Americans appear to be miles behind in the debate to put their TV programming on the internet, with an emphasis on the world ‘appear.’
The debate was highlighted at last week’s cable show when two sides of the equation had their say in the form of Disney’s Bob Iger standing off against Time Warner’s CEO Jeff Bewkes. America only seems to be behind, because with the global reach of its content, it has so much more at risk than other TV industries.
Both of the CEO positions have been widely reported and are more or less the idea that broadcast TV in the US goes out for free, supported by advertisers, so Iger (because he runs Disney which owns ABC) supports the idea of content on the internet being free to air, supported by advertising, and available to everyone, while Bewkes, who kind of speaks for both Warner Brothers and Time Warner Cable, is suggesting that only cable TV subscribers should be able to view free cable TV programs on the internet.
If you think about it both of them are thinking inside the box ‘ in Iger’s case ‘ and we rate him as the content supremo who best understands the internet ‘ he is protecting the existing model and trying to move it lock stock and barrel onto the internet ‘ no changes needed. While we are not sure this is good enough, it is perhaps good enough for now, while the cable move is all about protectionism ‘ protecting the existing revenue flow from cable subscribers.
So one is protecting existing advertising revenues, and will need to sell advertising viewership on the internet to the same advertisers (will there be an internet TV Upfront one day?) while the other is saying that internet viewing is just an adjunct to what it is already doing. This is peculiar and peculiarly Time Warner and cannot work.
We say that it is peculiar to Time Warner because this is a content company that also owns a cable operator, and this is the only strategy that tries to leave both of them where they are today.
There is a potential disaster available here. If Bewkes convinces a big swathe of cable players to go his route, then all the us cable operators will agree, and a technical solution will be put in place to ensure that the online customer is a cable subscriber. At this point perhaps non-cable subscribers might be allowed to subscribe on the internet for payment, but without subscribing to a US cable operator, or perhaps they will have to sign up with a cable operator in order to get the free service.
Either way this is a subsidy for cable, and if a different business model thrives on the internet, say Iger’s free to air model, then the Bewkes model will be unable to sustain cable. Then crash, down it all comes, and a sudden exodus occurs from cable in about fives years, when the people who are habitually viewing cable online suddenly realize that they don’t use cable any more only online and there are other ways of getting the same or similar content. So it will be a gradual shift, followed by a sudden switchover. It is a black hole that Bewkes’ idea is storing up.
The issue for Iger’s model is that we have never seen a successful Internet model happen as a copy of the pre-internet world. So for instance content owners want to be free to explore internet models on their own without a broadcaster in the loop, and some will, perhaps through partnership with companies like YouTube and MySpace and other online properties, who own so much of the current internet advertising stock.
Suddenly Iger’s idea of transporting an entire TV channel to the internet, expressed for the first time at Cable World, also looks fraught. What would that do to the total advertising inventory on the internet? It would go through the roof, with two results. Firstly internet advertising would have surplus and the average price for internet video advertising would fall (whereas right now it is rising as it becomes more popular) and at the same time the number of people viewing broadcast TV channels would fall, making those properties less cash rich and less able to commission TV series of the quality that there are today.
You see this is first and foremost a quality argument. Desperate Housewives, made by Disney for ABC, is one such case in point. It is better than most cable TV programming, and this and other TV series like it are designed to drag up viewing numbers on broadcast networks, against cable TV channels which get more money from cable operators to carry them, and which are therefore across the board offering higher quality programs. So cable tends to have better quality overall and broadcasters have these islands of quality to get their viewers back to their channels.
These islands of quality placed for free on the internet, will harm all other internet viewing, including the free online cable channels, and set an expectation in the public’s mind that content should be free, not attached to their cable bill.
Another thing that would happen is that the Nielsen hegemony on testing US TV audiences would disappear. Because a server can count viewers better than all of Nielsen’s technology. What would happen then is that the big TV lie will be out of the bag. And that big TV lie is that people actually watch 300 TV channels. The viewing figures for the smaller channels would become transparent, and the idea of bundling will come under massive scrutiny.
Advertising server based campaigns on the internet which involve the ‘cake making’ channel or some such, would show for sure that so few people watch these channels that they should never be forced into a cable channel bundle. These channels are produced to create new inventory for the media conglomerates to sell more advertising. There is no exact measurement about them in cable but there would be on the internet.
So five or six free ad supported programs like Desperate Housewives alone might kill or at least harm the TV Everywhere campaign that Bewkes is running.
However for the time being we think that there will be room for both ideas on the internet. For a start the two constituents ‘ broadcast and cable, each buy different exploitation rights, and while contracts remain as they are, before content creators try to grab back lucrative internet content exploitation, then both models can work side by side.
But as more international online efforts (iPlayer in the UK) take off in huge numbers (used regularly by around half of all UK households) then the forward ground will be taken away from the international cable effort. Iger’s model will have the controlling hand internationally. Eventually we will ALL be watching more and more TV which is VoD over the internet, advertising or otherwise. You then have to add to that the pressure on US content, which is in huge demand outside of the US, to be free to air, due to the amount of piracy currently going on due to the delay in making programming available outside the US. Then we see the public perception becoming that programs are free on the internet, and you just have to put up with advertising (or find a technical means to get around it). Suddenly cable will find that it makes more sense to make its content free to air, with advertising support, and then the content creators will ask why they are hobbling themselves.
From there it is only a small step to cable customers in the US saying, ‘I get this content anyway, why do I need this outmoded cable subscription except to get an internet line,’ and cable will be in an invidious position.
And with rampant international piracy, you have to ask how long before US content companies can earn more from the international market purely over the internet, than from their existing distributors and when we get to that point, the entire paid content world comes tumbling down and a whole new set of rules apply.