Time Warner, Other Cable Cos. Stake Out Turf in Digital Frontier

IPad App Sets Off Tussle Over Content and Distribution

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There's an epic tussle going on over the future of TV, and fusty old cable served notice last week -- it won't be left behind.

With little advanced warning, Time Warner Cable rolled out an app that put 17 live TV channels on the iPad via a cable modem, with more on the way. It's not alone: Cablevision is planning its own app that will have an even more comprehensive offering of live TV by the end of the month, and Dish Network provides a live feed to devices through its Slingbox service.

And why not? Increasingly, the TV is but one of many screens in the home. Moreover, there's no real difference between, say, an internet-connected TV, a computer, laptop, tablet or phone. They're all screens, and the cable company wants to enable all of them, rather than sit back and watch as the TV networks sell rights to competing distributors, or worse, sell directly to consumers and cut them out altogether.

But the owners of cable networks such as Viacom (MTV), Scripps Networks (Food Network) and Discovery claim those moves require additional rights to content and, Time Warner Cable, Cablevision and others will have to negotiate for them. Scripps went public with its opposition, saying it "has not granted iPad streaming rights to any distributor and is actively addressing any misunderstandings on this issue." Other networks are doing their grumbling in private, but assure Ad Age they're weighing their options and will soon respond.

That's setting up the next wrestling match between content and distribution, jealous siblings that have for years tried to take bites out of each others' businesses. Cable, and to some extent satellite-TV services, have the billing relationship with consumers and the pipe to the home. TV networks and studios have the programming product that generates demand, and increasingly, more avenues to reach consumers.

Just look at the most recent agreements struck by content owners and distributors: Major League Baseball and Warner Bros. Entertainment are distributing on Facebook; Viacom struck a comprehensive deal with Hulu that includes its $7.95-a-month service, Hulu Plus; and Netflix bid on a series from David Fincher. As networks find new distributors and markets for their content, people will need a robust data pipe to the home for the near future, but perhaps not much more. Cable is facing a future as a dumb pipe, which is why Comcast snapped up NBC Universal.

True to form, the networks' central argument is that these are rights they should be able to sell for an additional premium, for a mobile device, much like they've already licensed for MobiTV and Verizon's V-Cast. They argue the content is being delivered via a wireless broadband network, which TWC charges extra for. But most troubling, while their ads are shown in the stream, Nielsen isn't yet able to measure them, meaning the networks can't make money through advertising.

Networks argue that if the iPad is just another TV, as TWC argues, then it should be subject to FCC laws, including "must carry," requiring them to carry broadcast channels, as well as other services required by regulators, such as closed-captioning.

In the end, this is less about laws and cable agreements than about leverage; as the second-largest cable operator, Time Warner Cable has it, and is taking the calculated risk that that the networks won't follow through on their threats. Aside from additional subscriber fees, the networks need to preserve what they already take in.

Time Warner Cable presented its plans to cable networks during the past few weeks. Those meetings didn't go very well, said a person familiar with the situation. They initially said April was the planned launch date, but then pushed it up, outraging programmers.

While network sources say cease-and-desist letters have been sent, Time Warner Cable says none have yet been received. "The problem on this is their position is very anti-consumer," said Time Warner Cable spokesman Alex Dudley.

What happens today becomes a bargaining chip when carriage deals inevitably expire and negotiations begin tomorrow -- and it'll be about who has the leverage.

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Contributing: Brian Steinberg

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