Cable TV Attempts To Fend Off Internet Video

I've written several posts, most recently, here, regarding the efforts of cable television providers to cope with an initially small, but growing segment of viewers who are turning to the internet for all of their video programming.

Last week, the Wall Street Journal carried two separate articles on the response of cable systems to this phenomenon. Basically, they cable system providers are offering their customers access to exclusive video content, and internet access to existing cable video content, in exchange for not disconnecting their cable feeds, and merely keeping their high-speed internet access.

I don't think this will work. It seems to me that people tend to want known content for the lowest price, consistent with their viewing habits or access capabilities. Quite a bit of existing cable content is now available on Hulu, or on an inexpensive, per-episode basis on iTunes.

Like many technologies, there's a growing rift between younger consumer segments and older ones. For example, I prefer to watch most television programming on a large screen, but my children have learned to be fairly ambivalent between a television screen or their laptops.

Promising as-yet-unspecified video content in exchange for very pricey access to content you can access either via Netflix, Amazon, iTunes or Hulu doesn't seem like such a great deal anymore. Further, consumers are learning to accept and use a variety of means by which to access video content.

Finally, as I noted in this post, in February, TiVo is now fully capable of adding a menu of internet URLs to its menu, thus allowing a subscriber to access any internet site for video content. It's not clear to me why TiVo is waiting to do this. Perhaps it's a matter of quid pro quo with content providers continuing to make it easy to use TiVo instead of their proprietary DVRs.

In any case, there are a multitude of paths to video content that don't lead through a paid cable television subscription.

Adding a few exclusive video programs is, in my opinion, unlikely to be a long-term solution for the cable providers. Eventually, they're going to face what music and movie producers have already undergone- technological advances which render their proprietary hold over video content moot and of much less value than it could command in the past.

Another Take on Local TV Stations & The Internet

Last June, I wrote a post about consolidation in the local TV station sector. In part, I wrote,

"I can't help but see a parallel to the troubles and solutions of daily newspapers a decade or more ago. Papers began to share printing plants, and, essentially, become differently positioned products freelancing off of the same production assets. It would not surprise me if local television stations, including the major city stations, do the same.

... I'd expect that, over the next few years, competing local broadcast stations will pool their facilities and news gathering, perhaps simply merging into one station per local market. If not the latter, then at least sharing all possible resources, save on-air staff, content selection, and idiosyncratic local programming.

Yet another example of Schumpeterian dynamics at work without any overt organizing entity to guide it, save technological change and consumer behavioral responses."

A recent Wall Street Journal article updated the situation, noting how many TV stations are losing ad revenues faster than they can transit to web-exclusive content.

But this time, what struck me, in addition to my prior observations, is that there is no particular difference between the online presence of a newspaper, and that of a TV station. Once they both go to the internet, how could you tell which is which, if they weren't labeled? I suppose, initially, because one would feature more writing than the other. However, I'm not sure that will last.

Because online is a medium tailored to video, won't both morph in that same direction?

Last year, I foresaw multiple TV stations in a single market combining online. Now, I wonder if we won't see all, or most, print and TV assets/organizations combine online? Essentially, both types of local information media companies are struggling with the web's erosion of all of their exclusively non-local content.

Isn't the obvious solution for them all to simply combine into one new media outlet? Further, if one were starting up a local information content business, wouldn't you just develop a web-based multi-media site? Offer written pieces, news, editorials, video news, ads, and local commercial, community, etc., information? Of course you would.

I can't see much meaningful differentiation in local print or video media, once it moves onto the web. Seems to me the consolidation has at least one more important step to go.

Question is, where would that leave the local affiliation to a broadcast network? Would it even have economic value anymore, in a world in which every entity, whether local media outlet or network, can provide its own content on separate websites?

Google & The Networks: Is Content King?

Yesterday's Wall Street Journal featured an article discussing the push back of NBC, CBS and Viacom to YouTube's approach to airing their video libraries. Additionally, Paul Vigna, a writer for Dow Jones, wrote an editorial declaring the networks safe, for now, because content will always be king.

This week's alliance between online video site Joost, and Viacom, is clearly aimed at setting up and reinforcing a competitive threat to Google's YouTube.

Did Google make a mistake buying the best-known piece of online video distribution real estate? Probably not.

Does Google, via YouTube, expect to air all the video content of the networks for free, or just shares of advertising revenues? Again, probably not.

Is Viacom going to get as much viewership for its content at Joost as it has, or would, at YouTube? Once again, probably not.

I don't think the issue here is whether YouTube will successfully deprive owners of existing video content of value for distributing that content directly online at a very popular site. I also think many pundits mistake YouTube as a joke, just full of some home movie producers.

The issue is whether YouTube successfully exemplifies the ability of one or two sites to become so valuable that they will rival the owners of content in importance.

In this regard, I disagree with Mr. Vigna. I don't believe the networks have much time to build any proprietary online distributions sites. YouTube is already pervasive. Why won't some creative production team approach YouTube directly for a distribution deal, and never even stop at the networks? Just release content on their own URL, and via YouTube. Or Joost. Perhaps one or two other sites.

What Mr. Vigna overlooks, a la AOL-TimeWarner, is that nobody has successfully owned distribution pipes and content. Either one may be managed successfully, for a time, to provide consistently superior total returns. But it's doubtful any company can provide both and have that performance.

Other content originators suspect a distributor who also produces content. Other distributors suspect a content provider who also owns distribution.

But, alone, the best-run, most creative distributor or content producer can easily dominate their business, and even fight its functional counterpart to an even revenue-sharing arrangement.

YouTube isn't an empty threat just yet. I think it will simply take a little time for the reality of the new, disintermediating online opportunities to fuel the move of content producers directly online. If so, then Google's bet on YouTube will look smart after all.

Network TV's Bright Spot: Charging Cable for "Free" Programming

Yesterday's Wall Street Journal featured a piece describing how broadcast television networks are charging cable systems for carriage of what the public may view for free on those networks and their affiliates.

It's a non-trivial issue, when a major cable system, such as Comcast, is faced with an ultimatum to pay, or be unable to deliver the Superbowl telecast to its viewers.

Will it matter in the long term? My guess is that it will not. Right now, many sources of video content come to the broadcast networks first. And events such as the Superbowl have been loathe to sell the rights to a cable-only network, thus freezing out 'free' viewers. Talk about bread and circuses.....

However, this describes the current state of affairs.

Won't cable look to new programming sources? Will production still go to network exclusively?

Is it not possible that, whenever the Superbowl carriage rights are up for renewal, the NFL might sell only the broadcast rights to CBS, ABC or NBC, and reserve direct cable carriage for a negotiated fee directly from each cable network?

Is that not disintermediation? The article mentions the growing power of broadcast networks, as groups of stations are now allowed to be owned by a single entity. Markets being what they are, would not content providers also feel some pinch from that, and seek wider distribution alternatives?

Could television-focused video content not go the route of the Hollywood studio distribution model, treating various markets- US cinemas, cable movie networks, overseas, DVDs- separately?

Seen in this light, we could well be seeing the common occurrence of vendors in a shrinking product/market raising prices as the category becomes extremely mature. Faced with fleeing consumers, demand is relatively inelastic, so raising prices is the theoretically 'correct' choice to maximize profits.

In this case, however, it could well accelerate the development of vibrant alternative distribution channels around broadcast television. The recent Viacom-YouTube non-agreement, leaving the former to demand removal of its content from the latter's site, only reinforces how broadcast is raising the drawbridges and hunkering down with its legacy content.

My consultant friend S opined last year that one of the best things to have happened to all this old video material, such as Viacom's content, was to be seen, for free, on YouTube, thus rekindling consumer interest, for no advertising expenditures, in old bands, television programs, movies, etc. There's bound to have been some uptick in demand for some of that content on a paying basis.

Google, of course, is perfectly familiar and comfortable with this revenue model. Give content away for free, and run the most efficient advertising program available around it. Old media can't quite get it's head around this, and, since it can't control the vehicle, is simply refusing to play by the new rules.

My sense is that this burst of network demands for fees to distribute "free" content will last only so long as the average life of the existing content's exclusivity to network distribution. Then, watch out. Disintermediation is bound to run rampant, with devices such as XBox and AppleTV to facilitate streaming bespoke video content right off your high-speed connection, through your video switch..ah...sorry.....computer...over your wireless network, to a server (the Xbox, AppleTV, etc.) connected to your television.