The Internet has been good for cable companies. Comcast (NASDAQ: CMCSA ), Time
Warner (NYSE: TWX ), Cablevision (NYSE: CVC ) they owned the cable, so when it
was high-speed Internets time to replace dial-up technology more than a decade
ago, they opened up a whole new stream of revenue. Its been great. At the same
time, all cable companies and even other premium television services like
DirecTV (NASDAQ: DTV ) and Dish Network (NASDAQ: DISH ) have got to be missing
the way it used to be back before most U.S. households had easy access to the
World Wide Web. Those were simpler days, when the money flowed like an
affordable but delicious boxed wine. Those were the days when cable companies
made their fortunes on pay-per-view pornography. Those days are gone. An article
in The Wall Street Journal highlighted the fact that premium television services
are watching quarterly revenues sag on what DirecTV in particular called lower
adult buys. Both DirecTV and Comcast noted declines in adult film revenues from
their television businesses, though they decline to specify dollar amounts. Time
Warner lost $14 million from its total on-demand revenue because late-night
audiences simply arent interested in paying for dirty pictures any longer.
Playboy s (NYSE: PLA.A ) TV endeavors have seen earnings practically halved,
with Playboy TV and Spice bringing in just more than $44 million in 2010,
compared to almost $76 million in 2007. Analysis firm SNL Kagan said that
overall revenue from on-demand and pay-per-view porn dropped from $1 billion in
2008 to $899 million in 2010, and it expects 2011 to be flat. What happened to
the good ol days when premium television providers could rely on late-night
audiences to plunk down $10 for a half-hour of programming involving sorority
girls and possibly nurses misbehaving? An unnamed cable executive told the WSJ
that the problem is the overall devaluation of television content by alternative
models namely, the proliferation of streaming video options online. That
opinion misses the point entirely, of course. While the Internet clearly is
changing how television is monetized, its certainly not devaluing it. If
alternate models are devaluing television, how has Netflix (NASDAQ: NFLX ) grown
so much during the past two years? If the Internet has devalued anything, its
pornography itself. What was once an expensive and restricted commodity is now
commonplace and free everywhere on the Web. If cable companies want to keep a
revenue stream flowing by preying on their audiences more illicit tastes and
desires, theyre simply going to have to rethink what people badly want to watch
after midnight. Follow what Scripps Networks Interactive (NYSE: SNI ) has done
with the Food Network, for example. Start making half-hour-long clip shows of
television chefs putting the finishing touches on signature dishes and call them
Hot Co-Ed Barbecue. Another alternative: Fantasy news. Hire Dan Rather to read
fake news broadcasts about how the economy is booming, the U.S. government is
stable and making progress while returning to traditional values, and the world
is at peace though less prosperous than the United States. Just rethink what a
fantasy people would pay to watch might be! A more realistic proposal on
recouping revenue lost to declining cable porn sales: unlimited access to free
on-demand programming on connected devices like smartphones and tablets. Cable
companies can add an additional fee on top of existing cable packages. Time
Warner and Cablevision already are experimenting with this by releasing
streaming TV apps for subscribers on the iPad. Its time for television providers
to find new fortunes in those pesky alternative models. As of this writing,
Anthony John Agnello did not own a position in any of the stocks named here.
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