WASHINGTON, D.C. -- When Brian Roberts dazzled the crowd at the National Cable and Telecommunications Association’s opening session Tuesday with a preview of Comcast’s X2 video platform that offers personalized programming recommendations, the only surprise for Stephen Necessary was that the chairman and CEO of the largest cable TV provider seemed to bill it as an industry first.
Necessary is vp video product development and management at Cox Communications, the third-largest multisystem cable operator in the U.S. In December, Cox launched a very similar innovation under the brand name Trio on a limited basis that it plans to roll it out across the country this summer with even more enhancements.
“I was glad to see he adopted our lead,” quipped Necessary.
What Roberts' presentation did signal was the next big step in the evolution of cable television, with the introduction of a host of new technological innovations that are designed to improve the user experience, take advantage of cloud technology and open the door to extending cable’s business model beyond the sale of video, broadband and phone services.
This comes at a time the market for cable TV in the U.S. has matured and begun to erode slightly, with most big multisystem operators (known as MSOs) actually seeing a small decline in the number of subscribers.
Those small declines are troubling because it could lower stock prices, make it hard to attract investments and even lead to further consolidation. There was a report last week on Bloomberg News that Liberty Media will use its stake in Charter to acquire Time Warner Cable and operate them as one company – although that speculation seems premature. Time Warner Cable won’t comment.
Glenn Britt, CEO of Time Warner Cable, warned during a panel this week that customers are already unhappy about their rising cable bills.
A veteran industry observer agrees. “If you charge the customer too much,” says Dina Myer, senior analyst at SNL Kagan, “if you try and raise rates every year, if you’re not really trying to serve the customer with true service, there are other options.”
Those options include cord cutting, the practice of cable customers dropping paid services either for economic reasons or for streaming services like Netflix and Amazon Prime, or they opt to get content from hundreds, even thousands, of online channels available free on any computer or on home screens via Apple TV or a Roku box or other devices.
So cable is finally getting its act together on things that do matter to consumers. After years of talk, there were announcements that week that indicate the industry is finally ready to implement TV everywhere – making programming consumers pay the cable company for available on all their connected devices. Until now the implementation -- despite the hype -- has been slow and haphazard. Many customers have found it difficult and confusing to get content on their computers, tablets and phones even after they pay for it.
Meyers says the key thing she picked up at the cable TV show this week was the “total acknowledgement that television everywhere needs help, that they need the content to get out there, that they need to better explain to the customer what it is, that they need to make authentication easier and give the customers need more help.”
Offering faster connection speeds is a start, and the ability to move transactions to the cloud with nearly unlimited capacity make these changes possible; but with so much content, it is also crucial to sort out for the customer what is available and offer better ways to find what they really want. That is what Comcast and Cox are really talking about with personalized recommendation engines.
And Time Warner Cable says it is also working on the same kind of systems.
“We're developing an entirely new video guide with a simplified interface to help our customers enjoy TV even more,” a Time Warner Cable spokeswoman told The Hollywood Reporter this week. “The new guide, or hosted navigation system, will be cloud based and work in concert with the deployment of new set top boxes. … It will … provide a better, more consistent experience with other popular Web-based portals and TV viewing habits.”
Translated that means TWC, like Comcast and Cox, believe that by adding a personal touch, offering “Wi-Fi hot spots” all over the place where subscribers can connect and by making the entire experience more user-friendly, they can start to acquire more customers and do a better job retaining those they have.
“The reality is we offer hundreds of channels,” says Necessary, “plenty of content, tens of thousands of video-on-demand assets. We all know for consumers it is very difficult to find that content, so they all gravitate to the same channels they typically watch, or wander through video-on-demand searching for content. Quite often, they miss the content they have paid for and might enjoy if they had a better way of finding it.”
So the answer, the MSOs believe, is these personalized recommendation systems, similar to what Netflix has done for several years, but with a difference – recommendations for every member of the family.
“Our recommendation engine is personalized with up to eight profiles,” says Necessary. “What it does is it learns based on your viewing habits and your viewing behavior – if you don’t opt out. It learns from what you have watched, what you have recorded on your DVR, and determines what you like. Dad’s profile will be different than mom’s and from each of the kids', and it will change as you change.”
While the big companies are taking the lead on announcing these plans, a company called Arris was at the show offering a similar system for sale or lease to smaller cable systems. Arris is a public company that bought Motorola’s set-top-box division in April for $2.2 billion in cash and about 7 percent of its stock from Google (after it acquired Motorola) to add to its own technology. Comcast is one of the biggest investors in Arris.
“We’re trying to put the viewer in control,” says Jonathan Ruff, technical marketing lead for Arris. “The customer will now influence and drive the experience instead of being driven by the operator.”
Arris has already begun to deploy its recommendation engine technology in Europe and in Canada, where Shaw, a large cable MSO, is using it. Ruff said the company showed it at the U.S. cable show this week for the first time. He expects it will take time to reach customers every where.
“Its not a revolution,” says Ruff. “It’s an evolution.”
These moves have even drawn an enthusiastic response from some of the small independent cable channels who find it difficult to reach consumers who are preoccupied with the well-known branded channels. That is the case even as some small channels have been bumped off systems by MSOs who feel they don’t have enough viewers to warrant even a small sub fee.
One of those is Mnet America, a fledgling English-language cable channel that serves up Asian pop and culture.
“There are a lot of discussion about the future of television,” says Ted Kim, president of Mnet America. “Ultimately as programmers, we’re all about content and delivering great experiences. We view cable as a powerful connected way to do everything. That’s why we're excited about TV everywhere, but it has to be fully integrated to work.”
While these new cloud-based systems will offer benefits to consumers, they also open up even more moneymaking opportunities for the operators, as Ruff points out.
Besides recommending TV shows and movies and making it easier to use security services and environmental systems, Ruff says that they also will offer related opportunities to sell merchandise like T-shirts with images from movies or TV shows, and services including banking, education (what they call long-distance learning) and even the ability to monitor your health.
Comcast’s general manager of new business, Mitch Bowling, said on a panel this week about these new services that, driven by improved broadband, they “can literally change the way people live in their homes.”
He also noted they can drive the MSOs' growth.
Or as Ruff puts it, they can get customers so involved and integrated into the cable company offerings that it won’t be desirable to cut the cord or switch to satellite or over-the-top providers who can’t match the full cable bundle of services.
Amy Quinn, director of external communications at Cox, says the company has done research already in homes where the new system that includes personalized recommendations and expanded services have already been deployed. It found 56 percent of users said it has made them more aware of content they didn’t know about; 32 percent said it makes them watch more television; and 76 percent “strongly agree” that it has made it easier for them to find and record shows and movies they want to watch.
This summer in phase two, Cox will make all of the new services available on “second screens” like the tablet computer, a PC or a smart phone.
Arris systems already allow the user to move content around from one device to another and even use a tablet computer in place of a remote control.
“We certainly like to provide our customers more value,” says Necessary. “If we do, it is going to be harder for them to change. And it will make us more successful in acquiring new customers and more successful in retaining them.”
So before you look at the small decrease in people who pay for TV as a signal of dark days ahead or get excited about cord cutting or over-the-top competitors, keep an eye on these capital intense MSOs who have no intention of unhooking their customers any time soon.
This time it's personal.