Cable Operators

Cable's Bad Web Habits

3/29/2009 3:00 AM Eastern

The theme of this week's The Cable Show is “Cable Takes Me There,” a nod to cable's ability to reach consumers across numerous platforms.

But some cable programmers are questioning whether networks should be taking their high-profile content to the Web for free, potentially leading consumers away from the traditional linear cable channels.

While a steady increase of Web-streamed, full-length episodes from such popular and critically acclaimed shows as Burn Notice, The Closer and The Beast have not hurt cable viewership, some cable-network executives fear that the industry is creating bad consumer viewing habits — particularly among younger viewers — that will eventually lead to the “Napsterization” of cable and destroy the economic model necessary to create such shows.

“What we think is that younger people don't distinguish between TV screens and computer screens the way older people do,” said Rainbow Media Holdings CEO Josh Sapan. “If everyone engages in putting cable TV shows on the Web shortly after they air on cable television, they're doing nothing other than creating what I would call very bad habits. They're bad for the health of the industry.”

Much like the broadcasters, most cable networks offer some free, long-form, episodic content on the Web. Sapan said consumers won't see episodes of AMC's Emmy Award-winning drama Mad Men or shows from other Rainbow-owned cable networks online, however. That's because he said such actions will eventually undercut the healthy advertiser/affiliate-fee dual revenue stream that networks enjoy and use to make the programming that he says has ushered in a new “golden era” of television over the past decade.

And Sapan believes that time will happen sooner rather than later — possibly within the next year or two, as more consumers watch video on the Web. He pointed to the rapid decline of the newspaper business, which has recently seen such iconic publications as the Seattle Post-Intelligencer cease their print product to focus on the Web as more and more consumers get their news and information from the Internet.

TV ISN'T DEAD

While other programmers are concerned with possible conflicts with affiliates over streaming video, few believe that such a doomsday scenario will occur anytime soon.

“It's a concern,” said A&E Television Networks president and CEO Abbe Raven. “I don't know if it's the No. 1 issue for programmers.”

NBC Universal streams only select episodes of such top shows as USA Network's In Plain Sight via Hulu.com as an effort to expose such shows to younger viewers who are actively on the Web, and to provide consumers a chance to catch a show they've missed.

NBCU president of TV Networks Distribution Bridget Baker said such offerings have not had an adverse affect on the network's ratings. In fact, NBCU's cable networks — USA, Sci Fi Channel, Oxygen and Bravo — all generated record viewership and ratings performances in 2008.

In addition, TV shows online are generating advertising revenue, according to Baker, although it's a drop in the bucket compared to ad revenue on linear cable channels.

Still, Baker admits the operators have expressed concerns about the amount of free content on the Web, but said networks have to also serve the growing audience watching online video.

“We're in the business of supporting the dual-stream model — it's the business that funds our business,” she said. “The answer is to try to address the customer's desire to get the content where they want it when they want it, while protecting the value of the product on the TV screen.”

AUTHENTICATING SUBS

Sapan believes one way of doing that is to “authenticate” cable subscribers through their local cable systems' broadband portal to allow them to consume television programs in multiple locations.

Comcast, Time Warner Cable and Cox Communications are already attempting to secure distribution agreements from programmers to provide an expanded collection of video content online, whether through a free authentication format or a potential pay tier of broadband-based video content.

A&E's Raven said she was “intrigued” by the MSO authentication model, although she would not reveal specific details on MSO discussions. “Conceptually, it's an interesting conversation,” she said.

But not everyone is in favor of consumer authentication for online content. Viacom CEO Philippe Dauman said during the McGraw-Hill Media Summit conference earlier this month that he's concerned about such plans. Viacom's stable of networks offer on the web content ranging from Nickelodeon's SpongeBob SquarePants to Comedy Central's The Daily Show With John Stewart.

“We want to make sure that it's a good consumer experience,” he said. “I don't think it would be very effective if you wanted to watch The Daily Show on your computer [and] you had to type in a PIN number. It has to be seamless from a consumer standpoint.”

Yet without any major change in consumer behavior, Sapan believes the industry in headed toward a “Napsterization” of its programming business, referring to the devastating effect then free music downloading online service Napster had record sales in the late 1990s and early 2000s.

“Our view is that it's inevitable, and that we're in the middle of a trend,” he said. “Sometimes, when you're in the middle of a trend, you don't necessarily see the end, or the consequences or the collateral damage.”

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