Broadcast News

FCC Proposal Could Change American TV Landscape

FCC_logo_lAmerican cable companies are renowned for their package deals. If a subscriber wants channel A, they should be prepared to pay for channels B to G, too. Some of these bundles originate with the content owners, using their popular programming to subsidize less popular shows, but most consumers tend to oversubscribe.

A number of high-profile content creators recently announced they would begin streaming directly to consumers via the Internet. CBS and HBO’s respective announcements about online subscriptions gave the impression that an à la carte trend was in full swing. It seemed that subscribers would be able to choose individual channels, and that video would break a decades-old legacy to establish itself as an over-the-top service. In reality, this isn’t likely to happen in the US until the rules of the game change, but it might not be far away.

This week, the chairman of the American Federal Communications Commission (FCC), Tom Wheeler, wrote a proposal for changing the legal status of Internet-based services to afford them the same recognition as cable operators. Content owners would be required to discuss leasing their shows to Web-based broadcasters, potentially enabling a very different entertainment business model in the US. Start-ups and established technology companies would be able to compete against major broadcasters. Apple, Microsoft or Sony could theoretically become broadcasters, selling subscriptions via their branded living room hardware.

Such a change in the rules isn’t unprecedented. A similar proposal in 1992 enabled satellite-based broadcasting services in the US to carry an array of popular shows as content owners were then required to negotiate deals with satellite broadcasts. This latest proposal — and that’s all it is at this point — would require a technology neutral approach to broadcasting.

The inevitability of big change in the broadcasting industry is clear. However, the current environment is legacy sticky and there’s more opposition to innovation than encouragement. This is typical of industry disruption, and behavioural shifts are driving change. It’s estimated that 13% of American households are entirely cord-free, and many more are cutting the cords they can, namely fixed-line phone and cable. Declines in the number of cable subscribers hit hard in 2014. A new generation is seeing things differently — the bundle could fade with age.

Mr Wheeler’s proposal reflects a great deal of dissatisfaction among current subscribers. There aren’t guarantees that any legal changes will result, but pushes from technology companies like Amazon, Facebook, Google and Microsoft could see changes to the broadcasting rules that lead to new opportunities.