Warner, others look to expand digital distribution

TV Everywhere to offer content on PCs, mobile phones

By Jennifer Netherby -- Video Business, 3/6/2009

MARCH 6 | For the last year, Netflix, Amazon, Blockbuster and others have been in a mad dash to move their Internet TV and movie services from the PC to the TV, where most people prefer to watch. Now they’re about to face a new wave of competition on the computer, as cable networks and providers announce plans to deliver their content online.

Time Warner chief Jeff Bewkes announced an industrywide push to make content even more available for cable households. Bewkes told Advertising Age that Time Warner, which will split off from Time Warner Cable this month, is pushing “TV Everywhere,” an initiative that would allow cable subscribers to watch TV programs on their PC, mobile phone and other devices, in addition to the TV.

Under the plan, Time Warner programs would be available throughout the Web on sites from Hulu and MySpace to even YouTube. But to watch them, users will have to log in to prove they’re a subscriber through a cable operator or other multi-channel distributor.

TV Everywhere wouldn’t just include Time Warner channels, if others sign on as TW hopes. Under the plan, cable subscribers—whether through Time Warner Cable, Comcast, Verizon Fios, DirectTV or other providers—would be given access to their cable programming online and on other devices.

“What we’re saying is every satellite and telephone and cable distributor can and should offer all of this stuff on broadband,” Bewkes said during the Deutsche Bank Media & Telecom Conference in Palm Beach, Fla., last week. “And the condition is that everybody who’s watching should be a multi-channel TV subscriber.”

DirecTV CEO Chase Carey said the satellite TV provider would be open to such a plan during the Deutsche conference.

Comcast Corp. had announced its own plans to offer subscribers online access to cable shows later this year through its Fancast site as part of a new service being called OnDemand Online. Other cable companies, including Time Warner, CableVision and media companies, also have said they are considering offering subscribers online access.

The move comes as online services make audience gains as consumers get used to watching content online. Americans watched a record average of six hours of video online in January, according to ComScore. Though most videos viewed were YouTube clips and other shorts, longer-form programming is gaining.

NBC Universal/News Corp. joint venture Hulu streamed 250 million clips of TV shows and other videos and attracted 24 million users during the month, according to ComScore. Apple iTunes, Microsoft Xbox Live, Netflix and others also have reported gains in streaming and TV and movie download sales.

Still, digital revenue remains small, and most companies are pushing to reach the TV, where consumers prefer to watch, through everything from TiVo boxes to videogame consoles.

Mark Ely, executive VP of strategy with Sonic Solutions, parent of CinemaNow, said companies are all trying to stake their claim online, and he expects more to enter the digital business in coming months. Sonic and CinemaNow, which partnered with Blockbuster earlier this year, are now in talks with Internet service providers, which compete with Comcast and other cable companies, that want to offer their own movie download store.

Ely doesn’t view cable’s move online as a direct threat to CinemaNow.

“We think of ourselves as being an a la carte video store,” he said. “We rent movies and sell movies, we sell episodic TV shows. We’re not going to do ad-supported content or subscription-based content. The value proposition is really different. … People go to Fancast or Hulu and get ad-supported content.”

Netflix spokesman Steve Swasey agreed, saying it’s too early to tell how cable’s online entrance will impact the retailer’s streaming service, though he noted that in Netflix surveys, some customers have said they’ve replaced their cable service with Netflix.

"Netflix regards itself as a movie channel on the Internet. We see the world as evolving to the TV where the Internet will be delivered directly to the TV, as Netflix is doing now," he said. " People trust netflix for movies," he added, noting that they don't stream news or live-action sports or weather. "We think there’s room for all of it. Netflix is trusted for movie and TV episodes."

Swasey said the retailer believes all Internet models—ad-supported, pay-per-view and subscription—will continue to grow.

Ely noted that because of release windows, CinemaNow is able to sell new release movies that ad-supported sites can’t yet offer, though if Comcast and other cable companies were to offer movies on demand online, they would become a more direct competitor.

Analyst Brahm Eiley of Convergence Consulting Group predicts cable companies won’t put all content online because the demand isn’t there and networks make more money on TV advertisements.

Eiley also noted that although the movie business is seeing softening DVD sales, the number of cable subscribers continues to grow. Comcast and other cable companies reported a slide in subscribers last year, but the overall cable, satellite and telecom industry added 1.4 million subscribers for a total of 98.6 million, according to Convergence. That was fewer than the 2 million added in 2007, but Eiley expects 2 million new subscribers in 2009 driven by the switch to digital TV.

“Everybody who is online is dying to get to the TV set. Now, here come the TV guys, and they’re going online,” he said. “Good luck. The economics are not favorable.”