Cable Networks Weigh Web Moves Carefully

At NCTA: Avoiding Breaking the Business Model

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WASHINGTON -- Viacom and Time Warner Cable kicked off 2009 with a messy contract negotiation, and that conflict set the stage for the first day of the National Cable and Telecommunications Association's Cable Show in Washington. If cable networks offer too many of their most popular shows for free online, will the cable operators call their bluff when it comes time to negotiate higher fees per subscriber?

Van Toffler
Van Toffler
In a panel titled "Jumping Through (Hulu) Hoops," Van Toffler, president of Viacom's MTV Networks' Music and Logo Group, said the company's business with the cable operators "has been great" since it threatened to pull its content from Time Warner Cable in January. "We want to experiment with them. But we also want our content creators to get paid, and we think our services have a certain value." He then added, to save face, "We love Time Warner Cable."

John Lansing, president of Scripps Networks, said Food Network and HGTV have seen record ratings and higher per-subscriber fees from their affiliate partners as a direct result of not offering full-length content for free online like their competitors.

"Offering everything for free online completely undermines the ecosystem," he said. "The leverage we have with the operators is us saying, 'We understand we're interconnected with you. The existing subscriber base supports our video business today.'"

John Lansing
John Lansing
Mr. Lansing said Scripps is "open to hearing ideas" about experimenting with subscriber authentication online, as proposed by Time Warner CEO Jeff Bewkes' "TV Everywhere" initiative and others, such as Comcast's Project Infinity, also known as On-Demand Online.

In an earlier NCTA panel, Comcast Corp. CEO Brian Roberts said the multichannel industry's continued growth -- by 2 million customers in 2007 and 1 million in 2008 -- is a sign that cable's overall health as a business has never been better, and it needs to capitalize on new content initiatives quickly in an on-demand media environment.

"This is a great opportunity for us to find an additional revenue stream, not replace one with another," Mr. Roberts said. "I think you'll hear from the content companies at this conference that that's the goal here: to give the consumers what they want but do it in a way that's fair, friendly, but at the same time adds value, not destroys value."

Bonnie Hammer, president of NBC Universal's Cable Entertainment and Cable Studio, said USA and Sci-Fi have experimented with ad-supported streaming of hit shows such as "Monk," "Psych" and "Battlestar Galactica" within availability windows that don't deteriorate from their live ratings.

Bonnie Hammer
Bonnie Hammer
Typically, those shows are uploaded online within five days of their premiere and remain available for five weeks so viewers can catch up with current seasons but don't start to replace one platform with the other.

However, it's precisely that viewing strategy that has companies such as Discovery Communications and Rainbow Media keeping their cards close to the vest. Rainbow Media President Joshua Sapan in the "Hulu Hoops" panel said, "The motivations that would cause us to put abundant free material on the web are understandable, but they create bad habits. Fundamentally, over time, they can jeopardize the business model in which people pay for high-quality TV. We think the web is wonderful, vibrant and good for business to generate promotional attention to our shows. But until we have advanced mechanisms that verify people paying for TV, that doesn't provide an economic reward and potentially interferes with the model that supports creativity."

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