The Future of TV doesn't include cable

[Guest EXPAT]

Predicting that transmission of TV will move to the Internet eventually, Cablevision Systems Corp. Chief Executive James Dolan says "there could come a day" when his company stops offering television service, making broadband its primary offering.

His comments may be the first public acknowledgment by a cable CEO of the possibility of such a shift, long speculated about by analysts. It comes amid growing tensions between cable operators and channel owners over rising programming costs, highlighted Friday night when Time Warner Cable Inc. dropped CBS from its channel lineup in major markets such as New York and Los Angeles.

If cable operators drop TV service, charging only for broadband, channel owners would have to sell directly to the public or through Web outlets.

In a 90-minute interview on Friday, the usually media-shy 58-year-old executive also talked about his marriage, his relationship with his father Chuck and his after-hours role as a singer and songwriter. He said his rock band, JD & the Straight Shot, toured with the Eagles last month.
Mr. Dolan said that on the rare occasions he watches TV, it is often with his young children, who prefer to watch online video service Netflix, using Cablevision broadband.

He added that the cable-TV industry is in a "bubble" with its emphasis on packages of channels that people are required to pay for, predicting it will mature "badly" as young people opt to watch online video rather than pay for traditional TV services.

To ensure Cablevision is prepared for the future, he said, he is investing heavily in the company's network connectivity and overhauling operations to improve efficiencies.
If Cablevision does drop video service, "I don't want to be saddled with an infrastructure that is as big as the one that I have now," he said.

He was speaking at a point of intense uncertainty for the cable industry, which faces a wave of online competitors offering cheaper video options. Meanwhile, cable pioneer John Malone and other cable executives have been calling for consolidation among U.S. cable operators, in part to push back against entertainment companies over rising program costs.

Cablevisionthe fifth-biggest U.S. cable operator, serving about three million customersis considered a likely acquisition target, given its hold on much of the New York area. Mr. Dolan's family controls the company and gives little sign of whether it is interested in selling.

In the interview, asked if the Dolan family will continue to control Cablevision in 20 years' time, Mr. Dolan said: "I would not go so far as to say that."
He added, "We are going to continue to do the right things for the shareholders. That's why you can't rule out the possibility of a sale."

Mr. Dolan declined to comment on whether the company was having any talks currently or had received any approaches.

Later in the interview, he said that "business is in our blood, particularly these businesses, but if it wasn't this business there would be another business."

But Mr. Dolan doesn't expect consolidation to necessarily help cable operators gain leverage against programmers to push back on rising fees. While he said "size helps," he added that Cablevision's position in the valuable New York market "helps us have more leverage than our size would dictate."

Much of his family is involved in running the business, including an uncle in his late seventies. Mr. Dolan recently promoted his wife Kristin, a veteran cable executive, to lead sales, marketing and product management, shortly after the two said they were taking a trial separation. "I didn't promote my wife; I married an amazing executive. We're really good friends," he said, adding that "we're figuring things out."
As for his father Chuck, the 86-year-old company founder and chairman, Mr. Dolan said with a laugh that he "comes over everyday and harasses me." The two talk over the weekends "for extended periods of time" and throughout the week about direction and philosophical differences. "He guides me," Mr. Dolan said.

The father of six boys ages 4 to 26, Mr. Dolan has plenty of outside interests, such as chairing Madison Square Garden Co., owner of the National Basketball Association's New York Knicks, and performing with his rock band.

Still, Mr. Dolan has immersed himself deeply in Cablevision since late 2011, after a period in which the company experienced severe subscriber defections amid signs of customer dissatisfaction with its service. A Federal Communications Commission report earlier that year indicated the company was trailing its main rival, Verizon Communications Inc.'s FiOS, in Internet speeds relative to what each advertised.

The company at that point had pushed capital spending down to "fairly bare-bones maintenance levels," Chief Financial Officer Gregg Seibert said in June.

Mr. Dolan said that he became more involved shortly before Cablevision's chief operating officer at the time, Tom Rutledge, left to run Charter Communications Inc.

"Tom has a different operating philosophy than the operating philosophy I wanted to follow," Mr. Dolan said, while adding that Mr. Rutledge was an "excellent executive." Mr. Rutledge, he said, was more focused on marketing while Mr. Dolan is "focused more on the relationship with the customer," which is crucial to "the long-term health of the company."

"I felt that we needed to reinvest," Mr. Dolan said. "When we took a hard look at what we were offering,it just wasn't what we wanted it to be."

He boosted capital expenditures 32% to $1.1 billion in 2012 and poured about $150 million directly into the broadband network. And for this year, the company has told Wall Street that capital spending will remain at "elevated levels." The result, so far, has been higher Internet speeds, expanded outdoor wi-fi service, new modems for customers and an array of products that Mr. Dolan promised will reinvigorate subscriber growth, including a cloud-based digital video recording feature that allows 10 shows to be recorded at onceeven through older set-top boxes. He has also beefed up network-monitoring systems so the company can detect outages before customers call in to complain.

Despite the investment, in the past two quarters the company lost video-subscribers, unlike in the year-earlier periods, while it added broadband and voice customers at a slower pace.

But, Mr. Dolan said Cablevision is "finally starting to see a little light at the end of this tunnel." A recent FCC test found that the company's Internet speeds were faster than advertised and nearly matched FiOS's performance.

"I think he's taken some very positive steps," said Chris Marangi, portfolio manager at GAMCO Investors Inc., a Cablevision shareholder. "Jim has a multigenerational view, a longer-term view." Mr. Marangi added that the reinvestment is "having a positive impact" on customer satisfaction and customer adds. "But it's coming at the expense of margins in the short term," he said.

Mr. Dolan, who first started playing guitar at age 17, said he has learned a lot from watching the downfall of music companies that used to require consumers to buy albums of songs rather than letting them choose what they want. The lesson: If you don't "ride the wave" you "get eaten by the wave."

[RA1]

Interesting. I wonder if there is some practical limit to using the internet? I also would like for it to be more dependable than I perceive it to be now. However, satellite and cable TV also have their problems now. I can never tell from where the problem emanates when it flickers, the transmission site, the satellite company, my dish or what.

We already are seeing some signs of increased fees for increased usage of the internet so likely there will be no savings when those fees become universal. The biggest advantage I immediately see is being able to pay for what you watch only, rather than for all those channels never accessed.

Best regards,

RA1

[Guest NCBored]

Interesting. I wonder if there is some practical limit to using the internet? I also would like for it to be more dependable than I perceive it to be now. However, satellite and cable TV also have their problems now. I can never tell from where the problem emanates when it flickers, the transmission site, the satellite company, my dish or what.

We already are seeing some signs of increased fees for increased usage of the internet so likely there will be no savings when those fees become universal. The biggest advantage I immediately see is being able to pay for what you watch only, rather than for all those channels never accessed.

Best regards,

RA1

I currently have my cable TV, broadband internet & landline telephone through Time-Warner, and I'm pretty unhappy with how much I pay, as well as the fact that they've dropped Showtime during their current dispute with CBS, but when I investigated alternatives, I didn't find alternatives acceptable to me.

I dislike paying for those many. many channels I never watch, and a per-channel subscription or some usage-based pricing schema seems preferable - but the cynical side of me suspects that we'll never see any real reduction in charges.

[Guest EXPAT]

I believe that we will move to a streaming only viewing of TV. But then the internet providers will charge by usage with so much streaming going on.

[TampaYankee]

I believe the demise of the cable company is premature if it is to be at all. What is in the cards is the demise of programming monopolies that have been the business model of the Cable Industry. If that is your definition of Cable then, yeah, it's days are numbered.

If they wish to exist in the Brave New World there is a place for them as aggregators or brokers bundling programs much as they do now but without the iron hand that an openly competitive environment will require. Whether they wish to operate in that environment is another issue but someone will.

However, lest we trade one monopolistic entity for another, we have to open up ISPs to the competitive environment much like the electricity industry has recently done and before that the long distance phone industry. Otherwise, our ISPs will milk us dry with a strangle hold on bandwidth charges.

We also need a high tech network spanning the country much like Hong Kong, So Korea, Japan; even Latvia and Romania. ( http://www.bloomberg.com/slideshow/2013-01-23/top-10-countries-with-the-fastest-internet.html )

[boiworship]

Cable provision should be opened up to break the monopolies. There's no reason why 10 companies couldn't offer services in a metro area like greater LA. I keep pondering dropping it altogether. I rarely watch TV anyway, except for a handful of English shows on KCET.