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TheStreet Open House

Cable Companies Think Out of the Box

Stock quotes in this article: CMCSA, TWX, LBTYA, GOOG, AAPL

By the Financial Times

Television is learning some lessons from the web.

At the Cable Show, the television industry gathering in Chicago last week, technology buzzwords like "apps", "cloud" and "social" were bandied about with much excitement.

But it wasn't Apple, Google or Facebook showing off their latest wares. Instead, it was stalwart cable television companies such as Comcast, Time Warner and ESPN seeking to exploit advances in mobile communications, remote storage and software design in a bid to stay relevant to today's consumer. "The users' expectation of how to consume video is changing," said Imran Shah, managing partner at IBB Consulting. The way viewers search for programmes is shifting, and "social recommendations are an integral part of that".

Comcast, the largest cable operator in the US, unveiled the next generation of its Xfinity software. It allows users to search for content more easily and access some web content. For example, a search for "Tom Cruise" will turn up any upcoming programmes about or starring Mr Cruise, as well as his films that are available on demand.

The new Comcast software also features four "apps" that display information about weather and traffic, and provide access to online features including Facebook and Pandora, the internet radio service.

Efforts to improve the TV watching experience are part of a broader push by Comcast and other cable operators to retain subscribers who might otherwise flee to online options.

Behind Comcast's new system is a fundamentally new approach to television navigation. Instead of the "grid" software that displays channels and is built into the set-top box provided by cable operators, Comcast will provide an interface hosted in "the cloud" that can be customised and updated.

"The cloud allows you to have faster innovation to be able to take all the brains of the guide - the search, personalisation and recommendations - and pull it out of the cable box," said Brian Roberts, chief executive of Comcast.

"Cloud TV is more flexible," said Ian Blaine, chief executive of The Platform, which provides the infrastructure for Comcast's new system. "You can develop faster, reach more devices. It is the trend pushing forward this year."

Liberty Global, the US group that owns cable television properties throughout Germany and Scandinavian countries, said it was also working on a similar product for European markets, called Horizon, which will be available later this year.

Overall TV viewership increased 22 minutes per month per person from last year, according to Nielsen, and viewers' expectations for ease of navigation continue to rise.

And while Netflix, Hulu and Apple are winning fans with their alternatives to traditional cable packages, analysts see the largest opportunity for a cable company that can use the best of the web to its advantage.

"The company that integrates online, traditional linear channels, video on demand and digital video recorders online across multiple platforms in an easy to use interface . . . has tremendous upside in terms of video market share and more importantly video pricing," said Benjamin Swinburne, analyst at Morgan Stanley.

Companies who wish to seize this opportunity will have to act fast. Already, the established model of television distribution is showing signs of breaking down. HBO and ESPN, two of the most successful cable networks, have deployed their own applications that let users watch on an iPad.

ESPN's app, which lets users view live programming, has been downloaded more than 2m times. HBO's app, which provides on-demand options, has more than 1m downloads.

"The stronger brands are saying that I'm not sure we want to be bundled," said Nomura analyst Michael Nathanson.

"We have a subscriber base that knows how to find us on their own. We can develop our own application."

So while the cable industry is riding high these days on steady subscribers and booming revenues, its executives recognise that after decades of dominance by traditional television, new technology has suddenly made their world much more complicated.

"We have to embrace new technologies, we need to deliver things in new ways, we need to embrace all of the screens," said Time Warner Cable chief executive Glenn Britt.

"There's no such thing as a TV anymore. There's a video display device."

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