What the Justice Department’s Investigation of Cable Companies Says About the Current State of TV

By  · Published on June 19th, 2012

Culture Warrior

Last week, Thomas Catan and Amy Schatz of The Wall Street Journal published an article about the Justice Department’s antitrust investigation into whether or not cable companies are manipulating consumers’ access to streaming competitors of television content in order to reduce competition. The investigation’s central question is this: are cable companies like Comcast and Time Warner setting data caps to limit download time, speed, and amount of content in order to stave consumers off from using alternatives like Hulu and Netflix? Furthermore, the DOJ is investigating whether or not selective data limits applied to certain streaming outlets (like the fact that Comcast’s data limits can apply to streaming Hulu, but not Comcast’s own Xfinity services) violates Comcast’s legally-binding oath to not “unreasonably discriminate” against competitors.

According to the WSJ,

“Attorney General Eric Holder on Tuesday suggested he had sympathy for those who want to ‘cut the cord’ rather than paying for cable channels they don’t watch. At a Senate hearing, Sen. Al Franken (D., Minn.) said cable bills are ‘out of control’ and consumers want to watch TV and movies online. Mr. Holder responded, ‘I would be one of those consumers.’”

What’s most important about this story for TV consumers is not so much the specific outcomes of this investigation (though that will no doubt have wide-ranging but uncertain implications), but the fact that lawmakers, regulators, and the industry will continue to be forced to recognize new distinctions being made between cable companies, networks, and individual shows as citizens increasingly consume TV online.

The Crisis of Cable

In terms of forming a healthy climate of competition and a variety of choice for viewers, American cable companies hardly represent a free market consumer utopia. Access to certain providers is typically dictated by region, often resulting in relatively limited choice, ever-changing subscription fees and a host of other problems for consumers who feel they have little control, or access to, the companies that bring the internet and television in their homes.

But with the popularization of Netflix, Hulu, iTunes, Zune, and other online streaming alternatives to actually watching television on television (and, of course, the fact that these market alternatives mostly arose as a result of online piracy), the “bundling” logic informing the current business model of cable companies seems increasingly irrelevant. The proliferation of high-speed Internet simultaneous to the threat of TiVo just over a decade ago irreparably changed the average viewer’s relationship to “live” television; access to programming would now be dictated by the consumer’s schedule, not the cable provider’s.

And while DVR no doubt remains a popular technology, with more and more young consumers utilizing their computers to access televisual content it’s increasingly uncertain whether or not we’ll need TVs to watch TV at all in the next decade or so.

Granted, the current investigation is only about possible antitrust violations of behalf of cable providers’ Internet plans, but a shake-up could inspire some of the major cable providers to seek out alternative means of delivering televisual content to their subscribers.

Consumers (and several networks) have displayed an increased preference for an a la carte mode of subscribing through cable networks (though this has yet to be realized amongst the major cable providers). Instead of getting access to cable channels through a bundled subscription, the idea behind the a la carte approach envisions a subscription model that permits consumers to choose which channels they watch and not pay for the (likely) dozens or hundreds of networks that they don’t. But even the a la carte approach is a bit short-sighted, for is still conceives of consuming television content primarily through networks, when consumers are increasingly interacting with television content in ever-smaller increments.

People increasingly watch television today by the show, not by the network, and that’s the real threat that cable companies perceive within the online alternative.

The Crisis of Networks

It’s no wonder networks support the a la carte model for cable providers. It lets them retain a cohesive sense of identity that will outlive their individual shows. But with TV on DVD and many streaming options, audiences are increasingly perusing the market for individual shows irrespective of the network that provides them.

When you have a service like Netflix that makes nearly every existing season Showtime’s Californication, AMC’s Mad Men, and NBC’s The Office all available simultaneously, the perceived distinctions between broadcast, cable, and premium programming that cable providers have lived by since the late 1970s have evidently broken down significantly. Absent commercials (and sometimes even absent censorship for some shows upon reaching home video) and available to be viewed long after their original airing, viewers are experiencing less and less of a sense of cohesive correspondence between the programs they watch and the individual networks providing them – much less which cable package will provide them new episodes of each program. (Test this theory out: do a survey to see how many of your acquaintances can name the network Mad Men airs on; I bet many will mistakenly say HBO).

Breaking Bad on Netflix

Where select networks have a lot to gain from an a la carte approach, those same networks have a lot to lose if online alternatives continue to pervade in such a way that renders any connections between program and network virtually absent for the average viewer. Sure, your given sports fan or news junkie might want all-day access to ESPN and CNN, but viewers invested in select fictional series have in many ways already bypassed the a la carte approach to TV viewing by devoting time to individual series with dedicated followings like Community or Breaking Bad within their own schedule. But NBC will still want you to tune in Thursday nights even after Community gets moved to Fridays, and AMC wants you to watch their newest prime-time drama after the last episode of Breaking Bad airs this year.

With the vast changes taking place in how people watch TV, the measures that networks will have to take to remain competitive and maintain a brand is uncertain.


AMC is a prime case study for the evolution of TV viewing activities. For years, AMC was the inferior version of TMC, having far fewer rights to studio vaults than its Ted Turner-owned competitor. But when AMC got into original programming five years ago with the first season of Mad Men, it followed with a string of successful shows and made-for-TV movies that established the basic cable network as a bona fide competitor with premium cable channels like Showtime and HBO (where Mad Men was initially pitched).

But premium cable dramas are known for their short runs; these shows aren’t designed to be the next Law & Order. After two more seasons, Mad Men will end, but AMC will want you to continue watching their original programming as it seeks to maintain a reputation of “quality entertainment.” How else could so many of us have been duped into following The Killing for so long if it weren’t on the same network as Sterling-Cooper-Draper-Price, Walter White, and The Walking Dead? If you selectively watch one of AMC’s shows but don’t invest in the idea of AMC as a network, then AMC no longer successfully functions in the way that cable networks have defined themselves since the advent of cable.

And this is why today’s TV audiences are encountering a unique conundrum with HBO. The network that basically created what quality non-broadcast television looks like has, with its ebbs and flows, managed a continual output of programming that has retained significant audience interest. Today, it’s biggest draw is in its genre programming: i.e., Game of Thrones and True Blood.

But just as HBO is known for its engrossing original shows, miniseries, and TV movies, the network is equally notorious for limiting the availability of its content via alternative outlets. An antagonism has grown between viewers and the network (an antagonism that has been credited to the rampant piracy of HBO content). This practice has put HBO at something of a crossroads (or, at least in the eyes of its fans). On the one hand, HBO as a brand that delivers a certain type of programming remains as solid as it has ever been specifically because it distinguishes itself not only by its content, but by exclusionary practices like these. And make no mistake: if cable providers lose HBO content to outlets like Netflix streaming, even residually, it’s a big threat to their (antiquated) way of doing business.

On the other hand, people are not watching TV as they used to. That HBO Go is available only to those who already subscribe to the network simply makes less and less sense to viewers who see a decreasing need to actually own a TV in their household. Piracy of HBO content is not likely to decrease.

Perhaps more than any other cable network, HBO is the symbol of the crossroads that TV has met in its mass proliferation on the Internet and continued competition with non-cable exhibitors. Not only are cable providers at a decisive moment in terms of how they’ll adapt to a changing media landscape (the DOJ investigation is only part of this inevitable change), but networks are in a situation where they must find a way to continue to define themselves even as viewers experience content not by the channel but by the series, or by the individual $1.99 episode. The network that proclaims, “It’s not TV. It’s HBO.” now looks more like “TV” than any other network out there.

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