Pay cable tests online delivery

Could the experiment be a TV game changer?

For a peek at the future of pay television, take a trip to Milwaukee.

Amid the beer and bratwurst, select Time Warner Cable subscribers are being allowed to stream or download such HBO shows as "Curb Your Enthusiasm" and "Entourage" to their PCs -- at the same time they're airing on TV.

No ads. No extra fees. No telling how this might change the cable TV landscape.

The service, scheduled to roll out to a broader audience this year, is one of several initiatives championed by Time Warner and Comcast to make episodic programs and movies as ubiquitous online as such broadcast TV shows as "Desperate Housewives" and "The Office." Despite piracy concerns and the potential to dilute premium content, the efforts are attracting support from other cable operators, TV programmers and new competitors AT&T and Verizon.

"It is in the interest of subscribers to have access to programming that is not predicated on subscribing on a specific provider's bundle," says Dan York, senior vp programming at AT&T.

Time Warner and Comcast quietly have held talks during recent months with networks, cable operators, telcos and satellite companies seeking to exploit that sentiment.

The devil, of course, is in the details. Time Warner seeks an industrywide solution that would allow pay TV customers to access their favorite shows wherever they want them -- whether at HBO.com or such popular video aggregators as Hulu or Veoh. Comcast, on the other hand, is preparing to launch more limited tests that would allow subscribers to access content only through Comcast-owned sites. Chase Carey, CEO of satellite company DirecTV, said this month that he also supports putting pay TV shows on the Web but has not offered specifics.

The concept isn't new. Many primetime shows that air on ABC, NBC, CBS and Fox are available on the Internet for free. But the broadcast networks can, at least in theory, make their money back through ads. For the most part, pay TV distributors and programmers want a solution that only includes consumers who already have paid for subscriptions -- and keeps out everyone else.

They're betting that those efforts will help, not hinder, plans to bundle TV, Internet and telephone services.

The challenge is developing technology that can sniff out authorized users across dozens of competitive Web sites while keeping out hackers, a feat that until now has not been accomplished. It also would require the blessing of a vast constituency of TV programmers and distributors, some of whom barely talk to one another, much less work together.

A likely scenario, independent broadband analyst Will Richmond suggests, is that pay TV subscribers initially will have online access to premium programming on a controlled, site-by-site basis, as Comcast is proposing.

Time Warner CEO Jeffrey Bewkes' vision "is more of a long-term end state than a short-term proposition," Richmond says. "Most existing cable subscribers would be thrilled if they could just get online access to cable programming, regardless of where they would have to go to get it."

One point on which many distributors and programmers appear to agree: Online access to pay TV programming should be available, at least for now, only to subscribers. The prospect of pay TV customers "cutting the cord" and buying their favorite shows a la carte from operators -- or worse, not paying for them at all -- is something they'd rather not face.

Indeed, Bewkes' "TV Everywhere" concept could be seen as an attempt to keep consumers from watching copies of TV shows downloaded illegally from the Internet and viewed on their TV screens, the same phenomenon that annihilated music industry profits.

Time Warner has held talks with Scripps Cable, ESPN, BBC America, Viacom, Verizon and AT&T.

Bewkes has plenty of mistrust to overcome. When he casually mentioned in an Ad Age interview recently that Time Warner would consider offering a "Web-only" programming option to consumers who don't have a pay TV service, New York Times columnist Saul Hansell accused him of "preparing to stab the cable industry in the back."

Time Warner spokesman Keith Cocozza insists that the company simply wants to "build upon the existing business model we have with distributors," and has no plans for "over-the-top services that cut operators out of the food chain."

Comcast hasn't gone as far. CEO Brian Roberts announced last year at the Consumer Electronics Show that the company plans to allow consumers access to network fare on TV, the Internet and mobile phones. But so far, Comcast's Fancast.com site offers a relatively small selection of free broadcast-network shows and a few showcase videos from its cable programmers.

"We've taken a more conservative approach," says Matthew Strauss, Comcast's senior vp new media. "We share the vision that a paying Comcast customer should have the ability to access their programming on different platforms. That doesn't mean everywhere."



Comcast is trying to persuade such big programmers as Viacom (MTV, Nickelodeon, Comedy Central) and Disney (ESPN, Disney Channel) to allow the operator to sell their video content on Comcast sites like Fancast -- even as the networks explore ways to exploit their programming themselves.

Comedy Central, for example, already posts full-length, ad-supported programs from "The Daily Show With Jon Stewart" and "The Colbert Report" for free on its Web site, despite being criticized by some for risking cannibalizing the shows' performance on television.

"We've seen the opposite," says Denise Benton, executive vp affiliate sales and marketing at MTV Networks. "People go online to see what they've missed. They think, 'This is something we need to watch.' "

Starz is pushing its Starz Play Internet service, which allows Verizon subscribers to stream its programs and download movies for $5.99 a month.

And ESPN already pulls in hundreds of thousands of subscribers from such operators as Verizon, AT&T and Frontier Communications through its ESPN360 service, which delivers a select stream of its television programming as well as Internet-only streams of more specialized fare, including European soccer and cricket.

The problem with these approaches is that they require consumers to navigate multiple Web sites to get the content they want.

"The expectation from the consumer is to log on to one site and access every movie known to man," says Bill Myers, president and COO of Starz Entertainment. "There isn't any one of us who can deliver on that promise at this point."

The HBO test in Milwaukee is designed to solve that problem. Using newly developed "authentication" technology, Time Warner executives say they have developed a way for any Web portal -- programmer, cable, telecom or aggregator -- to recognize consumers with pay TV subscriptions and give them access to their favorite shows online.

Analyst Richmond is skeptical.

"It's not just authenticating your own users on your own platform," he says. "It's authenticating the users of multiple distributors across multiple platforms. It gets really complicated really quickly."

There's also the question of whether Time Warner can get wary telecom and satellite competitors to buy in, even with its oft-repeated assurance that it will treat everyone the same.

Not a problem, says Terry Denson, vp programming and marketing for Verizon's FiOS television service.

"We are completely open to participating in authentication," he says. "But unless there's been significant movement on the technical side, it doesn't appear that inter-operability (between program distributors) is ready for primetime."

Meanwhile, Verizon isn't waiting for Time Warner to take the lead. It recently launched its own longform video offerings -- including Starz and ESPN360 -- on the Web, and Denson says the company is talking with others.

He isn't worried that Time Warner or another rival will get an upper hand online because content owners, who make more money when more companies distribute their products, "would be reluctant to allow it."

Ultimately, he says, programmers have the trump card. "They can make more or less or no content available," Denson says.
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