Free TV vs. Hotel Cable

I've written quite a bit about over-the-air (OTA) digital television. It's an impressive advance in a major consumer technology and I'm a satisfied customer, but the most interesting aspect of the OTA story might be the coverage that it doesn't get. It took the New York Times months to produce a single (factually challenged) story on the subject though bloggers like Rajiv Sethi had long been on the case.

The absence of coverage fell in line with a couple of suspicions I've long held about the current state of journalism. First, journalists tend to view the world almost exclusively through an upper-middle class perspective (which, given the pay many of these journalists make, is really strange). Second, journalists have grown more passive, more likely to wait for someone (usually someone with a vested interest) to tell them what to say.

Though they might not be talking about it, media companies have taken notice. Both the Tribune Company and MGM have quietly moved into the field with AntennaTV and ThisTV, while the cable companies have been issuing carefully worded statements about how they are not worried about the recent drop in subscribers.

I'm pretty sure they are worried, and and a recent encounter with hotel cable explains why.

For some reason, hotels seldom splurge when it comes to cable (other than the mandatory HBO). This could be because rigorous cost-benefit has shown that all those extra channels don't pay for themselves or it could be because it's an easy item to cut and corporate politics tends to reward short term savings. Either way, you're looking at the most basic of basic cable.

As I was settling in for the evening during a recent trip, I turned on the TV and surfed through the channels. The best thing I could find, honest to God, was Spy Hard on TBS. To add insult to injury, the signal had been severely compressed so the picture was strangely blotchy.

It struck me that I would have been much better off had the hotel simply put an antenna on top of the TV. Being in a major metropolitan area I would have gotten more channels including multiple choices from PBS (I get ten in LA) and at least one OTA superstation like ThisTV or AntennaTV. The programming on these two runs the gamut from from awful (Benny Hill) to good (Philadelphia, La Cage aux Folles) to great (Lean's Great Expectations). ThisTV in particular has been bringing its A-game (It's currently showing Billy Wilder's One, Two, Three. All about Eve is coming up tomorrow).

Cable is largely based on a commitment/upsale business model. You get customers to sign a contract for the economy package then bump them up into progressively more expensive options. This creates a hard (contractual) and soft commitment (you often find yourself hooked on one or more of the shows in the higher tier).

This model worked extremely well for over thirty years but now viewers in much (if not most) of the country have an alternative to basic cable that offers more channels with better programs in higher quality with no commitment for free. All that's required is an appropriate antenna. When we add other elements (Redbox, Netflix, online video, even the DVD section of your local library) the picture becomes more complex but not in a way that improves the situation for the cable companies.

How do you use an upsale approach when your cheap option isn't as good as the free one? I don't see brand-building as a viable solution; the relevant brands here are the shows and networks, not the providers. That leaves two choices: improve basic cable; or hope that the lobbyists for the cellular industry manage to shut down OTA television and grab the bandwidth before consumers realize what's happening.

I would probably have gone with the first choice, but the cable companies may know something the rest of us don't.

Rajiv Sethi was there first

While going through the comment section of this post by Tim Duy, I was reminded that Rajiv Sethi was talking about broadcast HDTV long before the rest of us and was doing a remarkably thorough job of it.

Reputational Capital and Operational Definitions

The following obviously demands a longer post (or series of posts or articles or maybe a book or two) but I'll throw this out in the hope that someone else will do the work for me.

Rajiv Sethi has a characteristically strong piece on "Reputational Capital and Incentives in Organizations" which includes the following:

How, then, might a firm accomplish the subordination of short term goals to long term objectives in practice? There are two possibilities: one could hire individuals who are predisposed to behave in a principled manner even in the face of incentives not to do so, or one could design compensation schemes that adequately reward actions that preserve or enhance reputation. Economists, being fervent believers in the power of incentives, usually tend to favor the latter approach. But in this particular context, there are two possible problems with this. First, the contribution of any given transaction to the reputation of the firm is generally much more difficult to ascertain and quantify than any contribution to the firm's balance sheet. This makes it difficult to assign reward appropriately. Second, in order to serve as credible commitments to clients and customers, compensation schemes must be easily observable and not subject to renegotiation after the fact. This is seldom the case.

Which leads to today's essay question:

20 points

Are organizations biased toward properties that come with operational definitions? If so, can this bias lead to economically irrational behavior? (if you need extra space you can continue your answer on the back of the blog)