Story from the Wall Street Journal
It is called playing defense.
There is no doubt the film and TV industries need to find a way to protect their copyrighted programming on the Web. But the strategy unveiled on Wednesday by Time Warner and Comcast falls short of the ideal solution.
The two companies will test an approach to offering cable shows online without charge but only for viewers who have a video subscription. It is aimed at stopping anyone from turning off their TV subscription and watching video via an Internet connection instead.Trouble is, as a deterrent to cutting the video subscription, it lacks teeth. Plenty of video programming is available online for free. Not only is there YouTube, but the broadcast networks such as ABC, NBC, Fox and CBS offer many of their shows for free on the Web. There are even a few cable shows available. And consumers also can buy individual episodes of many TV shows on services like Apple's iTunes.
Of course, cable channels have good reason not to throw all of their programs up online for nothing. Unlike the broadcast networks, they get big fees from TV distributors such as cable operators and satellite-TV firms. That has made cable channels hugely profitable and a source of steady growth for Time Warner, Viacom, Walt Disney and News Corp., owner of The Wall Street Journal.
Not only would a free-for-all approach threaten those distribution fees, it would likely undercut advertising revenue. There simply isn't enough ad revenue online to replace dollars lost from television, an issue broadcasters also are wrestling with.
But the Time Warner-Comcast approach could backfire on the cable-network owners. One big reason the sector now draws a majority of TV viewers is that its potential audience has increased. The number of households subscribing to some form of pay-TV service rose to 85% last year from 58.6% in 1990, according to SNL Kagan. That has helped boost cable channels' share of TV advertising.Putting cable shows behind an Internet wall could start to reverse that trend. Admittedly, the number of consumers switching off their video subscription in the short-term is likely to be tiny. But given the amount of TV programming available and the steadily growing number of technologies making cheap online viewing easier, it will increase.
At the very least, Time Warner and Comcast should offer an online-only option for consumers, so channels won't automatically lose viewers among people cutting off their video subscriptions.
There is little the media companies can do to stop the havoc that the Internet is wreaking on their traditional business. They can slow the drain of profits for a while. But eventually, the companies will have to come up with new business models a little more adventurous than what was unveiled on Wednesday.
