Time Warner Cable and Viacom Fight Over Who Gets to Snuggle With Consumers
It's court time for Time Warner Cable (TWC) and Viacom (VIA), and we're not talking tennis or basketball. The reason is an iPad app. Time Warner released an app that allowed its customers to watch television from their Apple (AAPL) iPads -- including programming owned by Viacom, which argued that Time Warner didn't have the rights to do so. Now the two are suing each other.
This is about money, of course. But it's also about relationships with consumers, and that is will become a big issue in all media. For years, cable has owned the relationships with its customers for a good reason: it owned the physical connections to them. The companies that created the programming depended on cable, which gave those carriers enormous negotiation power. The Internet has changed that and the current court fight is only the beginning of the wrestling between the two sides.
What concerns the TV and movie producers is how the digital music business developed, as says Keith Nissen, a principal analyst with market research firm In-Stat, explained to me:
Because Apple has become so dominant, if you want an MP3 player, it's pretty much going to be an iPod. In the video space, the movie studios are lamenting the lack of a decision to rein in Wal-Mart with regard to retail disk sales. They permitted Wal-Mart to control the retail disk sales business and did not do anything to promote the sales of videos through grocery stores to create completion. As a result of that, Wal-Mart comes back to them and says, "Because we dominate this market, you now have to sell this content to us at this price." That's what they're up against, and they do not want to have the online distribution controlled by any company or ecosystem.It is the combination of strategic imperative and the knowledge that the producers can use multiple channels to reach consumers, or even do business with them directly, that will push the studios in this direction. In a way, they are in the same position as independent video producers who seek their own audiences. Ironically, the studios play the same part for the independents as the cable companies play for the studios.
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