TV & DVR

With the advent of DVR and TIVO I rarely find myself watching commercials unless I forget to record my favorite shows or sporting events. Sometimes I catch myself watching commercials after I've DVRed something, but I quickly hit the fast forward button to spare myself the agony. And when I dont have time to watch TV, which is frequently, I usually end up watching clips on Youtube thanks to Google. Clips on Youtube don't have commercials so my TV experience these days is commercial free (and therefore positive).

The way I watch TV makes me think about the television industry and where it's going in the future. If TV channels can't find a way to present commercials, how are they going to pay for the new and existing TV shows which we enjoy? Presumably they have to buy the content from outside production houses unless they grow their shows in-house. Syndicating content that's not homegrown costs money, and aside from charging Comcast or DirecTV fees for showing their content, how are they going to recoup their costs and make a profit without people watching commercials? Commercials, to the best of my knowledge, are the only way channels make money.

The same thing applies to Comcast / DirecTV if they have to pay channels for their content or the right to show their stuff. But here is the kicker: these cable companies have virtual monopolies, depending on where you are, and they can always get away with charging the consumer more money for their cable service. Think about it: if you want cable and HDef channels, you have very few options in the Mid-Atlantic area. In DC, for example, Comcast and DirecTV are the only carriers which give you the full line up of Fox channels AND the full line-up of CBS-affiliated channels. On other cable services, you cannot always get both sets of channels. Add on the fact that you can get cable, internet, and phone from places like Comcast, what's to stop them from charging even more if they can't afford to sydicate content from channels that can no longer show commercials (and therefore make money on their shows)?

DVR and Youtube are basically screwing us while we're sleeping. We love their content, we love the fact that it's free, and we love the fact that there are no commercials. But what is it going to do the channels that sponsored this stuff to begin with? It's going to force them to make money elsewhere and that may mean higher rates for cable TV service since the carriers could get squeezed in the long-run.

Putting aside the option that we'll pay more for cable and HD channels because of Comcast, the cable channels could always show fewer ads but charge more for them. CBS and the Masters do this: Exxon basically pays CBS a lot of money to just show their ads during the tournament and in exchange, their ads are the only ones which run. Fewer ads which cost more, but get presented in a way that doesn't force the audience to TIVO the content.

Conversely, cable channels could run more ads and have more channels which either target specific audiences or focus on a particular subject, instead of just running fewer ads. Raise revenue by decreasing price but increasing volume. I think this is why we have cable packages which give us channels like AZN-TV or History Channel 2, or basically just channels which most people don't watch, but do in fact appeal to a specific, niche audience.

The kicker here is that if cable channels adopt this strategy (and I think they have), it may force Comcast or DirecTV to charge the consumer more for packages of channels we'll never watch. In other words, instead of giving viewers the ability to choose what channels they want to pay for (and watch), it gives us a bunch of crappy channels which come with the channels we actually want. The downside is less viewer choice and higher costs per month assuming the multiple channel offering costs more for Comcast to deliver (more bandwith over the telephone lines, for example). I could be wrong, though.

Bringing this full circle, the advent of TIVO and Youtube is certainly good for us in the short-tun, but in the long-run, what is it going to do the content we love? How will those channels react to their decling revenue? Example: I love watching the NBA on TNT, but what if TNT decides to charge Comcast a huge premium to feature their content? And what if Comcast passes that charge onto the viewer? Considering how bad Comcast's customer service is, I would be really pissed if I had to pay them more per month just to see basketball.

Higher costs from Comcast could mean fewer people watching TV, too. What will Comcast do then? The questions could go on and on, but I'm just throwing that out there since we all talk about sports and sports come on TV a lot....