Cable-TV needs a new digital strategy. And fast.
James Murdoch, CEO of 21st Century Fox (FOXA) , didn't mince words on Thursday when castigating cable-TV and satellite providers for failing to build a mobile TV platform -- known widely as "TV Everywhere" -- that viewers will actually use. Something that conveniently, even elegantly, gives them the channels they want.
"'TV Everywhere' hasn't been executed properly. The user interface isn't great," Murdoch said Thursday during an interview conducted by Discovery Communications (DISCA - Get Report) CEO David Zaslav at the Paley Media Center in New York.
Cable and satellite-TV operators, he added, "haven't really innovated enough over the last 20 years."
Instead of a stylish or even functional platform such as the one built by Netflix (NFLX - Get Report) or the outlawed Aereo, "TV Everywhere" platforms don't make all channels available for mobile viewing, are difficult to search and are loaded with so many channel exceptions that user adoption remains sluggish.
As a result, Murdoch lamented, there's been "this explosion now of new entrants because the innovation for customers hasn't been there."
No wonder that TV ratings are down.
Live television viewing among people 18 to 49 fell at most cable networks during the third quarter, according to a study by Morgan Stanley using data compiled by Nielsen. Overall, Time Warner (TWX) networks posted an 8% drop, while viewing of channels owned by Comcast's (CMCSA - Get Report) NBCUniversal tumbled 17% and Disney's (DIS - Get Report) cable group dropped by 13%.
Viewing of Fox's cable-TV group rose 4%, due to strong demand for sports programming -- the Major League Baseball playoffs and the start of the NFL season -- coupled with the beginning of the presidential election campaign at Fox News.
Sluggish ratings have translated into slower revenue growth at Time Warner and Disney, and sales declines at Viacom (VIAB - Get Report) . Time Warner was forced to cut its profit forecast for 2016, citing lower fees from pay-TV operators who are seeing subscriber decreases, the product of cord-cutting.
"Customers are demanding better search and discovery options for TV viewing," wrote Craig Moffett, media analyst at MoffettNathanson, in a Nov. 18 investor note. Essentially a "Spotify for TV," he added, referencing the popular music streaming app known for its ease of use.
What if cable-TV had innovated?
"If you really had a 'TV Everywhere' product that was compelling, it would create a much more nourishing environment economically, and from the viewer perspective," Zaslav said.
In response, network owners have been fast launching their own streaming services. Time Warner, eager to counter Netflix's ascendancy, began HBO NOW earlier this year, followed by CBS's (CBS - Get Report) Showtime, and a facsimile of its flagship network, CBS All-Access ("all" does not include its lucrative NFL programming).
Viacom, eager to counter Netflix as well and capitalize on its Nickelodeon brand, began a child-focused subscription service called Noggin.
"Les [Moonves, Comcast's CEO] has already says he's going direct, and he has a different portfolio," Zaslav said.
But going direct-to-consumer, Murdoch says, has its downside. Fox has yet to launch a subscription streaming service for any of its networks, Murdoch said, for fear that marketing networks separately runs the risk of alienating price-conscious consumers while driving down viewership.
The solution, he said, will come from cable-TV providers offering a variety of digital bundles that are likely to include the major broadcasters as well as sports programming -- the engine that all but sustains the industry.
"I do think we'll see a re-bundling," Murdoch said. "Not just the so-called skinny bundles, which are broadcast basics and a few bits and pieces, but are inclusive of brands that really matter, inclusive of sports and big general entertainment networks that can be delivered at a lower price than the full 200-channel package costs right now."
That's an innovation that's likely to be embraced by viewers.