Channeling TV shows to the Web
Cable operators and media companies are cautiously dabbling in on-demand online video, but this is one case where caution could be as dangerous as recklessness.
Recently, the nation's two largest cable operators have been talking about offering their cable lineup to subscribers online so they can view their favorite shows on their computers. And now, YouTube, the site Viacom sued for more than a $1 billion in 2007 and threatened to have shut down, is signing deals with big studios like Sony Pictures and Lionsgate, as well as TV network CBS. (CNET News is published by CBS Interactive, a unit of CBS.)
All this recent activity seems to suggest that cable companies and big media companies finally understand that the Web is their future. People want to watch what they want when they want. And the Internet provides an ideal way to connect people to their favorite content.
While these efforts are a step forward, the cable operators and the media companies are still trying to maintain control and strike a balance between the old and the new. Their biggest fear (and a reasonable one) is disrupting an extremely lucrative business model that has served them well for the past 30 years. But experts caution that if they move too slowly, they could risk losing everything to digital piracy.
In short, do you give up some of your existing revenue and hope you can make that money back through advertising? Or do you stick with your current model and fight what could be a losing battle to protect your copyrights?
"There is no way to put the genie back in the bottle now," said Avner Ronen, CEO of Boxee, a company that acts as a sort of browser for the TV to help people find and play online video on their big screen TVs. "But if users can't easily get the content legally and reasonably priced in a reasonable amount of time, they will go out and get it some other place. That has been proven with music, and video is no different."
Appetite for online video grows
There is little doubt the online media age is upon us. Movie studios and network TV companies have been serving up popular shows online for at least the past couple of years. And now the nation's two largest cable operators, Comcast and Time Warner Cable, are testing services that allow their cable TV viewers to watch their regular cable lineup over the Net on their computers.
Time Warner Cable, the second-largest cable operator in the country, is already testing its online video-on-demand service in Milwaukee. The service allows Time Warner customers who subscribe to HBO, for example, to watch episodes of "Entourage" or "Flight of the Conchords" online through the Web site. Subscribers who don't pay for HBO, don't get access to those shows. Comcast isn't in tests yet, but the company plans to offer a similar service available through its Fancast Web site later this year.
Unlike video Web sites such as Hulu.com, which is owned by NBC and News Corp., and CBS' TV.com, the cable online video services are not free. And it doesn't sound like the cable operators have any intention of offering them for free.
"We believe we can add more value to the entertainment that people are already paying for," said Sam Swartz, executive vice president for Comcast Interactive Media. "We recognize that consumers have different ways to consume content. Some will want to view it on a PC. Others will want to see it on a TV. Our job is--for the same subscription fee--to offer it to consumers on whatever platform they want."
One thing has become very clear to be successful in offering online video: Content is king. And sites that don't have it die. Just look at Joost, which was founded in 2007 by Janus Friis and Niklas Zennstrom, the same pair who founded Skype and Kazaa. But the company had trouble landing top TV shows and films and two years later, it's on the auction block.
Meanwhile, NBC and News Corp.'s Hulu.com has flourished providing online access not only to NBC's and News Corp.'s own content, but also TV content from others, as well as some movies. CBS has also gotten into the game by offering some of its TV shows online through its Web site TV.com. And now movie studios are courting the once loathed and feared YouTube. The site owned by Google recently signed distribution deals with Sony Pictures, CBS, Metro-Goldwyn-Mayer, Lionsgate, Starz, Discovery Communications, and National Geographic.
Show me the money
Media companies plan to make money from these services through advertising, a model that has worked well in the broadcast world for more than 50 years. But making money in advertising on the Web has so far proven harder than in the broadcast market.
The problem is that media companies make more money from airing a show on broadcast than they do online, even though a lot of people who record their television shows with a DVR fast-forward through the broadcast commercials. And viewers of Hulu can't forward through the commercials offered during their shows. The other problem is that advertising firms get paid bigger budgets to develop advertising for TV spots than they do for Web spots, providing an incentive to push clients toward TV advertising rather than online advertising.
Another major problem with the current business model is that cable companies spend tens of billions of dollars each year to license content from media companies. They then turn around and sell subscriptions to their service to consumers, who view the content. Popular content, such as the sports channel ESPN or the all-news channel CNN, are very expensive. And if consumers can get the same content from those sites for free on the Web, why would they pay $100 or more a month to subscribe to cable?
Understandably, cable operators have pushed hard to keep media companies from offering too much of their content for free online.
"Media companies are getting pressure from the cable companies to not put as much content online," Ronen said. "Cable is saying, 'Why should we be helping people cut the cable cord when we're paying $20 billion a year for content.'"
Still, online distribution represents a new opportunity for media companies providing them the chance to monetize older content that sits unused in their archives as well as bringing in additional revenue from new products associated with popular shows.
As media companies try to figure out how to make more money from the Web while not biting the hand that feeds them, i.e. the cable companies, they are experimenting with which content to distribute online and how much of that content they make available for free to online viewers. For example, NBC offers full episodes of all three seasons of the show "Friday Night Lights" on Hulu.com. But the super-popular comedy "30 Rock" only offers full episodes of some of the most recent episodes.
Content owners have also restricted the use of services, like Hulu, overseas, since there are special content license deals with foreign broadcasters for TV shows and movies produced for the U.S. market.
But there have also been occasions where media companies have actually taken content off the Web. Earlier this year, Hulu.com upset fans of the FX show "It's Always Sunny in Philadelphia" when it yanked almost the entire three seasons of the show. Distraught users sent angry messages on Twitter and Hulu was forced to post a response in a blog saying that it was FX's decision to pull the show and not Hulu's.
The situation demonstrated that it is the media companies, and not video-playing Web sites, such as Hulu, that have control of the content.
Media companies, likely nudged by the cable companies, have also tried to keep the online video viewing on the PC. For much of this year, Hulu has been blocking Boxee, a software application that provides an easy way to discover and view online video on the TV.
While the media and cable companies may be merely trying to protect their copyrighted content and existing business models, they may find their attempts to control the distribution of their content fruitless. Boxee CEO Ronen said that these companies are risking losing complete control of their content through piracy.
"Piracy will become an even bigger concern for them if they don't give viewers what they want," he said. "It's already happening, especially overseas where you can't get access to most of this content legally."
But Comcast's Swartz said that the online video market is still young. And experimentation is necessary at this stage.
"We are in the bottom of the second inning when it comes to putting content online," he said. "Content owners are realizing that they put some content out there and they aren't making money. Now they are at the point where they are trying to figure out which business models will work."
Of course, the big question is whether they will figure it out in time. The game may only be in the bottom of the second inning, but it could be over a lot quicker than Swartz or any of the other cable and big media execs realize.
Marguerite Reardon has been a CNET News reporter since 2004, covering cell phone services, broadband, citywide Wi-Fi, the Net neutrality debate, as well as the ongoing consolidation of the phone companies. E-mail Maggie. 
I watch Hulu, Sling, Tv.com, Crackle, You Tube, Netflix, The Networks, Joost, Amazon and so on. Many of them in HD.
Keep up the hype Cnet. You are right on the money!
Once consumers understand that they can get better quality video through the internet and better options (Example: not having to use a DVR which is 3rd rip-off because they charge you for that too). I am enjoying watching the Cable companies squirm. They have been dreading the adoption of video streaming for years and now they are paying the price for poor customer service and overcharging consumers.
The internet is great, The internet has brought down the greedy phone companies, the greedy music industry, the cable companies and soon the greedy movie industry.
Love it!
Unfortunately, the offerings from the networks are limited, and you have to wait a day or two after airing for them to show up on the available programs list. And they are gone after a month. But, using On Demand has allowed us to reduce the number of shows we record on the DVR, which is a big help because the FIOS DVR has lousy capacity. I would prefer the DVR series programing and On Demand bookmarking to work similarly, and be integrated on a single menu. Perhaps this is a programming improvement that Verizon can consider in future upgrades.
It won't be long before data is just considered data, regardless of the format and source, with little distinction between computers, TV's, audio, etc. But the delivery system still has to be something that the average person can administer. Unfortunately, we are not there yet.
Don't forget the cable company's preoccupation with FORCING us to rent hardware in the form of set top boxes that we shouldn't need with the technology built into any new television available today.
I also enjoy seeing them squirm.
I told some neighbors about my hookup and several of them are on the verge of dropping their cable TV/phone service, doing NetFlix for movies, ESPN360 for sports, using a pay-as-you-go or cheap phone service (e.g. MagicJack) and keeping the cable internet. Estimated savings, about $100 per month, $1200 per year.
That's why the cable companies are worried.
Power to the people!
A by product of this change?
More time with family as we only watch what we want it.
When I want to buy something, I Google up all the sellers of the product, research quality and price and then make the purchase on line if possible - including my cars. Best way to shop there is - and no swine flu or other contagion probable. This is the business model that is going support advertisers effectively now and in the future, not holding viewers captive against their will for lame and repetitive commercials. It may take time - but nothing is going to save the current TV and Cable broadcasting business models from themselves.
I called up Verizon to get FIOS and they told me they couldn't offer the service because QWest (the local telco) had exclusive ownership of the infrastructure in my area and it was too old to support FIOS. She told me that if their company could legally gain access to the infrastructure they would install their own fiber network and provide service..
It is ironic considering that they provide service 40 blocks from my home that costs at least $20 dollars less per month then I pay for capped 2mg/sec (Comcast advertises 16mg/sec) service with capped upload speeds of 200kB/sec from Comcast.
The telco on the other hand offers a speedy $120Kb/sec DSL service at $35/mth oh boy! I guess I get to wait 30 more years before they upgrade their infrastructure, or maybe by then I will be using a global wireless internet service (oh no wait that was lobbied out of existence by the current service providers)
Yeah it is great here is the USA, special interests with deep pockets keep costs high and services antiquated.. while in other countries service improves and prices drop.
Start with your Friends/neighbors a "Californian" Style Vote, maybe use also the Internet, place a Blog let everyone know.
Something else, why not sell some content like 3tv shows for $0.99? So anyone can see a full season for $6-7? Then No commercials of course!
- by maeckg April 27, 2009 2:55 PM PDT
- Choice and cost are the reasons I already cut Cox cable TV out of my budget, but kept my cable broadband. The cable companies are also a victim in the middle because they pay so much for such lousy content. After realizing that I was paying more than half the subscription for advertizing, infomercials, reruns and channels that I have no interest in watching, I cancelled the service. Cable companies refuse to offer a la carte service, which I think would make the content providers come up with better programs. A lot of the cost is lost in the multi levels of the process of buying the content with deals that fill a lot of pockets of non-creative people. The content is much the same on satellite TV, so the content model as well as the distribution model are brokien. Maybe someone can develope an internet model that allows viewers better choice also to a wider range of content at a better price while being cheaper to distribute for the providers.
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(19 Comments)Netflix gives me real choice to watch what I really want at a good price. Cable TV did not. Over the air DTV is limited, but fills out some broad content and news I want while internet provides precise choice also of media content. I found that I am better off without the hype and drivel that comes out of a lot of cable TV channels. Even if I miss something or have to wait or pick up some news or content piecemeal, I am saving money instead of wasting it on stuff I do not want anyway. Cable TV has a lot of airtime to fill; it fills it with a lot of air or poor content'
My suggestion is embrace the internet possibilities, so like has already been said, that viewers can get content through legal channels. To watch Daily Show episodes, I gotta sit through advertising, but I am used to that after decades of American TV. Netflix offers me thousands of movies at a good price even though I have to watch them on my ancient TV or a PC, so I go to the movie theatre for the big screen.
I would move my broadband to another service IF I had another option, but there is no other providers willing to offer me service. Qwest has not been able to offer me DSL although I live in the middle of a college town near Phoenix, AZ(5th largest city in US). I would not really want to deal with them anyway because of the experiences I have had at work. So not much choice in ISP, but Cox is at least fairly fast even while they increase their fees again and again.
YouTube, Netflix or something like it could be a vehicle to aggregate content and make money for the content providers through advertising, subscriptions or micropayments or mix thereof. Most people are willing to pay something...see how they pay cable TV fees...for good content at a fair price rather than all the trouble of pirating it.