Newest generation of set-tops are 21st century cable-ready TVs

Jim Barthold, FierceIPTVI saw my first cable-ready TV a long time ago when a friend with way too much money carried it into his family room with the announcement, "Look what the bank gave me for depositing $5,000."

When you figure that sum was a goodly percentage of my annual salary at the time and that banks give away nothing but grief these days, you can pretty much pinpoint when this all took place.

Anyway, this friend, who was a lawyer, never saw a reason to pay for something he could get for free, so he immediately glommed onto the fact that the local cable system was putting its premium channels unscrambled in the upper tiers where only those scant few cable-ready TVs could tune them.

The majority of viewers with 12-channel sets couldn't see channel 100, so it was just my rich friend and others of his ilk who got away with a free ride that lasted about as long as banks gave away TVs.

So what do cable-ready TVs have to do with the IPTV space? Everything. Cable-ready TVs were one of the first of a long line of devices intended to circumvent the cable operator's desire to reap rewards from premium channels--or, as some might say, the cable operator's desire to gouge as much as possible from hamstrung consumers. The minute those operators figured more than one person was stealing their property via cable-ready TVs, they shut it down.

This week's newsletter has two stories that are six degrees linked to cable-ready TVs. First, a source at Amazon (Nasdaq: AMZN) has leaked the online giant's intention to build a set-top box that will connect all Amazon content directly to a TV via, of course, a broadband connection that Amazon doesn't, and probably won't ever, control.

Amazon's box joins those being built by Roku, Boxee, Apple (Nasdaq: AAPL), Google (Nasdaq: GOOG), Microsoft (Nasdaq: MSFT), Intel and anyone else who's ever given a cable television or IPTV engineer a job. Each announcement, whether formal or not, comes with an equal pronouncement that the days of the pay TV service provider are waning, and there's a new bunch of kids in town who are going to control the residential consumer.

Not quite in so many words, Netflix's (Nasdaq: NFLX) Reed Hastings said the same thing when he predicted that "linear TV" would disappear in an avalanche of apps provided by Internet TV providers, providing the second tangible link to cable-ready TVs. And, while Hastings seemingly played the IPTV tune, it wasn't an intentional riff. Yes, he said, multichannel video programming distributors (MVPDs, aka pay TV service providers) are getting wise to the Internet game. But their programmers are ahead of them, and a new breed content delivery specialists, beholden to no one but the end user, are gaining strength and preparing to take the lead.

Both stories sound good. Certainly Amazon has a wealth of content from major studios and television channels and other programmers that would make an attractive package streaming over a pay TV service provider's broadband pipe to a modern connected TV. And yes, Netflix continues to rack up huge subscriber numbers, fomenting irrational exuberance on Wall Street and grating on the nerves of the naysayers.

The problem with both models, though, can be traced back to cable-ready TVs. It would have been very easy for cable operators at the time to simply allow consumers with cable-ready TVs to tap into all cable fare. It didn't happen because the programmers, who made their money from subscription fees paid to cable operators, didn't want them to do it.

And it won't happen now--at least not on the wide scale so many so gleefully predict--because the programmers that hold the content make their money from the pipe the pay TV providers put into the residence, and they won't let it happen. They'll toy with the idea of cutting out the middleman and they'll certainly try to do it on their own by putting their material directly on the Internet but, in the end, they'll follow the same pattern they did way back when banks gave away TVs and shut down the free pipe.--Jim

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