Comcast-Time Warner Deal Shows Promise and Challenges of TV Everywhere

If you're looking for a template of how pay-TV operators and cable networks need to be working together if they want to successfully combat the rise of Netflix and other over-the-top entrants, yesterday's long-term agreement between Comcast and Time Warner is a great example. Under the agreement, Comcast digital subscribers will gain access to popular programs and movies from Turner Broadcasting networks like TNT, TBS, CNN, Cartoon Network and others, across multiple platforms, including Comcast's On Demand service, Xfinity TV online web site and companion iPad/iPhone and Android apps (which just last night began streaming full episodes). Importantly, Turner networks' viewers will also be able to view the same programs/movies on Turner web sites and online/mobile platforms.  No extra charges to the consumer are planned.

The deal is a solid step forward in realizing the vision of TV Everywhere that both companies' CEOs laid out back in July, 2009 (see this video for more). And no doubt both companies want to make similar deals with others in the industry; Comcast with other cable TV network groups, and Time Warner with other pay-TV operators. Still, the fact that the two foremost proponents of TV Everywhere took a year-and-a-half to go from laying out their vision to actually announcing a deal underscores how arduous the full realization of the TV Everywhere model will be.

At first glance, TV Everywhere should look very appealing to cable networks. They get to keep their dual revenue stream model (monthly carriage fees plus advertising), while opening up access to their programs on connected and mobile devices, all with secure, authenticated delivery. With viewers clamoring for anytime, anywhere access, and OTT competitors already delivering this, absent TV Everywhere, cable networks are at risk of being marginalized.

Nonetheless, many cable networks aren't bought into TV Everywhere. Chief among their concerns is lack of measurement. Because views on connected and mobile devices cannot be seamlessly included in their Nielsen ratings, TV viewership levels could be cannibalized by new devices. That's a bad thing since in the media business anything that can't be measured, can't be sold. On this point, the Comcast-Time Warner release offered little new comfort, stating only that "Turner content on Xfinity platforms is expected to accrue to Nielsen C3 ratings across TV and the Internet in mid-2011, and eventually to phone and tablet devices."

Money also looms as a large issue. For some cable networks, incremental distribution to new devices should mean incremental fee increases. For these networks, the fact that pay-TV operators don't intend to charge subscribers doesn't matter; current agreements cover set-top box-only distribution, anything more is a new deal. Some see this as an imperative because they're considering launching their own subscription online/mobile services. Particularly for the networks that own Hulu, preserving the option of paid offerings is critical. Last but not least are control and quality issues. Will viewers be forced to access programs only at pay-TV operators' portals or can they view on networks' own sites? If the latter, what assurance will there be that back-end authentication systems will deliver a high-quality user experience? And on the list goes.

Meanwhile, for pay-TV operators, rolling out TV Everywhere isn't a piece of cake either. This is complicated stuff, and as I wrote recently, once you get beyond the biggest operators who can handle the capex and opex requirements, the resources needed may be too steep to bear. That means partners will be pulled in (as 4th largest cable operator Charter just did with TiVo, while simultaneously putting the brakes on its TV Everywhere initiatives). But once partners are involved, there are a new set of issues related to content rights and security that cable networks will closely scrutinize.

TV Everywhere is fundamental to the health of the pay-TV industry, but for now is still a Rubik's cube of complexity. Comcast and Time Warner are absolutely doing the right thing by leading the industry by example. Whether the others will follow is still a big unknown. Meanwhile Netflix is adding 3 million subscribers a quarter and rattling the cage of HBO, the most powerful of all cable networks, by suggesting it will bid aggressively against HBO for the rights to Warner Bros. films. All of this shows how online and mobile delivery will have a huge impact on the pay-TV industry's future.

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Categories: Cable Networks, Cable TV Operators

Topics: Charter, Comcast, Netflix, Nielsen, Time Warner