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New Levels of Self-Destruction

00297_00152If you’re not one of the 34 MILLION or so Direct TV or DISH Network satellite subscribers who’ve been hit with one kind of station blackout or another these past two weeks, allow me to fill you in.  There has been a nasty fee and carriage contract dispute going on between multiple satellite service providers and the media content companies who produce our favorite TV shows such as Sponge Bob Square Pants and Breaking Bad.  Personally, I don’t watch much TV to be affected, but these will be important in a minute.

On Sunday July 1st, DISH Network dropped three major AMC networks and on Wednesday July 11th, Direct TV dropped 26 Viacom channels from its lineup.  And, this isn’t reserved to SATV.  Less widely reported, Time Warner Cable is currently blacking out major networks in many homes across the country with cable because of contract disputes with Hearst Television.

A carriage contract is not unique to the television or entertainment markets; it happens in all markets where one party provides the mechanism for delivery and another supplying the goods.  There’s nothing inherently wrong with this type of contract. In fact it holds substantial opportunity for each party.  Until, that is, they get greedy and indignant with each other at the expense of their real customers.

Satellite and media companies are failing to realize one critical factor.  Customer satisfaction is going to be, in the end, what decides whether they live or die.  It doesn’t matter if you get the programming back today or a month from now; you’ve already had a bitter experience that customers won’t forget.  And, as soon as another option becomes available to the market, they will feel no loyalty to EITHER of you to re-up their contract.

I liken this to the couple having a spat in their living room.  While they are so busy fighting about the issue du jour, they don’t notice their next-door neighbor sneaks in and steals the flat-panel display off their wall.  They’re too busy squabbling about trivial matters; they can’t see the real threat is lurking outside ready to take everything they have.  Meaning, the business model of pay-to-play is already available and will only continue to grow.  Don’t believe me, read two of Gary Kayye’s most recent articles here and here — let alone if Apple TV ever becomes a reality.

Each side of this dispute has its merits and a reasonable argument.  Here’s the thing, Viacom is wrong because their shows have constantly slipped in Nielsen ratings, and Direct TV has a limited customer base without Viacom programming.  Hello, you guys actually NEED each other to stay in business.  But the real self-destruction is, they are BOTH fighting to sustain a business model of delivering television content that is already dead.  Did they not learn anything from the music industry and iTunes to see where this all leads? Extinction lies ahead if they don’t realize Internet providers are breathing down their backs.  And, like the next-door neighbor, they are busy working on taking everything you own.

Have a flat panel that accepts HDMI or another digital format? Sign-up for NetFlixAmazon, or Hulu today.  If not, there are plenty of adapters out there to convert your signal until you have one.  Sure, you can’t watch all the programming real-time YET. But, how many of us use DVR’s so we can watch our shows when it’s convenient.  And, this trend of “network-ready” flat panels will only continue to increase.

Which brings me back to Sponge Bob and Breaking Bad.  These companies have taken things to an entirely new level without realizing their detriment.  Take one look at Viacom or DirectTV’s twitter feed and you will see how shortsighted they both are.  Each one is tweeting, retweeting their customers and supporters messages.   Not only does that make them look incredibly petty, but also, I’d say the entire marketing around this fall-out is outright childish.  I find myself saying, who in their right minds as CEO would let this type of behavior continue.  Is this really what we can expect from our major companies in USA.  It feels particularly desperate to me.

And, customers are fickle and trends change overnight.  Remember, Barney the purple dinosaur all kids loved?  Each has gotten into this stance of “see my customers know we’re right” instead of focusing on the business of trying to work out a reasonable agreement to satisfy both parties.

Really Viacom, did you honestly put up a picture of Sponge Bob Square Pants on your website taunting all DirectTV subscribers whose KIDS can longer watch their favorite show?  And, DirectTV, did you really set up a Twitter hashtag #DirectTVHasMyBack as if paying $70 a month is some kind of deal?  To see some of the ridiculous ads both parties have “time” for, check here.

My philosophy on business has always been you either ride the wave or you end up end being crushed by it.  And, more importantly, you need to be looking out to three waves ahead… so, you don’t inadvertently miss the one that wins the Mavericks.

So, are these companies playing a no-win game or will customers continue on with these types of outages and fee hikes as long as we have our TV’s and season premieres?  Are you already looking for or using alternatives, let us know!

 

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