Cable Show 2012: 'We Don’t Know What the Customer Wants,' Says Discovery's David Zaslav

UP: David Zaslav

The Discovery CEO's 2011 pay rises to $52.4 million, up 23 percent from 2010 and topping rival moguls Philippe Dauman (Viacom), Jeffrey Bewkes (Time Warner) and Robert Iger (Disney).

The executive and panelists including Time Warner's Glenn Britt and AOL's Tim Armstrong converged in Boston to discuss the industry's uncertain future.

BOSTON – One thing was clear from the opening general session of the 61st annual national cable television convention: there has never been more competition, cause for concern and confusion about the future since cable became a force in global media more than three decades ago.

“Our old system worked for years but it’s somewhat archaic,” admitted Glenn Britt, chairman of Time Warner Cable, adding on a more positive note: “Our goal is to get the video service we sell on every single device in our home.”

The way that is going to happen is likely to be one of the biggest changes, added Britt. Apologizing to Cisco and Motorola who make most of the set top boxes, he said those are likely to go away in the future and be replaced by TVss and devices that use the Internet Protocol (IP) to deliver the signal directly to the consumer, whereever and whenever they want that content.

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“Eventually most people wil have so called smart televisions which are capable of displaying these services without a set top box,” said Britt, “and we want to be on every one of them.”

That is the other big question. Will cable as we know it remain relevant, or will it be usurped by over-the-top services, by steaming video alternatives or other new platforms that go around the traditional gatekeepers and directly to the buyers?

"The truth is we don’t know what the customer wants,” said David Zaslav, president of Discovery Communications in reference to technology and programming, adding: “It’s important for us to stay flexible and look at the market place and see what is working. I don’t think we should presume every device has a similar type of consumption.”

What Zaslav means is that the early experience indicates people want to use their smart phones for communication, texting and to watch short video, but not long form video such as full-length movies. That, the panelist said, is still when people want to watch a big screen TV.

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Zaslav said they recently bought a company that does a hundred million short streams a month, mostly of user-generated video content, that costs a lot less and doesn’t look anything like the slick, highly produced content on most of Discovery’s 13 domestic channels.

“Our key priority is growing our channel and our world but we don’t want to wake up one day and discover people are watching short form video instead,” said Zaslav.

Tim Armstrong, chairman of AOL, said they think there is an opportunity in video of differing lengths. Everything doesn’t have to be a half hour or hour show any more. He said the “average length of what people watch is on video is short but growing.”

Armstrong said much of the attraction is still in offering brands people can understand and trust. “We really want to be the arms dealer,” said Armstrong, meaning they want to offer “the best content, partner with advertisers and look to distribution partners” to help get it to consumers.

Armstrong said his company is about to launch the Huffington Post streaming network, a new kind of network for news.

The question kept coming up of who was going to pay for all this, especially as new technologies are offered that allow consumers to skip commercials. First was the fight over the DVR, but then that was worked out. Now Dish network is offering the “hopper,” a way to jump over commercials.

That had the panelist fuming about what it means to the future.

“It’s incumbent upon us in the content business to preserve the model so we can reach people and we can invest,” said Zaslav. “It’s the fad of the moment. It gets a lot of headlines but I don’t think it’s sustainable.”

“In the end we need subscriber fees and we need advertising revenue,” added Zaslav, “so we need to be disciplined as an industry.”

What Zaslav means is that Dish and others need the content and they must not make deals to provide them programs when they will use it to destroy the economic basis of the entire system.

“The dual revenue stream of advertising and subscription has been great for content creators,” said Britt. “We have more television than I ever imagined when I was growing up. I don’t think we want to destroy one of those revenue streams.”

Britt said that “everybody I talk to” in the mobile business tell him the pipe to the smart phone is never going to be as large as the system that delivers to the home and that will continue to limit what can be done. “Mobile networks are always going to be some what limited,” said Britt, “especially when it comes to video.”

Britt said the average household today watches about 400 hours of video a month, and that cable is still the most efficient way to deliver all of that TV. “Most of those other things don’t offer that kind of value to consumers,” said Britt.

That is clearly what cable is counting on in the face of great change.

In opening the first general session, former FCC commissioner Michael Powell, who now heads the National Cable and Telecommunications Association, said that “The fact so many Americans stuck with cable through the recession is a testament to our stability and importance.”

Powell said cable has invested over $200 billion in private capital to build to the point it has reached where some 90 percent of Americans have or are in reach of high quality cable TV services, which today includephone and internet service.

“Amazon was just a river in South America until national broadband made possible the national retailer,” said Powell, adding: “Too many industries have been wiling to rest in the face of challenging and disruptive technology but I assure you cable will not be one of them….We want to get content here, there and everywhere.”

“Yes,” added Powell, “some consumers may even cut the chord but at the end of the day cable will benefit from the competition.”

That echoed the comments of Massachusetts Gov. Deval Patrick, who opened the convention with a welcome and comments about how much they have invested in high tech industries, education and infrastructure tosupport these businesses, and how it has paid off in higher employment and a stronger economy.

"We are investing in things that we know are not just important today,” said the governor, “but for a generation to come.”