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?
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.'"
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.
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."