February 20, 2009, 7:40 pm Don’t Count Out Cable Online By Saul Hansell NY Times
http://bits.blogs.nytimes.com/2009/02/20/dont-count-out-comcasts-online-vod/?pagemode=print There was a lot of discussion online Friday about reports that Comcast and Time Warner are preparing a way to let their customers watch their cable programs on the Internet. Most of the reports characterized this as a way for the cable companies to defend themselves against the threat of Hulu, an online video service. This move may actually be more about an offensive strategy than defensive and much more about cable-only networks like ESPN, CNN and MTV than the broadcast networks that provide programming to Hulu. I also suspect this may wind up being a very good thing for TV viewers, even those that don’t want to subscribe to a cable service. What’s going on is that the cable companies are looking to rethink their business. Instead of simply offering a bundle of programming you can only watch over their wires in your family room, they’d sell a bundle of programming you can watch anywhere, at home on the TV, at the office on your computer, or while traveling the road on your cellphone. Comcast plans to call this service OnDemand Online. The exact business model is still being determined. It might be free with your cable subscription or it could be an extra-fee add on. The hard part of such an offering isn’t the broadcast networks, which for 50 years have operated with an advertising-only business model. That turns out to be much more suited to the Internet age than the cable networks model in which cable companies pay the bills through a combination of ads and subscription fees. Cable companies pay little or nothing for the rights to put broadcast stations on their systems, and so they haven’t been able to prevent the networks from offering their programs online. On the flip side, it hasn’t been difficult for the cable companies to get online rights to these programs either. Comcast’s Fancast Web site already offers on demand episodes from CBS, ABC, NBC and Fox (the last two over Hulu). What is very much unsettled, however, is how the cable-only networks will move online. Comcast alone writes $6 billion in checks to Viacom, Time Warner and other media companies. And in return those companies have kept most their best programs off the Internet. Over time, one of two things will happen: Either the cable networks will have to learn to live on just advertising revenue or they will find a way to earn a subscription fee for distributing their programs online as well as on cable. (Just look at the newspaper industry to see what happens when companies used to two revenue streams have to find a future in only one.) As a result, the cable companies have a great opportunity to take the lead in creating a subscription model for pay TV networks, creating ways for people to get their Greta Van Susteren or Meerkat Manor on the go. The first time any new sort of content rights are distributed, the negotiations are confusing because no one knows what they are worth and companies don’t want to set the wrong precedent. The Wall Street Journal set off all this discussion Friday with an article on the tense talks between Time Warner, Comcast and several programming companies. There’s nothing special about cable as such, and similar online bundles could be offered by other pay TV companies, such as Verizon and DirecTV. What’s interesting is what will happen next. Once the content companies get a basic business model down and the technology is debugged, it will open the door for all sorts of other configurations. Most significantly, what happens if you want to buy your programming bundle from someone other than the company that runs a wire to your house? The cable industry keeps talking about the specter of “over-the-top” cable service, but no one has offered it yet. It’s possible that if programmers start selling to over-the-top services, we may also see channels offered one at a time or in smaller bundles than the pay TV companies do today. There’s a lot we don’t know about this world. How much will consumers value the ability to watch Sportscenter or Larry King Live online, and will the amount they might pay, if anything, be enough to compensate the programmers for any potential loss in revenue from their existing pay TV customers. There is one thing we do know. Until now, people have been willing to pay a monthlyfee for television, and so far Hulu and other Web TV haven’t dented that. Comcast says that even though its subscriber count is down, it is losing business to the telephone and satellite companies, not free Internet programming. By its count, the number of pay TV subscribers in the country actually increased by about 1 million over the last year. Until consumers decide that they are content watching just the most popular networks shows plus extremely low-budget productions without paying a subscription fee, the efforts by the cable companies to get more for their bundles have a much better chance than the commenters seem to think. -- ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 Mail: antunes at uh dot edu *********************************** * POST TO [email protected] * *********************************** Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
