TV Everywhere -- As Long As You Pay for It
Time Warner's Bewkes Plots Industry Initiative to Eradicate Free Content
NEW YORK (AdAge.com) -- Jeff Bewkes hopes to put more TV on the internet, but he's going to make consumers prove they've paid for it.
Time Warner, the largest owner of cable networks including TNT, Cartoon Network, CNN and HBO, sat back and watched as broadcasters such as ABC, CBS, NBC and Fox tried to sort out the distribution of TV on the web. But now Mr. Bewkes, Time Warner CEO, has a plan to put all cable programming on the web in places such as Hulu, MySpace, Yahoo TV, or even YouTube. Of course, there's a catch. To get it you'll have to prove you subscribe to pay TV through cable, satellite, or telco.
The initiative, dubbed "TV Everywhere," is intended to be an industrywide effort, and Mr. Bewkes expects to ready a test of it this year. "This is not just for the cable industry," he said. "It's about keeping the health of all these fantastic networks while making them available at no extra charge on the online platform."
Cable TV is one of the few sources of subscription-based content that most Americans have shown a willingness to pay for. Yet that's what keeps most of its programming off the web, as the networks fight to keep the 50% of their revenue that comes from cable subscriptions from suffering the same fate as newspapers or record labels.
Advertising vulnerability
Both the networks and cable operators have a lot to lose if the subscription model breaks down, but the networks are particularly vulnerable. For the last two decades, cable has dined out on broadcast ad dollars, moving from 20% of their revenue from advertising to 50% today. But the salad days are over; TV advertising is flat, and operators such as Viacom have sustained themselves with subscriber revenue in the midst of flat or declining advertising.
"At the end of the day, the cable operators are going to be fine because they will charge for the service they provide, which is access to the ones and the zeroes whether that service takes the form of linear video or broadband," said Bernstein Research cable analyst Craig Moffett.
The cable networks, however, don't get any subscription revenue from broadband viewers. And if they put their content online directly, they risk weakening their hand when they negotiate their next round of carriage deals with operators. Here's how "TV Everywhere" would work: an individual, or a member of a household that subscribes to cable, satellite or any of telco's TV offerings, would be able to have online access to the programming included in their pay-TV package. With broad industry buy-in, it wouldn't matter if your TV provider is Verizon FiOS, Time Warner Cable, or DirecTV. You log in, put in some subscriber information for a pay-TV operator, and unlock a host of shows not currently on the web, such as HBO's "The Wire" or TNT's "The Closer."
For 85% of U.S. households, the added access would be, essentially, free. Mr. Bewkes said he anticipates there will be a web-only option for those who don't have pay-TV service.
Not-so-small details like how many people could use one account, whether say, a kid in college would qualify, or how, exactly it would all work, are still being hashed out. But Mr. Bewkes said he believes the system would err on the side of making it convenient and easy. The goal is to keep households from dumping pay-TV subscriptions, while expanding a nascent business, which benefits from scale.
"The networks love it if five people are watching TV in a household; I think the same is true in this world," Mr. Bewkes said.
Universal appeal?
Mr. Bewkes' project, in a sense, is like Project Canoe, an industry effort to fulfill the long-promised goal of targeted, customized TV advertising over cable networks. And like Canoe, it really only works well if a critical mass of networks and operators join up. Earlier this month, The Wall Street Journal reported on talks among cable companies and networks about creating a plan for online distribution, but Mr. Bewkes is eager to make the plan universal.
As partners in Hulu and major owners of cable networks, buy-in from NBC U and News Corp. could help this plan along. With a critical mass of TV -- but little cable programming -- Hulu has built itself into the fourth-largest video service on the web in less than a year. Hulu could provide the back-end technology to make such a system work, those with knowledge of the talks said.
Insiders at Viacom, NBCU, and Discovery said they're working with Time Warner, while talks have begun with News Corp. and Disney. Comcast is pursuing a different strategy with its "On Demand Online," which seeks to add cable TV to its Fancast service for Comcast subscribers, but execs there said they don't see their initiative as conflicting with "TV Everywhere," and could be compatible with it.
Even among the networks that are looking at "TV Everywhere," there is plenty of skepticism. In addition to getting broad industry cooperation, it would require a change in behavior online, and erect a hurdle for consumers now accustomed to easy access to TV on the web.
"Just look at the old expression, 'How's it working for you?' Look at the music business. You put your stuff out on the web -- how's that working for you? Most newspapers are free on the web. How's that working for them? Broadcasters are putting their content on the web. How's that working for them?" said one industry leader.
Throwing spaghetti
But many feel like something needs to be tried, and a year ago many still doubted that Hulu could be made more appealing to users than piracy.
Cable networks operators such as Viacom and NBCU are already pushing ahead with free online distribution of cable, and making the argument that it boosts awareness, and ratings, for a show.
Viacom's "The Daily Show" and "The Colbert Report" both saw series-high ratings during election season, despite the same episodes being available online hours after their live broadcast. USA's "Monk" and "Burn Notice" also continue to see ratings increase on a weekly basis despite being available on Hulu.
But joining the effort would be an admission to multichannel providers that online distribution isn't all promotional, and it may soon replace cable TV, threatening the lifeblood of the industry.
There's also an ad play in that such a system would allow TV ad dollars to more easily follow the video. One cable network executive said including those who watch online could increase a show's TV rating by as much as 10%. "In a flat-is-the-new-up universe, 10% is a big gain. Until you start to put it in those terms, you're not going to move dollars from TV to online," he said.
Strong hand
The subscription revenue stream isn't yet threatened: Even as they put cable shows on the web, networks have a strong hand to play in negotiations with the operators, including video-on-demand rights, which networks desperately want to build their own advertising businesses.
There is also much debate whether cable disconnecting due to Hulu is a significant phenomenon, or a creation of the media.
The number of minutes spent watching video online grows each quarter; up to 2 hours and 30 minutes a month, on average in the fourth quarter, according to The Nielsen Company. But TV viewing is also on the rise, over 142 hours a month, and much of the video being consumed on the web isn't traditional TV.
Further, a Leichtman Research study of U.S. adults found that those who are watching TV online are more likely to also subscribe to premium channels, HDTV and use On Demand services. They were significantly less likely to cut their subscription or change providers.
Time Warner Cable CEO Glen Britt, however, argues that the phenomenon of consumers dumping cable for free content on the web is a significant and growing problem.
"Traffic on our data network is increasing exponentially and the overwhelming majority of that traffic is video traffic," said spokesman Alex Dudley. "It's a clear indication this is a growing phenomenon and we have to find a way to incorporate that into our business model."
Test run
Time Warner claims to have something of a proof of concept. In a trial in Wisconsin, local cable subscribers were allowed to download HBO shows by inputting their subscription details. HBO has been eager to distribute content online, and investigated options to do so without destroying its subscription business model. The program will be expanded to additional cities this year.
What's at stake? Turner Networks and HBO accounted for a third of Time Warner revenue in 2008, but nearly 50% of the company's operating profit. The model has been good to the cable industry so far, the question is whether it can hang on to it. It's a model that hasn't yet been destroyed by the web, the question is whether they can keep it that way.
RSS Feed
RSS (What is RSS?)
The web will also simplify the old cable network challenge of getting people to remember when, where and what time to tune-in. National broadcasters own better real estate on the dial and have local affiliates that heavily promote their shows, which generally deliver larger audiences on a per show basis vs. cable network programming.
Additionally, in the not too distant future, the web will replace cable operators, because a viewer will simply subscribe to the content of their liking on-line. Cutting out the middleman will enable cable networks to reduce the overall cost to the consumer while taking in more revenue per viewer for themselves, which is often a point of contention they have with cable operators, as in the recent case between Viacom and Time Warner Cable at the end of 2008.
Adding Klickable.tv players, the hottest new web tool that enables viewers to Klick on anything in a video they see for pop up information including direct links to make purchases, will bring true interactive TV programming everywhere, giving all content providers a real CRM, direct selling video platform, straight out of the Jetsons or Starship Troopers.
Rodney Mason
CMO
Moosylvania
The Great State Of Design
www.moosylvania.com
I would suggest that Mr. Bewkes fixes what he has before going off on new adventures.
And now they're deliberately lying and hoping no one notices.
Time Warner pulled whole episodes of "Big Bang Theory" and "How I Met Your Mother" off of broadcast network web sites (and Hulu). They wanted to spur DVD season sales, so decided not allow online access, except for clips. That's not on cable. That's broadcast. They clearly don't understand that the demographics of those particular shows are more likely to torrent (steal) the shows, rather than wait for a DVD.
"The networks love it if five people are watching TV in a household; I think the same is true in this world," Mr. Bewkes said. That's clearly why the networks pressured Hulu to remove access to its services from Apple TV last week. One exec was quoted as saying that online content was intended for one person at a time, which was circumvented by people watching Hulu on their TV at home. The way I see it, if advertisers are willing to pay for one person to see their message and the networks are comfortable with their stated model, they should be THRILLED if several people are actually exposed to their ads.
And they wonder why people are tuning out in droves. It's because of crap exactly like this.
I do agree with Bewkes though - the key here is finding a model where you pay a lot per month to get any content you want, anywhere and on any device. If they don't come up with one soon, piracy will win out.
I fondly believe there's ways for broadcasters to be creative without annoying furthermore its users (based on the fact that they've been making a ridiculous amount of money on our back for soooo long).
If they expect users to pay for the service, they better come up with a valuable enough offer so it worth the investment.
Traditional medias are going down and yes for its survival,some kind of premium seems to makes more and more sense.... but not at all costs.
It's important to distinguish the difference between producers and distributors here.
Cable re-distributors initially relied on maintaining their subscriber base by providing clear reception of free OtA channels. Broadcast HDTV removes that edge. They then grew the controlled access game to birth internal product supported by the MSOs. Eventually their local ad insertion ("we got eyeballs, we just can't prove it") crept in. Experiments with interactive subscriber testing died on the vine.
Today's Internet is the new cable -- thousands of channels delivering static and motion video+. It can prove metrics, offers free VoD, is truly interactive, delivers better PPV, and reaches a global audience. The cable distributors' business model remains based on highway robbery. Now that the inter-continental train is building through their landscape, the thought of an actual product output makes them crap their shorts. Cable distributors are intermediate toll-takers, not creators.
The networks built on program subscription can offer a better product at lower end cost via the 'Net. Formerly, cable was the only route capable of controlled consumer access. Today, distributors continue to "lick the bowl" with ad insertions, yet they add no value to the end product. Their jurassic distribution model has also made further highway robbery impossible; their penetration has maxed out.
When compared with what the Internet is becoming -- a global harvest of foreign and domestic content -- cable's relatively few measly channels are a ridiculous comparative option. The cost of an analog distribution plant (hybrid or not) is prohibitive to maintain. TW offloads their own systems due to this, yet believes that positions them to continue to control programming access? There appears to be a major disconnect still languishing in the upper echelons of TW.
Better they should see if there's still some way to further reduce AOL value and leave the future of TV to the non-dinosaurs among us.
The entire success of free electronic mass media -- from radio to Internet -- has relied on ad-supported content, not subscription fees. The new subscription is Internet access cost. Via the 'Net, Advertising can deliver a much better sponsor ROI showing provable engagement, concept success, and lasting reach. DVD sales could continue to ice that cake, offering ad-free versions, until pure downloads can further reduce producer overhead. Lower end prices increase buyers.
The smart media future is not in taking a protectionist stance. It lives in the desire of families who must now reduce their entertainment expenditures in deference to real needs.
There are no more "cable networks," only content creators who need to streamline their delivery methods to reduce costs and increase consumption in a more profitably sustainable way.
The future of cable is in renting broadband modems, home security systems, and providing competent and timely maintenance service.
Somebody should also tell the telcos TV toll-taking is a growing dead-end proposition. They rent modems too.
There's a growing global audience out there and American lifestyle and culture is still a sure sell to much of it.
The objective is right.
As Jeff knows, it took a long time for HBO to establish its value. Once consumers got it, the upside is exponential.
A consumer-oriented product development and marketing solution will accelerate success. We've been experimenting and learned a lot.
katherine@comradity.com