Sun, Feb 04, 2018 - Page 6 News List

EDITORIAL: Cable service business model outdated

Cable system operators on Wednesday spoke out against the National Communications Commission’s (NCC) proposal to adopt a tiered pricing system for charging subscribers, saying it would interfere with their right to handle their own property.

The system operators argue that the NT$13 billion (US$444.67 million) they have invested in equipment cannot be recovered if channel operators are permitted to set their own pricing for channels and packages. Conversely, those in favor of tiered pricing argue that as systems have gone digital, system operators should be able to develop value-added services to recover their costs and generate profit.

System operators are right to want to recover their investments, but their attempts to cling to the traditional cable service business model seem to reflect a lack of understanding of modern viewing trends.

A report from Deloitte in December said that a growing smartphone adoption rate is fueling demand for online streaming content. By the end of this year, 50 percent of adults in developed countries would have at least two online-only media subscriptions and by the end of 2020, the average would have doubled to four, the report said. Cable service operators have been predicting the death of cable for years, which is now evidently happening, but it has not meant a decline in content production.

Research reported on Web site Flurry Analytics last year showed that people in the US spent an average of five hours a day on their smartphones. By November 2014, smartphone use had already surpassed TV use, the report said, adding that while smartphone use was originally focused on gaming and user-generated content, by 2016 the majority of people were using phones to watch studio-produced television series.

Arguably, TV programming is as popular now as it ever was, but more people want to access this programming on mobile devices. The reasons are twofold: First, people spend most of their time outside their homes where they do not have access to a TV. Second, the convenience of mobile streaming platforms is that they allow viewers to watch what they want when they want it, they can continue viewing it where they left off on any device, and the content is free of advertising.

The world’s largest video-on-demand providers are rapidly expanding into new markets and viewers now have many choices. In 2016, Taiwan gained access to California-based Netflix, China’s iQiyi and France’s Dailymotion SA, as well as expanded video-on-demand services from Far EasTone Telecommunications and Chunghwa Telecom.

A November 2015 report from telecommunications equipment supplier Ericsson said that Taiwanese that year spent 1.8 hours more than the weekly global average using video streaming apps.

Despite the increasingly crowded market, streaming service platforms have been profitable largely due to their focus on original content. For example, Netflix produced the highly popular House of Cards, Stranger Things, Orange Is the New Black and several Marvel Comics series.

If cable system operators are to keep making profits in the future, they need to adapt to viewing trends. The best scenario would see system operators like Taiwan Broadband Communications developing their own streaming platforms, and channel operators like Eastern Broadcasting producing original content to sell on a per-show or per-series basis to various system operators, or to single operators based on exclusive contracts. Streaming platforms would be mobile app-based, with optional TV modules running that software available for purchase, for viewers who want to watch content on their TVs.

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