Stephen’s Posterous

The music and newspaper industries have faced serious challenges and are struggling to survive in the form that we know them.

The mis-steps of both, the former for reacting too slowly to the onslaught of digital technology and the latter for hesitating in the face of competition from free content on the internet, framed discussions at the annual National Cable & Telecommunications Association convention in Washington DC last week.

Executives puzzled over the explosive demand of free online videos and whether that could lead customers to drop their cable TV service.

Hardly any conversations went without mention of the cable industry’s answer to the threat – “TV Everywhere” or “Entitlement”, a broad concept spearheaded by Time Warner to offer a cable network’s programming line-up online for “free”, but only to paying subscribers to cable video services.

“We’re all being too slow to take all these networks [and] put it on broadband. Do it right away.” Jeffrey Bewkes, Time Warner chief executive, urged some 12,000 cable executives attending the show last week.

TV Everywhere, and a similar plan by Comcast , the top US cable operator, called OnDemand Online, is designed to preserve the lucrative 30-year-old cable business model where networks such as CNN, which sell advertising, are also paid a fee by cable operators like Comcast for the right to carry the channel.

Mr Bewkes’s plan, a revision of a failed attempt to do the same for video-on-demand services, comes as the decline in advertising hits media businesses.

Privately, executives at the show said executing the plan would be a nightmare, but doing nothing could be worse. The tough slog over the next two or more years to convince nearly everyone to go along with the plan will determine the future of media for the next 20, cable executives say.

Talking to the Financial Times, Mr Bewkes conceded there were “some issues”. Among these: how many more adverts must programmers add to online videos, and in what form will these appear?

Services such as Hulu, the free online video service that is a joint venture of News Corp and NBC Universal, carry only about a quarter of the amount of adverts that appear on television. It might prove hard to sell enough ads to fill the available slots for online video. Hulu, which boasted of selling out its inventory of ads last year, has resorted to running filler ads this year.

“What emerges . . . has to result in a growth in advertising,” Philippe Dauman, chief of Viacom, told the FT.  Better technology to attract viewers, as well as the ability of media sales teams to sell across multiple media platforms could offset dented revenue if viewers suddenly flocked to the web, Mr Bewkes said.

For all the hullabaloo about online video, it has generated little revenue and almost no profits compared with TV. The average ad revenue per viewing hour for cable is about three times higher than for online video, media executives say.

“How much more content can you put online until you have mechanisms to monetise [it]?” asks Denise Denson, executive vice-president of content distribution at Viacom’s MTV.

Other programming executives were reticent about offering anywhere near their entire programming line-up on the internet. “We’re going to be as moderate as we can be,” said Joshua Sapan, chief executive of Rainbow Networks. Making TV Everywhere work would also require a massive, industry-wide co-ordination among rivals fearful of divulging valuable consumer data to each other.

“There are at least as many questions associated with building it as there are elements that seem attractive about it,” said Bridget Baker, president of TV network distribution at NBC Universal.

“Maybe it’s not such a good idea,” confided one top media executive by the end of the week-long cable show.

In spite of uncertainty, some, like Time Warner Cable, are forging ahead with plans to roll out an online version of HBO, which carries no advertising. Tests later in the year with ad-supported networks from Turner Broadcast and NBC Universal will be a better barometer of future success.

As to when programming schedules will be a key-press away for paying subscribers, “I don’t know the answer to that,” Mr Sapan confessed.

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