Translation Please

'How It Works,' Meet 'You're Not Allowed'

2/21/2011 9:30 AM

When in the business of explaining how technology works, there come times when the “how” of it gets blunted by the cavalcade of reasons why it can’t be done, whatever “it” is.

Rules, in other words. In prior chapters, this surfaced as retransmission consent; must-carry; syndicated exclusivity. We’re at one of those times again. Weird stuff is happening.

A cable operator arranges to distribute TiVo boxes to its customers. Hooray! Consumers love TiVo boxes. On the TiVo box is a Netflix button. Click on the Netflix app, find a title of interest, stream it. Ordinarily, this column would delve into how that works - where the stream is sourced, how it moves, how it’s protected, what happens to it along the way. Except, let’s say the operator isn’t allowed to include the Netflix button, because one of the content sources for Netflix also sells monthly subscriptions to premium content on cable. What’s a better deal for the program network - to get paid a tiny sum per stream, from Netflix, or to get a monthly subscription fee from the cable subscriber?

Yet if Consumer Jane trotted out to a retail store, bought a TiVo box, and hooked it up to her cable subscription, then she can have the Netflix app? That’s OK? (Huh?)

Contrast this to last week’s app-within-an-app riddle, which started to play out from the Apple camp. It goes like this: Consumer Jane can now buy subscriptions to stuff from Apple’s App Store. That is so great for Jane! Or is it?

Developers think otherwise. Here’s why: Under App Store rules, Apple takes 30% of any revenue, subscriptions included. Sure, developers can sell their subscription-based apps elsewhere - but not if that means giving consumers a better deal than they can get in Apple’s store and not if it means giving buyers an option to purchase goods outside of the Apple environment.

Google came out the next day with its “One Pass” plan - a 10% cut of revenues, and developers can sell their apps elsewhere without issue.

Maybe these examples are unrelated. But anytime the word “subscription” is involved, it seems wise for cable people to pay attention.

Cable is aggregated television content, available by subscription. The marketplace to deconstruct “television” into video components, as apps, is just beginning. At this point, it’s the rules of rights that seem to be the sticking point, more so than the technology that will make it possible.

So here we are again, at the intersection between technology and the rules about video-distribution rights. Rules slow things down. Slowdowns afford time, whether we want it or not, to wait and watch. While waiting, it matters to choose any next moves wisely. Forewarned is forearmed.
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