The developing storyline around Google Fiber is that it is getting out of the linear video subscription business because that business is dying. One need not look so hard for other conventional explanations. As every small telco and cable operator has known for decades, without scale, it is impossible to actual make a direct profit from linear video.
That was true even at the height of demand for linear video subscriptions. A couple of decades ago, as part of a due diligence review by a telco looking to buy cable TV assets, I asked the CEO what would happen to his business model if the subscription rate dropped from the then-current 90 percent rate to 70 percent. He immediately blurted out “then we’re dead.”
Keep in mind that this was before internet access or voice services were part of the bundle. The point is that even for a cable company with hundreds of thousands of subscribers, there was very little room in the business model for a dip in subscribers from 90 percent to a lower figure.
For any firm such as Google Fiber, with less than 100,000 subscribers, the video entertainment business case (as a stand-alone product) almost certainly will not work. For video as for any other consumer service, scale really does matter, a fact small cable TV and telco operators always have lived with.
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