, cable networks had achieved some of that same cache. Networks like Sci-Fy and Bravo were putting out great content. But there’s still a ton of junk out there, and people grew tired of paying $100/month for a hundred TV channels, when they only wanted to watch 2 or 3 — whence cord-cutting. Deciding that value is in the show brand rather than the network brand (i.e., I don’t care about E!, but I do care about “Keeping Up with The Kardashians”) makes some sense, but if you don’t have those different networks fighting for the eyeballs of their different audiences, how are you going to generate great content? And even if you do, how will people find it? Second, if you do get all the way to disaggregating content from broadcast brands, who’s going to pay for your service at all? Cable companies make some money from your subscription, but they make a lot more from advertising on those networks. In a world of Netflix, Disney Plus, and Apple TV, are you really going to pay $300 per month (to make up for the lost advertising revenue of the 50 cable channels you never watched) to get your five favorite shows in whatever season this is? People are quick to forecast the downfall of Netflix, but it seems far more likely that the cable conglomerates are at the losing end of this battle. They’re still just dumb pipes, and they don’t know what to do with their content.

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