Cutting the Cable TV Cord
In 1990, I was a legal intern at Viacom International, at the time, one of the largest owners of cable television systems in the United States. It was a great job. My main “clients” were Heckle & Jeckle, Mighty Mouse, and the company's library of classic television shows from the 50s and 60s. The library included the iconic Twilight Zone, I Love Lucy and The Honeymooners. I worked in the Enterprises division. My focus was pointy-headed copyright and trademark issues -- and sending default notices to television stations that stopped paying their bills. Down the hall from from me lived the cable television attorneys. In the early 90s, they spent a lot of time buying and selling cable television systems. When valuing a cable system, they looked at multiple of cash
flow and value per subscriber. At the time, the price you paid for a subscriber when you acquired a cable system in a sale was sometimes in the $2,000 to $2,500 range.
If the price Viacom was willing to buy and sell subscribers was $2,500, then $50.00 a Fire user is a steal.
Unlike cable, launching a tablet is not (relatively speaking) capital intensive. No laying of cables. No tough federal regulations. $50.00 is Mr. Bezos’ advance on the right to sell you and I – and our families – books, magazines, music, movies and television on their proprietary platform.
Curbing Cable & Book Publishing's Power
Recently, Eric Schmidt, Google's chairman, was grilled over similar issues. One of the concerns voiced at recent Senate hearings was whether Google (and by implication, Amazon and Apple) should own the content that flows through their pipes. Ironically, Viacom was formed in 1971, when the FCC issued consent decrees preventing the big three television networks (the Amazon, Apple and Google of their day) from owning a stake in the prime time programs they broadcast.
*Footnote. By 1991, the FCC relaxed the Fin-Syn rules. Shortly thereafter, Viacom acquired CBS Corporation. Viacom, once CBS’s child, was now, to quote the old Willie Nelson song, "it’s own grandpa."