April 12, 2006 10:00 AM PDT

Free Net TV threatens telecoms and cable

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Walt Disney's bold move to let people download TV shows for free could spell trouble for cable and satellite providers, but it also throws into question the strategy of telephone companies spending billions to get into the paid TV business.

On Monday, Disney-owned ABC announced plans to put "Lost," "Desperate Housewives," "Alias" and "Commander-in-Chief" on the Internet for free as part of a two-month trial beginning in May. The Net-accessible episodes, which will be available the day after the shows air, will be archived so viewers can watch any shows they miss.

Viewers will access the shows on the ABC Web site where they'll be able fast-forward, pause and rewind entire episodes. Short commercials will be aired with the programs; viewers will not be able to fast-forward through them.

Disney's ABC has been at the forefront of experimenting with new ways to distribute content over the Internet. Last year, it struck a deal with Apple Computer to sell individual episodes of some of its popular shows via the iTunes Music Store for $1.99 per episode. The two other major networks, NBC and CBS, soon followed suit by offering programs of their own on iTunes.

While the iTunes deal may have been a harbinger of bigger things to come in the realm of fee-based content downloads, Disney's move to offer shows for free on the Internet could be viewed as a direct threat to the business model of cable companies, which have been the gatekeepers of television programming in America for the last few decades. The news is equally grim for phone companies, especially Verizon Communications, which is aggressively moving into the TV business.

Over the past two years, Verizon has spent billions of dollars to build a fiber network directly into people's homes that can deliver a triple-play package of services including ultra-fast broadband, phone service and TV. It has bet the farm, so to speak, that the best way to compete against the cable companies, which are now offering phone service, is to try and beat them at their own game. But building and upgrading telecom networks for video is a capital-intensive strategy fraught with risks.


News.Commentary
The ABCs of video upheaval

Disney's plans "raise big questions for the phone companies' long-term strategy," said Joe Laszlo, an analyst with JupiterResearch. "To some extent, building a faster network is smart no matter how content delivery evolves. But if we reach a point in five to 10 years when video over the Internet becomes a bigger part of how we consume video, then the phone companies will have to find other ways to make their video services relevant."

No one is expecting Internet television to cannibalize traditional TV models overnight. Despite advancements in streaming technology, video delivered on the Web can still be choppy, with frequent interruptions as data packets buffer and reload on the screen. In fact many viewers who watched the NCAA tournament aired by CBS on the Internet last month complained about the network being overloaded.

No panic among telecoms
A Verizon spokeswoman said the company does not feel threatened by Disney's move to offer some of its shows on the Web. And executives at the National Cable and Telecommunications Association convention in Atlanta this week also said they aren't especially worried about Disney's plans.

"It's speculative to assume people will abandon one model in favor of another," said Sharon Cohen-Hagar, a spokeswoman for Verizon. "That's quite a leap into the future. Given the kind of network we are building, we believe we're well positioned to go wherever the market takes this."

Indeed, Verizon, as well as the entrenched cable operators, are already offering on-demand programming that lets viewers select movies or TV shows and watch them whenever they want. They are also offering consumers digital recording services that let them record programs and watch them at a later time.

CONTINUED: A taste for a la carte…
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10 comments

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Broadcast Quality IPTV
New media companies are being formed which are offering Dvd and HD quality video streams.

The old well know entities will begin to fade away unless they adapt their business models and provide a quality of service that is similar to current cable/satallite TV on the Internet.

We have tried numerous technologies and have found that only the EdgeStream platform can provide true click and watch DVD quality IPTV streaming experience.
Posted by jolly good (1 comment )
Reply Link Flag
New Wave
It is finally begining to happen.

I just wonder why it has taken so long for the media companies to wake up and start delivering quality programs via the internet.
Posted by alansegal (17 comments )
Link Flag
This is a little alarmist...
Free content for download like this is not so
much a threat, but rather a natural evolution of
the way things already work. Making it available
for download for free is not really any
different than a regular broadcast: the client
computer is the receiver and VCR, the server is
the broadcaster, your network adapter the
antenna, and the tcp/ip connection between is
the "airwaves". There's some minor differences:
now the VCR records shows after they air,
instead of while they air, and the broadcaster's
antenna is strong enough to reach the entire
planet.

It's only complicating for those that hold on to
the illusion that this is not so -- or rather,
those who want to prevent it so that they can
charge advertisers more (wider audience) while
still charging a fee to the consumer. Make money
twice as fast with less than half the effort!

I know that iTunes sells a lot of video content
and makes beauccoup dollars, but I still think
it's silly. P.T. Barnum was right.
Posted by Zymurgist (397 comments )
Reply Link Flag
iTunes value added
Not to be too defensive of iTunes (which may not be for everyone
for any number of principled or specious reasons), but for your
$1.99, iTunes does allow you to own the video content, back it up,
view it as often as you like with no commercials, and allows
simultaneous availability on multiple authorized computers
throughout your household (plus iPod portability, if you have one).
None of these conveniences are available through the Disney or
most other current online offerings. I don't feel taken advantage
of to pay for this. Your mileage may differ.
Posted by dantastic (3 comments )
Link Flag
This tactic is undermining the network affiliates
Most people don't know that the SHVIA Act of 1998 prevents people who subscribe to satellite service from getting distant stations over satellite. The reason for this is that the local affiliate OWNS the copyright to the network programming in their broadcast area.

This technology circumvents all of this and could pose a real threat to the local affiliates.

Something needs to give and if this is allowed to go on, then you should be able to subscribe to a network affiliate in Denver while living in Dallas. This restrictive legislation is about as absurd as being prohibited from reading the New York times because you are competing with sales of the local newspaper.

It will be interesting to see where the local affiliates weigh in on this. On a related note, free audio podcasts of nationally syndicated programs are taking off and you can bypass commercials. I wonder what the local radio stations think about that?
Posted by Big Tsunami (29 comments )
Reply Link Flag
It's just another change . . .
Communication systems are changing all the time, and this is just another of those changes. As an individual "changer" in news media, I get tremendous problems from conventional media - but they know they'll have to adopt to the web, or face even more problems. To see one potential future of online tv, take a look at Felixstowe TV, my local broadband station:

<a class="jive-link-external" href="http://www.felixstowetv.co.uk" target="_newWindow">http://www.felixstowetv.co.uk</a>
Posted by ChrisG46 (1 comment )
Reply Link Flag
Author's premise isn't well thought out
The model should be considered closer to the idea that production companies would make their new shows available on a schedule and their older shows simply available. A typical user would then schedule the new shows to download to their hardware (whether a virtual DVR like Cox provides or personal hardware in their home actually matters little) when those shows become available.

For eagerly anticipated content they may want to watch it as it's received but it's highly likely they'll get into a habit of watching shows on their own schedule.

News channels may end up being the only "stations" that survive.
Posted by aabcdefghij987654321 (1721 comments )
Reply Link Flag
smoke and mirrors
1. the infrastructure cant support widespread realtime streaming
2. my monitor sucks compared to my tv
3. anything on a puter is individual, most tv is a family affair with two or more people in front of the boob tube.
4. if just TV were the reason; the basic tier is cheaper than broadband.
5. I want my HBO
Posted by R Me (196 comments )
Reply Link Flag
And how does the broadband get to the home?
the author doesn't seem to get it. What's the difference between a legally downloadable video clip and one that arrives using conventional cable TV?

It's the same thing, isn't it?

It's still that same cable network and in most cases, the cable company still makes money off it.
Posted by Maccess (610 comments )
Reply Link Flag
Free Internet TV
<a class="jive-link-external" href="http://www.wfitv.com" target="_newWindow">http://www.wfitv.com</a> provides a selection of the best broadband internet television channels. - Enjoy news, TV shows, movies, music, entertainment and sports. Broadband internet connection recommended.
Posted by thomas_1234 (1 comment )
Reply Link Flag
 

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