April 12, 2006 10:00 AM PDT

Free Net TV threatens telecoms and cable

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But advancements in technology could eventually eliminate the need for consumers to subscribe to a third party such as a cable operator or a telephone company to schedule programming. Companies such as Kontiki and EdgeStream are improving the quality of streaming video on the Net. And others such as Cisco Systems and Microsoft are working on products that will let people watch video downloads from the Net on their TVs.

These advancements, coupled with the fact that broadband penetration continues to grow, makes it possible for millions of people to watch TV directly from the Internet. In 2005, roughly 55 percent of all online users had broadband, according to JupiterResearch. That figure is expected to reach 69 percent by 2010.

A step toward a la carte
If content providers are willing to distribute their shows over the Internet themselves, viewers could simply use a search engine to find what they want to view, and then watch it directly from the Internet anytime they want.

Clearly Disney's move signals that content owners are feeling more comfortable about Internet distribution. Others have also started distributing video over the Net.

Even though Disney is delivering content independently of the cable operator or the telephone company, it would be interesting to see if network providers respond by blocking content.
--Joe Laszlo,
JupiterResearch analyst

Warner Bros., for example, has teamed with AOL to distribute classic sitcoms such as "Growing Pains" and "Welcome Back Kotter." In March, CBS offered free online streaming of the NCAA basketball tournament. In November, NBC started offering its Nightly News broadcast on the Web for free after the newscast airs on TV. MTV's Comedy Central also launched a site called MotherLoad in November that offers clips of existing shows and airs new shows only available on the Web site.

And just last week, a group of Hollywood studios said they will sell digital versions of films such as "Brokeback Mountain" and "King Kong" through Movielink.com and CinemaNow with certain restrictions.

While experts agree that most people will continue to subscribe to a paid TV service for a long time coming, some research indicates there is consumer appetite to watch downloaded content from the Internet.

Parks Associates predicts that roughly 60 percent of broadband users will be downloading some video a la carte from the Web in 2010. These estimates were calculated when it was assumed that people would pay $1.99 an episode to download shows from iTunes, according to Kurt Scherf, vice president and principal analyst with Parks Associates. The figure could be even higher if content is offered for free, as Disney plans to do. Today, only about 3 percent of broadband subscribers download video from the web.

Increased competition in the video market from Internet-based video services could cause network operators to look for other ways to make money, added JupiterResearch's Laszlo.

"Even though Disney is delivering content independently of the cable operator or the telephone company, it would be interesting to see if network providers respond by blocking content," he said.

The issue referred to as Net neutrality centers on whether carriers should be able to charge different fees to content providers who access their network. For weeks, the topic has been hotly debated in the industry as lawmakers draft legislation that addresses the issue.

"I think Disney's move could open up this debate even more," Laszlo said. "I wouldn't be surprised if we saw large media companies getting into the debate soon."

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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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