Cable Needs Content Buying Entity, and its Own Netflix, Says John Malone

John Malone, Liberty Media Chairman, is a foremost proponent of the idea that U.S. cable TV business has to consolidate further, in part to allow the leading suppliers to gain more leverage in negotiations with progreamming suppliers.

Now Malone also suggests U.S. cable operators band together to create a national buying consortium that would amass the ultimate in scale. Also, such a buying consortium would amass in one place the content rights needed if cable operators want to create their own branded streaming service on the model of Netflix, with rights to operate outside the subscriber premises on a national basis. 

Because cable operators operate on a defined geographic basis, they can't buy programming nationally, he said, and often lack scale to invest in research and technology. 

He said cable companies should "get behind" a service, either one already existing or started by an outsider, which could buy programming nationally.

Such a national buying entity presumably also could allay fears that one or more operators would move to sell such a service on its own, over the top and outside its own geographic boundaries, bringing competition between cable operators to a head for the first time. Comcast likely is the firm most smaller operators might fear, in that regard.

Those notions point to the growing importance of scale in the U.S. communications and entertainment business, both for tactical and strategic reasons. 

For cable operators, it is tactically important to gain negotiating leverage over programming suppliers. Strategically, such a buying consortium and a branded streaming entity would be necessary in the future if and when streaming begins to displace traditional video services to a significant extent. 

But cable operators also are hampered in creating and selling services to enterprises that operate regionally or nationally, as well, because of service footprints that are fragmented. 

There are other implications within the ecosystem, including changing imperatives on the regulatory front. 

As the video business changes, so should the rules and regulations that traditionally have been applied to cable, telco and ISP providers of video services. In fact, many could argue, the traditional franchising rules do not apply at all to over the top providers.

That doesn't mean the place-based access networks will be unimportant. In fact, high speed access will be the foundation for all fixed network revenues. But "video entertainment" could substantially shift to an over the top application.