Wade Davis And The Cable Conundrum

The ACG New York Tech Media and Telecom Conference event on May 24th featured a “Fireside Chat”, with Wade Davis, CFO & Head of M&A, Viacom being interviewed by Leslie Picker of The New York Times.

But it actually felt a whole lot more like a discussion of how big cable is dealing with jumping out of the frying pan into the fire itself. Content consolidation is coming, and the cable companies face a major challenge when consumers compare the price and experience against Netflix.

Four Big Takeaways:

1. Content Consolidation is Coming

“You’ve seen consolidation occur on the distribution side. That will put pressure on the content, or the value chain, to consolidate,” Wade Davis said. “But it won’t be some sort of huge event – there won’t be a flashpoint that catalyzes the whole thing. It’s going to happen over time, as big distributors ratchet up the pressure.”

2. What Drives Scale In Content?

Really, it’s four things. First, Davis points out, “It’s a hits business. The bigger the portfolio you have, the more likely (you’ll) have hits.” Second, “as in (venture capital), the more mind share you command with the creative community the more likely you will see the best ideas.” Third, “a bigger portfolio gives you distribution leverage with emerging distributors like Amazon, Netflix, Hulu or traditional distributors.” Finally, it’s the appeal of cost savings. “You just don’t need the same corporate structure.”

But content is an ego business, and you can bet those egos will hold out against the pressures as long as they can.

3. Netflix and The Cable Bundle Chasm

Wade Davis pointed out the uncomfortable gap — actually, it’s more like a vast chasm — between $9.99 Netflix and an $80 big bundle in cable.

“(The biggest industry issue) is the inferiority of the traditional cable bundle as a product (…) the television ecosystem needs to evolve (to) product parity in the traditional MVPD (multichannel video programming distributor) product to something like a Netflix experience.” What’s ahead? Expect intense pressure on distributors to develop multiple price points and smarter offerings.

4. Overhauling TV’s Antique Operating System

Wade Davis ended by pointing out an urgent need. “Investment is needed in what I’ll call the ‘operating system’ for television.” He couldn’t be more right – compared with the rich data and flexibility marketers now expect from digital media, TV’s tech looks like an episode from a bad 1950s space adventure. “It’s all about data, advanced ad-tech, measurement, the ability to acquire the appropriate rights from multi-platform standpoint, the ability to invest in a user experience that works well, and drive authentication.”

Cable has a LOT of work ahead to compete effectively in the modern media marketplace. Can cable companies leverage their wealth of content – a real advantage vs. Netflix – to leap ahead, or will legacy pricing models and practices hamstring progress?

Stay tuned. And bring some popcorn: this promises to have a lot of drama.

ACG New York Contact:
Bobby Blumenfeld
Executive Director
ACG New York
E- bobby@acgnyc.org
O-(212) 489-8700

About ACG New York
ACG® New York, Inc., the founding chapter of The Association for Corporate Growth, is the largest association of middle market deal making and corporate professionals in New York, with more than 1,000 members across all industry sectors. ACG New York facilitates long term relationship building, driving middle-market growth. ACG’s members are focused on investing private capital, which benefits the pension funds held by municipal workers, fireman, policeman, health workers and others that provide years of service for the public good.



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