INNOVATION HUB
1:20 pm
Fri February 1, 2013

The Problem with Cable

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TVs have changed since the 1950s — so why hasn't the television industry?
Credit Ralph Bijker

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If there's one item in Americans' homes that hasn't changed a whole lot over the past 60 years, it's the television. It's been tweaked to be flatter, wider and clearer. The shows have changed a bit too — from the Cleavers of "Leave it to Beaver" up to the Dunphys on "Modern Family."

But the original vision behind TV has remained remarkably constant. And the forces behind it have as well. Big companies and conglomerates drive much of the content and the technology that keeps us entertained.

Meanwhile, phones and other gadgets have experienced a remarkable evolution. But when will the box in the living room catch up?

The Cable Oligopoly

Derek Thompson, a senior editor at The Atlantic, says that the first step in understanding television is defining the term. First there’s the TV itself. Next there’s the programming — everything from the Kardashians to the evening news. Last, but not least, there are cable providers like Dish Network or Comcast.

“The way that the television industry works, sort of an idiot’s guide to TV, is you have media companies that own all of these networks,” Thompson explains. Companies like Viacom, which owns Comedy Central, MTV, Nickelodeon and Spike, to name a few.

“When Viacom makes a deal with a cable provider like Comcast, they don’t sell them Comedy Central individually, or MTV 2 individually. They say, ‘Here’s a bundle of all of our channels, take it or leave it,” Thompson says. “95 percent of the TV that we watch is owned by seven media companies — that’s an oligopoly. And when you have an oligopoly, [the companies] have the power to set the terms.”

Philippe Dauman, who has served as Viacom's CEO since 2006.
Credit Joi / Flickr Creative Commons

Nilay Patel, managing editor of The Verge, is quick to point out that cable providers are also responsible for the industry’s slow pace of change.

“[The cable industry] has this massive pile of cable boxes in the world with hard drives in them, and all this equipment that they have to deal with, and they don’t want to swap it out every year,” Patel argues. “That’s not a good business for them. It’s a better business for them to give you a box, have you keep it for five years, and send you programming.”

Consumers are also responsible for the high cost of cable. Gone are the days of Law and Order — a low-cost show with little storyline or character development. Today’s most popular shows, from Homeland, to Mad Men or Game of Thrones, are elaborate productions with a big price tag.

So, if you add together an oligopoly of media companies, a handful of cable providers and the expensive tastes of the American public, what do you get? A stagnant industry.

“Once you get it home and plug it into your cable box, [watching television] is exactly the same,” says Patel. “The pace of innovation there has not kept up with pretty much any other part of the tech industry.” 

With the high price of cable, will more consumers turn to online content?
Credit Hulu

Increasing the Pace of Change

How can we make the television industry innovate? Thompson urges consumers to keep putting pressure on networks to give them the programming they want. Young people are leading this revolution — many already forgo cable because it’s too expensive.

“I think eventually HBO will see that it might be more profitable for them to avoid Comcast, and sent the content directly to the consumer,” he says. “The real question is...how do you add Internet users without taking away paid TV users, and balance it out at the same time?”

Things have slowly started to change, even if media companies and cable providers aren’t pushing for innovation. In the past few years that there’s been a rush to deliver television over the Internet, through services like Netflix and Hulu. Now tech giants like Google, Apple, and Microsoft are looking for a way to crack open the industry and bring consumers their favorite shows.

But although Thompson hopes that increased competition will encourage innovation, his optimism is tempered.

“It’s a really difficult business,” Thompson concedes. “If it were an easy business, they would have broken through on it already.” 

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