Executives from major cable networks and distributors are
finding common ground around a plan designed to protect its
precious subscription business from the rise of free online TV
viewing at the industry's largest annual confab in Washington,
D.C.
"TV Everywhere," a collaborative strategy for the TV industry
spearheaded by Time Warner Inc. (TWX) Chief Executive Jeff Bewkes,
aims to offer access to popular TV shows on-demand over the
Internet as long as viewers can demonstrate they subscribe to a pay
TV service, like cable or satellite.
The proliferation of online TV viewing threatens to result in a
phenomenon known as "cord-cutting," where some cable subscribers
drop TV service to use only broadband, high-speed Internet service
for their media needs. The plan is being discussed by media
executives this week at the Cable Show, the annual event hosted by
the National Cable & Telecommunications Association.
"The vast majority of broadband subscribers are already paying
for a multichannel TV service," said Peter Stern, chief strategy
officer with Time Warner Cable Inc. (TWC). "If we give [online TV]
to them for free, some of them will stop subscribing to a
multichannel TV service."
Major cable operators see little evidence that cord-cutting is
gaining momentum among U.S. consumers, despite the worsening
economy, but many observers agree the threat is real as more
popular TV programming becomes available online in better quality
formats. If such a trend were to take hold, the cable business
could find itself looking more like the newspaper business.
"None of us is dumb enough to imagine that cable cutting on a
larger scale isn't lurking around the corner," Forrester Research
analyst James McQuivey said.
Craig McCaw, chairman of Clearwire Corp. (CLWR), said the cable
TV business should avoid the mistake made by newspapers, which put
its content online for free, giving up prospects for an online
subscription model. But he said cable also shouldn't follow the
missteps of the music industry, which waited too long to embrace
the Web and "nearly committed suicide."
Time Warner Cable Chief Executive Glenn Britt has been critical
of TV programmers' willingness to put their content on the Web.
"Free wins. If you give people programming for free, they'll
take that over paying," Britt said. "We've got time, but you can't
see what might happen in the future."
Britt noted that a number of cable programmers, which get a
portion of their revenue from subscriptions, have put significant
amounts of content online for free. "Not all of them, but more than
you might think," he said.
Walt Disney Co. (DIS) Chief Executive Robert Iger said he's open
to the TV Everywhere concept but warned of a possible public
backlash requiring subscriptions, especially for already free
content from broadcast networks like Disney's ABC.
"That's something we would find very difficult to embrace," he
said, noting that it could lead to an increase in digital
piracy.
Philippe Dauman, chief executive with Viacom Inc. (VIA), said
such a public backlash is unlikely.
"People are used to paying for video subscriptions," he said.
"They're used to paying for broadband service, so there's nothing
new there."
The collapse of ad markets in the economic downturn has led the
media industry to shift its focus back to the more reliable
subscription revenue and reconsider the push to make video content
available online.
"People had very high expectations about the monetization
potential of online video, but the revenue hasn't matched the
hype," said Samuel Schwartz, president of Comcast Interactive
Capital.
Meanwhile, McQuivey calls online TV "the single most important
thing to happen to the video marketplace in the past 10 years,"
outweighing the rise of DVD viewing and the advent of digital video
recorders. Tens of millions of viewers are watching hundreds of
millions of TV shows each month on sites like Hulu, Joost, Veoh and
TV.com. Meanwhile, digital piracy of film and TV content through
peer-to-peer networks remains prevalent.
Comcast Corp. (CMCSA) Chief Executive Brian Roberts said online
video is "friend not foe" to cable, adding that its broadband
offering provides the best online video experience and the medium
will eventually drive growth overall for the industry.
While executives at the conference agreed that TV Everywhere
holds promise, it has technical challenges, including developing a
simple and quick authentication process for confirming that online
viewers are subscribers and agreeing on audience metrics for
advertising. Moreover, such a plan would require cooperation in an
industry beset by a variety of competing interests that has a poor
record of collaboration.
One example of cable's poor collaboration is the industry's
longstanding efforts to develop video-on-demand services, which
have generated disappointing revenue for programmers.
"We don't want to replicate [video-on-demand] in a TV Everywhere
model," said Lynn Constantini, executive vice president of
affiliate sales and marketing with Scripps Networks Interactive
Inc. (SNI). "We want to preserve subscription, but we can't do it
at the expense of the advertising side."
-By Nat Worden, Dow Jones Newswires; 201-938-5216;
nat.worden@dowjones.com
(David B. Wilkerson contributed to this report.)