Microsoft TV? Join the Club! Just Don't Disrupt the Cable Guys

Published on November 29, 2010
by Peter Kafka

Welcome to the club, Microsoft!

Now please stand next to Apple, Google, Amazon and Netflix. But don’t crowd the cable guys over in the VIP section. And remember to keep your wallet handy!

Of course Microsoft wants to beam TV shows to your house, for a fee. Everyone else does!

And Redmond has been at it longer than most — Bill Gates, and then Steve Ballmer, have been headed toward your living room for more than a decade.

They could get there, too. If they’re willing to pay up.

But what Microsoft won’t be able to do is fundamentally reshape TV distribution. Same goes for every other would-be player who wants in.

That’s because the TV programmers, who make their money from advertising and cable subscription fees, are happy to sell their stuff to new buyers. But they’re not going to work with new outlets that undercut their existing ones.

Ask Apple, who tried rounding up programming for a $30-a-month subscription offering last year, and ended up settling for a handful of 99-cent-an-episode rentals 9 months later.

Or more to the point, ask DirectTV, or Echostar, or Verizon, or AT&T. All of those guys have elbowed their way into a market once owned completely by cable. But none of them have changed the business: They all sell, more or less, the same thing your local cable company does, at more or less the same price.

The cable guys weren’t happy about the competition, but there’s not a lot they could do about it. As long as the new guys paid the same rates, there’s no reason for the programmers not to sell their stuff to them. But they won’t work with distributors that threaten their old business.

And that old business isn’t going away. Even as the cord-cutting drumbeat gets louder, programmers are winning rate increases for their cable shows. And they’re extracting new fees for broadcast shows — the ones they used to give away. Ask Cablevision. Or Time Warner Cable, etc.

So if Microsoft — or anyone else — isn’t willing to pay the going rate for first-run TV programming, they can try getting into the more modestly priced market for second-run shows — the stuff you can see on Hulu and Netflix now.

And watching “30 Rock” the day after it airs on regular TV may be worth something, to some customers. But for most people, it won’t be enough to replace regular TV. Which is exactly what the industry wants.

(Remember Screech? Not entirely SFW)

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