Cutting the Cord: Is YouTube the Answer?

By Howard Buksbaum filed under Tech

March 19, 2013

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About two years ago I cut the cord. I said goodbye to cable television because, like many others, I discovered that with high speed internet, there are very few compelling reasons why I should play upwards of $100 per month for cable TV. The problem is simple. Not unlike the record industry in the late 90's, cable providers have had a stronghold on their customers for decades, forcing them to pay substantial fees for a myriad of unwatched channels only to justify their business model. The jig is up. We all know they suck and customers are starting to do something about it. Everyone has been completely dependent on cable companies to provide television content because until very recently, there was no other viable alternative. 

 

Make no mistake about it, we are at a very interesting and tumultuous time for television. We are at a crossroad of sorts, because for the first time in a long time, television is home to some of the best programming in years while simultaneously technology has matured enough so that we can consume video anywhere, anytime. This presents a massive problem for cable providers who are trying desperately to hold content creators hostage through antiquated contractual agreements filled with non-compete clauses. As a result, people like me are jumping ship in droves. Ever since the success of content distribution networks such as Netflix, Hulu and YouTube, content creators such as HBO, Showtime and FX have taken notice, wondering if they might be missing the boat. The problem is that it's nearly impossible for these networks to reap the benefits of alternative distribution channels because they've signed their lives away to the Cablevisions, Cox Cable and Time Warners of the world. However, if the rumors brewing around YouTube's subscription service are true, the entire cable industry may be in for a rude awakening.

 

In many ways this is already happening. Each year more and more people say goodbye to their cable service. It's no coincidence that as a result, Netflix and Hulu+ subscriptions have grown exponentially and YouTube viewership has gone through the roof. Viewers want to watch want they want, when they want, where they want on whichever device they choose. While HBO may have to pussyfoot around with Time Warner, we don't. You see, years ago there was a certain allure to offering your customers 600 channels then charging an additional fee for "premium" channels. Most of which were movie channels. Some of whom offered the same programming, just on different nights. Then The Sopranos arrived on the scene and things started to change. With record ratings, HBO proved that creating original programming can be a very lucrative endeavor as subscriptions rose and they enjoyed a little bit of leverage. Nowadays it's a completely different playing field. The pressure of caving to alternative distribution channels has put the fear of you know who into cable providers who are starting to see the writing on the wall. However, even if HBO wanted to dabble with Netflix or Hulu simulcasts, they can't. If they wanted to release their shows behind the protection of a pay wall on YouTube, they aren't allowed. Their contracts prevent them for doing so. While apps like HBO Go for tablets and mobile devices are largely successful, you must already be an HBO subscriber via your cable provider and there is still no set-top solution because cable provides own that market.

 

One thing you can be sure of, this fight won't last very long. A YouTube subscription model would mean that millions of people will have direct, multiplatform access to the same "premium" content they currently pay their cable provider for. If networks like HBO can charge a reasonable fee and potentially convert those who still remain tied to the wall, they may be able to circumvent cable providers altogether. By offering per episode, per show or per season subscriptions, HBO may be able to find a whole new audience of viewers who are willing to pay for uninhibited access to their content. This may be just the solution HBO is looking for in that it would eliminate any if not all of the technical limitations associated with doing it themselves. Proven technology and existing infrastructure means low overhead and minimal barrier to entry. What is really intriguing is that it's not just cable companies and content providers taking notice, the set-top box market is poised to explode. STB makers are busy dotting their i's and crossing their t's, hoping to release the perfect one-stop-shop set-top solution.

 

Furthermore, as the lines blur between "online content" and "television content," we are seeing overwhelming evidence that suggests people are not particularly concerned with consuming solely high production value content normally associated with TV. As many YouTube channels bring in millions of monthly views, it's no surprise that a subscription model may be in YouTube's future. When it happens, content owners, both large and small, will have the opportunity to reach many more people in a one to one relationship, monetizing their content in a very real way. 

 

Indulge me if you will. Imagine this scenario; Apple either opens their API so that developers can create apps for Apple TV or decides to support a subscription based streaming app (maybe YouTube) that offers HBO, Showtime, and any other premium channel you can think of. The same app is available on your iPhone, iPad, Android device, and desktop. What would you do if you found that you can watch your favorite programming without being tied to a cable company? How much would you be willing to pay for such a service? While this may be dream for the time being, it won't be for much longer. As each day goes by and fewer people subscribe to cable service, cable networks are in a better position to renegotiate their contracts and the risk of losing business is mitigated. The question is not if, it's when. Rest assured, when the flood gates open, there will be a mass exodus of cord cutting consumers chomping at the bit for their untethered Game of Thrones, Girls and Boardwalk Empire.