Amazon, Netflix Mask the Real Video Fight

Tuning In: Why TV Networks Need to Control Your Program Streaming

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Amazon's decision to mount a video-streaming service to rival the one already made popular by Netflix will no doubt spark the sort of Coke-Pepsi talk we all love to indulge when two easily-recognized pop entities start going at it. Smart observers will recognize that there's a third player in this battle, however, with at least as much on the line: the TV networks supplying so much of the content to stream.

Whether Amazon can catch Netflix remains to be seen, but it's becoming obvious fast that the rise of these two services could actually mean serious challenges for CBS, TNT, NBC and their brethren.

If consumers want to buy streaming movies and TV shows, that's great, but doing so threatens to destabilize the financial model that makes so much of it available on their TV screens. Imagine, if you will, millions of TV viewers deciding to forgo a potentially interesting drama or comedy because "I'll just watch it on Netflix or Amazon after they collect it on DVD."

Sounds great for the consumer, and the fact that such content is available is a wonderful by-product of the "on demand" dynamic to which all this new technology has given rise. But the more people deciding to go this route, the harder it is for the networks to get the big ratings that help them bring in millions of ad dollars and support their ability to keep them on the air for longer than a season or two.

If FX could have gotten more people to watch the critically acclaimed drama "Damages," which the News Corp. cable network ran for three seasons -- ample opportunity to fly -- they may have kept the prestigious Glenn Close-starrer on its air. For some chunk of the population, however, watching a collected season on DVD -- a behavior soon to evolve into soon streaming episodes at will, I suspect -- likely proved a more attractive option. The next season of "Damages" will turn up on DirecTV, making the show unavailable, at least until it becomes available for streaming or on DVD, for a significant portion of the public.

All this is thrusting the TV networks into a difficult position. They want to keep people in the mood to watch their programs, no matter when or where the watching goes on. But they also need to exert control over the new viewing behaviors that develop if they want to keep their revenue intact. They're being made to act as traffic cops, allowing viewership to flow here and keeping it from moving there. Consumers don't like companies that try to ride herd on their convenience; just ask any of the record companies that took humble consumers to court over illegally downloaded music files.

Just yesterday, CBS stepped into the fray, offering an example of how gingerly any network has to step. The network entered into a two-year deal with Netflix that allows for the streaming of select shows from the CBS library. What it doesn't allow is streaming current seasons of programs including "Hawaii Five-0" or "NCIS." The most recent content available is "Medium," a program that CBS kept alive for two seasons after NBC decided to part ways with it, and "Flashpoint," a reliable piece of summer filler. And CBS is allowing Netflix to dust off classics such as "The Andy Griffith Show" and "Star Trek."

In a nutshell, CBS is developing new revenue for old shows that may not be faring as strongly in the syndication market -- without harming monies that support current favorites. And that may be one reason why CBS has resisted joining Hulu, the video-streaming site owned by Walt Disney, Comcast and News Corp.: Why draw a mass of people to a platform that drains viewers from the bulwark watching in more traditional, lucrative fashion?

As Amazon's entrance into this market makes video streaming even more palatable, Big TV will have to figure out how to stoke consumer interest without feeding all of it immediately. It's nice to watch a season of "Lost" as one sees fit, with no muss, no fuss, no purchasing of DVDs. But if enough people decide to make video streaming their main method for consuming TV favorites, the networks won't be able to afford to produce any of it in the first place.

Unless, of course, they demand significantly more money from Netflix, Amazon and others in that space, which would mean significantly higher prices for consumers too -- stifling, in turn, any streaming explosion.

Tuning In is an ongoing series of commentaries by Ad Age TV Editor Brian Steinberg on the TV schedule, the ads it carries and changes within the industry. Follow him on Twitter.

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