Cable Programers Not Giving Up The Fight To Save the Traditional Business Model, and They Have The Clout To Do It
Needless to say, those who profit from the existing business models do not take kindly to challenges to their way of doing business. Just last week, Time Warner COO Landel Hobbs told folks at the Digital Hollywood Media Summit to avoid doing deals with “over-the-top” services such as Boxee and NetFlix. As Mr. Hobbs explained:
We have to work with content owners. It's imperative that distribution and content work together. But we have to be very careful of stuff like over the top or all video content over the top on the Internet. There is a dual revenue stream that we have to be careful of. Surviving on just advertising is a very tough thing
Hobbs is not alone in thinking that cable programmers should not cooperate with any shift in business model by making it easy to license their “must have” programing. Mark Cuban last week wrote a blog post explaining why the CEO of Boxee must think that content people are “stupid” and that the “TV Everywhere” (if you pay for it) model proposed by Time Warner CEO Jeff Bewkes is the right model.
Those who believe that the internet makes it impossible for cable operators and content producers such as Time Warner and HDNet to prevent rival models from emerging need to think again. About a month ago, the online streaming service Hulu, often touted as a leader in the shift of video content from the TV screen to broadband, yielded to the demands of unnamed copyright holders to block access to its service by Boxee. For those unfamiliar with it, Boxee is an open source program that lets you easily aggregate content from online or on your computer and play it on your TV. In other words, Boxee is one more step toward convergence of online video, other forms of digital video, and traditional television viewing. We may think of it as a kind of “video VOIP.”
But copyright licensing gives the programmers (many of whom are vertically integrated with cable/broadband access providers) the ultimate say over who gets to (legally) put programming online. this gives the programmers considerable input into how the business model will evolve. Which is why, as Hulu explained in their blog post back in February (which I expect to disappear as soon as the Video Powers That Be realize that such a frank admission of market power seriously undercuts their stated position that the internet is the ultimate competitor to every video or audio service), Hulu decided to block access to its content by Boxee despite the fact that Hulu “realize that there is no immediate win here for users”:
Our content providers requested that we turn off access to our content via the Boxee product, and we are respecting their wishes. While we stubbornly believe in this brave new world of media convergence — bumps and all — we are also steadfast in our belief that the best way to achieve our ambitious, never-ending mission of making media easier for users is to work hand in hand with content owners. Without their content, none of what Hulu does would be possible, including providing you content via Hulu.com and our many distribution partner websites.
In other words, Cuban is right when he points out to the CEO of Boxee that programmers aren't stupid, so anyone wanting to distribute programming needs to stop thinking about the supposed inevitable march of technology and start trying to cut some deals that keep the current players happy. Mind you, this does not mean that video will disappear from the internet. You will still get to see all the dramatic chipmunks and other video clips you desire. But, if this goes on, it seems unlikely that internet distribution will become a competitor to cable or other MVPDs.
At this point, I think it worthwhile to bring up a bit of history. Direct Broadcast Satellite (DBS) was authorized by the FCC in the mid-1980s. But it could not become a real competitor to cable until Congress required cable operators to give DBS and other cable competitors access to affiliated programming like CNN and HBO (the “program access rules” codified at 47 U.S.C. 548). We can expect the programming interests happy with today's business models are likely to resist any competitors that threaten to disrupt existing business models in the same way, unless Congress passes a law giving online distributors some form of program access. After all, as Mark Cuban reminds us, programmers aren't stupid. They understand how to leverage copyright to preserve their existing business model, and we should expect them to do so. At least, as long as Congress permits them to do so.