A New (Cable) Deal for America

Until Saturday evening, millions of paying Cablevision customers in the New York City and Philadelphia metro areas were the unfortunate victims of a two-week blackout of all FOX channels, due to a contractual dispute over rebroadcast rights. Although both the timing and duration of the blackout were extremely unfortunate, we are nevertheless pleased to see that both FOX and Cablevision have stopped their petty squabbling and come to a fair, negotiated solution that will restore service at a critical time of year for millions of Americans. In the future, though, these sorts of disputes can be avoided by having both content providers and cable companies focus their efforts on expanding the role of streamed online video and the Internet space as a whole.

Until this past weekend, we had little evidence that either side was going to make a good-faith effort to negotiate. Both companies had effectively pulled out all of the proverbial stops in their attempts to convince the public of each other's evil. Cablevision, at one point, ran an inflammatory message on loop, encouraging customers to call FOX and complain. By contrast, News Corporation (which owns FOX) openly encouraged affected customers to purchase over-the-air antennas. Regardless of one's position on who was at fault for the original blackout, this catalog of childish retorts does not reflect well on either company. Instead of running flashy public-relations campaigns, Cablevision and News Corporation should have been trying to strike a fair deal the entire time.

The contract dispute has also highlighted a key transition in the global entertainment industry: the importance of the Internet space. At its heart, the dispute between FOX and Cablevision is a battle between two business models (traditional over-the-air broadcasting and "packaged" cable subscriptions). However, over the last decade, a third business model has become very popular, particularly with young Americans—streaming online video via sites such as Hulu. For many Americans, whose careers or families may make it impossible for them to schedule discrete and arbitrarily determined blocks of time to be in front of the television, the online platform offers the most in terms of innovation and flexibility. As such, all of the content providers involved in this dispute should explore various methods of expanding online streaming.

To that end, either the content providers themselves or the Federal Communications Commission must encourage a rapid move to the Internet space and a wholesale restructuring of the entire industry. In the future, cable providers like Cablevision should only be responsible for the physical infrastructure of the network itself, while content providers like FOX should offer paid subscription packages (either online or cable-based) that allow customers to pick and choose from a variety of channels and content. For example, the Entertainment and Sports Programming Network could offer paid online subscriptions that would allow subscribers to have access to the same live coverage as television viewers. Similarly, Hulu, a joint venture between several of the major networks, could expand on its Hulu Plus platform to offer paying subscribers full back-catalog access to its most popular programs.

Of course, such a radical change in a key sector of the economy should not be undertaken without considerable forethought.  However, there are several compelling reasons for the entertainment industry—which is hopelessly wedded to an outdated business model—to move toward the Internet space. Perhaps the most compelling is that it is already losing millions of eyeballs (and advertising dollars) to unauthorized "pirate" broadcasts hosted on overseas websites. By not offering a legal alternative for Americans who may not have cable access or choose not to deal with companies like Cablevision, cable and content providers are losing out on millions of dollars of potential income. The technology to stream high-definition content over the Internet is already in place; it is simply a matter of making that content available to consumers.

A far less-publicized—but equally important—aspect of the blackout was News Corporation's (thankfully short-lived) blocking of Cablevision customers on Hulu. This points to another key issue in the ongoing transition of the communications industry. Cable content providers, in their pursuit of profitability, should not let their squabbles with cable companies spill over into the Internet space. Not only does it violate the basic principles of net neutrality (that all data be treated the same, regardless of its source or content), but it is especially troubling because it creates a perverse system of incentives for both sides of the current dispute. Moreover, as many cable companies are also Internet-service providers, such childish tactics can only have a chilling effect on the industry as a whole.

Finally, as the millions of baseball or football fans cut out of the loop can attest, one particular aspect of the dispute that also needs to be addressed is the role of both Major League Baseball and the National Football League in the Internet space. Although both of America's most popular professional sports leagues have made some efforts to expand their viewership in the online space, they still have not made the full transition to allowing online customers to enjoy the same viewing experience as their television-bound counterparts.

At the very least, the two leagues should expand their online offerings to prevent more and more young viewers from becoming "hooked" on the pirate broadcasts that are easier, simpler, and faster than the various cumbersome alternatives currently offered. For example, one New York Times writer criticized MLB's Postseason.tv product—marketed by both Cablevision and MLB as an alternative to FOX's coverage—as "not, by any means, an appropriate substitute to the broadcast that many viewers in New York and New Jersey are missing." Similarly, the NFL offers no method of legally streaming either regular season or playoff football games.

At a time when the World Series, the NFL season, the midterm elections, and the ever-popular selection of various sitcoms are all competing for airtime, it was particularly inexcusable for what was essentially a contract dispute to deprive millions of Americans of a service that they had already paid for, and for which time was of the essence. We are happy to see this blackout come to an end, and we hope that in the future, similar blackouts will be rendered unnecessary by a digital revolution.