thebusinesswiki.com

This has been in the works for a while but details were published in the NYT yesterday: six of the largest cable companies in U.S. - Comcast, Time Warner Cable, Cablevision, Cox Communications, Charter Communications and Bright House Networks - are working to jointly form a separate company that would allow national advertisers to buy customized and targeted ads across the companies’ systems. The new company is still unnamed (but codenamed Project Canoe), and these companies have been working on it for about six months…the talks have been led by Stephen Burke, president of Comcast, and Landel Hobbs, the COO of Time Warner Cable.

These six companies will put up a total of $150 million behind this effort. Comcast itself may put up the most, between $50-$70 million.

Google recently got into the business of selling TV ads across satellite networks when it signed a deal with Echostar, and is working on deals with others. The execs in Project Canoe believe by jointly working on this ad platform, they can grow the cable industry’s slice of the total TV advertising pie from $5 billion a year to $15 billion a year.

Clearly the cable companies have a lot of work to do to pull this off, but the prize is huge. Forming a viable coalition where incentives are aligned to encourage continued cooperation in the long term is a major step forward.

If the cable companies are successful, Google will to an extent become a victim of it’s own success. Incumbents in other industries will do whatever they can to prevent Google becoming a dominant cross-media ad platform. This coalition has been spurred on by Google’s aggressive moves into new spaces. However the cable companies also have a significant revenue upside (this is not just a defensive move but one designed to increase their share of advertising revenues).

The first hurdle was to form a viable and well structured long term coalition. Assuming they can overcome the technology integration issues (not a trivial matter), the next hurdle will be negotiating terms with the content providers on how the revenue for targeted advertising will be split, and how much advertising will become targeted. It will be interesting to see how (and how soon) this plays out.