Report: Web TV won't challenge b'cast for some time

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TORONTO -- Don't bet the farm on Internet downloading just yet.

Squeezing revenue from Web TV is proving far more difficult than initially forecast, which should keep network TV king of the content universe for some time to come, Convergence Consulting Group Ltd. predicted Monday.

"At least until the end of this decade, there are a number of cold, hard realities dictating little economic and technological rationale for the broadcasters and cable networks to move away from TV as the primary driver (of their businesses)," the Toronto-based researchers conclude in their new report: "Battle for the North American Couch Potato: New Challenges and Opportunities in the Content Market."

Broadband access is making Web TV services like Joost and JumpTV a reality, but according to the 215-page report, Canadians pay far less to watch video via traditional TV than they do to download or stream video content, making the economics of traditional network TV viewing more appealing.

Bram Eiley, president of Convergence Consulting, said the average North American family pays 20 cents an hour to watch traditional TV by subscribing to a cable or satellite TV package.

He said those same consumers can purchase a network TV show from iTunes for $1.99 per episode. But that makes Internet TV far more costly. "Why pay 10 times what you're paying now on TV?" Eiley questioned.

Making the numbers work for U.S. network producers also is more difficult online.

Eiley pointed to ABC's popular primetime series "Desperate Housewives," which draws roughly 20 million North American viewers and about $10 million in advertising revenue each episode in the U.S. alone. And that excludes other content deals like DVD sales.

Until Web TV becomes more user-friendly, Eiley argued, consumers will prefer watching U.S. network fare on traditional TV sets -- commercials be damned.

"We're not saying there's no play online, but not in the way that traditional TV now works," he said.

Streaming content online has enabled broadcasters to better market their wares and reach new audiences, but with little penetration to date.

Convergence Consulting estimates the just 5% of a broadcasters' viewer base actually watches streaming TV.

Cable networks fair better, with MTV operating its own Web site, and about 15% of its U.S. TV base watching shows online.

For their part, major studios face a different dilemma than broadcasters as they depend more on DVD sales, especially to Wal-Mart, for revenue and profit growth.

Here, the studios have begun selling or renting their movie content via Apple, Amazon, AOL Video, BitTorrent and CinemaNow in the same DVD window as Wal-Mart, which puts their most luractive distribution channel in direct competition with online/device players.

So far, the Canadian report argues, movie service numbers from iTunes and other platforms have underwhelmed.

"The studios are in experimentation mode, having only provided the online players with a limited selection of new titles," the report said.

"If online becomes the direction the studios truly embrace, and when download to burn becomes universal, we forecast online sales will pick up," it continued.

But for now, traditional TV and DVD sales aren't going anywhere soon.
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