Internet Video

Over the Top Assault

10/04/2010 3:35 PM Eastern

Don't expect subscription TV services to get swept to their doom by an Internet hurricane anytime soon. Today, Internet-connected TV services are
supplemental to — not a replacement for — cable TV.

But there’s a steadily rising tide of “over-the-top” video services and
devices that could make life uncomfortable for cable, satellite and telco TV
providers by piping content directly to the big flat-screen in the living room.
These include new initiatives from tech behemoths Apple and Google and a
stepped-up focus by Netflix to expand its lineup of on-demand TV shows and movies.

Multichannel News cover story Oct. 4Even if Internet-distributed content doesn’t fully destroy the pay TV model, it threatens
to chew away at the edges of what is now a mature business by driving consumers
to lower-priced tiers. And the landscape could change dramatically if U.S. regulators
adopt rules forcing programmers to license content to online distributors.

“When incumbents are challenged by a credible alternative, they lose market share,” said
Will Richmond, industry analyst and VideoNuze publisher. “New choices will always lead to
some fragmentation in the market.”

Among industry execs sounding the alarm: Verizon Communications chairman and CEO
Ivan Seidenberg, who believes Internet video distribution will become a big problem.

“Cable has some life left in its model … The bundled offering of 300 or 400 channels is
the only way customers can buy that [content],” he said at a Goldman Sachs investor conference
last month. “But that’s going to get disintermediated over the next several years.”

Below: a table outlining major broadband-to-the-TV options available today, and how
likely they are — or aren’t — to siphon off subscribers of traditional TV service.

SERVICES

Product/Technology:
Amazon Video on Demand
How Does It Work?: 50,000-plus TV shows and movies, available via streaming to
PCs, several Internet-connected TVs, Blu-ray Disk players, set-tops, game
consoles
Pricing & Availability: TV shows $0.99-$2.99 per
episode to rent or own (some free); available now
Partners *: Sony,
Panasonic, Roku, TiVo, Samsung, major studios and networks
Cord-Cutter Outlook: A la carte model has narrower appeal than
subscriptions; no live-TV programming
Low

Product/Technology:
iTunes
How Does It Work?: iTunes Store off ers 65,000-plus TV shows and 10,000-plus
movies for rent or purchase
Pricing & Availability: TV shows to rent for $0.99 or
purchase; HD movies to rent for $3.99; available now
Partners *: ABC/Disney,
Fox, BBC America for rentals; major studios and networks
Cord-Cutter Outlook: No live
TV; 99-cent next-day rentals don't have wide support
Low

Product/Technology:
Google TV
How Does It Work?: Allows users to search for and access linear TV listings,
YouTube and other Internet video and run Internet-based applications on TV
Pricing & Availability: To be determined; devices scheduled to ship fall 2010
Partners *: Sony,
Dish Network, Logitech, Best Buy
Cord-Cutter Outlook: Initial approach is to enhance existing TV services and
provide expanded access to Net video
Very Low

Product/Technology:
Hulu
How Does It Work?: Free Web content includes 2,600 current primetime TV shows
and 1,000 movies; premium service Hulu Plus available on various devices
Pricing & Availability: Hulu Plus: $9.99/mo.;
currently in private beta
Partners *: Sony 225
content providers, including owners NBC, Fox and ABC
Cord-Cutter Outlook: Content is largely broadcast shows; no live sports or
news; may be "good enough" for some at an attractive price point
Low to Medium

Product/Technology:
Netflix
How Does It Work?: 20,000-plus movies and TV shows available to stream to more
than 100 devices, including many TVs, Blu-Ray disc players
Pricing & Availability: Subscription plans start at $8.99/mo.;
available now
Partners *: TiVo,
Roku, Sony, LG, Panasonic, Apple, Nintendo Wii, Microsoft Xbox, Best Buy
Insignia
Cord-Cutter Outlook: Content still lags availability on TV; no live TV (except
Starz's linear channel on PCs) but model could incorporate live events
Low to Medium

Product/Technology:
Wal-Mart's Vudu
How Does It Work?: 3,000-plus HD streaming movies on demand, many available in 1080p
HD, through compatible Internet-connected TV
Pricing & Availability: Rentals $0.99-$5.99;
purchases $4.99-$24.99
Partners *: LG,
Samsung, Sharp, Toshiba, Vizio; major movie studios
Cord-Cutter Outlook: Content catalog is mostly movies; aimed at high-end
niche
Very low

DEVICES

Product/Technology:
Apple TV
How Does It Work?: Small Internet set-top provides streaming access to rentals
of TV shows and movies, plus Netflix, YouTube, purchased iTunes content
Pricing & Availability: $99; was to start shipping September
Partners *: ABC/Disney,
Fox, BBC America for show rentals
Cord-Cutter Outlook: Rental model unproven and content selection limited;
Netflix feature not differentiated
Low

Product/Technology:
Boxee
How Does It Work?: Application and Web content guide designed for TV displays; touts
nearly 40,000 TV shows primarily from broadcast networks
Pricing & Availability: Boxee-based set-top from D-Link: $199;
to be available November 2010
Partners *: MLB.tv,
Pandora, Comedy Central
Cord-Cutter Outlook: Content is not differentiated; will have difficulty crossing
over to non-tech audience
Low

Product/Technology:
Microsoft Xbox 360
How Does It Work?: Game console provides access to Netflix, ESPN3.com, movies
and TV shows on-demand
Pricing & Availability: $299; available now
Partners *: Netflix,
ESPN, major studios and cable networks
Cord-Cutter Outlook: Access to ESPN3 is unique but not enough to prompt
cable cancellations
Low

Product/Technology:
Panasonic Viera Cast
How Does It Work?: Internet service that provides video, information,
entertainment
Pricing & Availability: Free with select HDTVs, Blu-ray Disc
players; available now
Partners *: Netflix,
YouTube, Fox Sports, Amazon, Pandora, Bloomberg
Cord-Cutter Outlook: A Most attractive feature may be Netflix streaming
Low

Product/Technology:
Roku
How Does It Work?: HD Internet set-top that provides access to Netfl ix
on-demand and other content
Pricing & Availability: Starts at $59; available
now
Partners *: Netflix,
Hulu Plus, Amazon, MLB.tv, UFC
Cord-Cutter Outlook: A Device's appeal is mainly as a Netflix client
Low

Product/Technology:
Samsung
How Does It Work?: Samsung Apps platform provides access to video, games and information
services
Pricing & Availability: TV Free with select HDTVs,
Blu-ray Disc players; available now
Partners *: Blockbuster,
Netflix, YouTube, Vudu, Yahoo Widgets, Pandora, eBay, Twitter, Skype
Cord-Cutter Outlook: Content lineup currently not differentiated from other
Internet-connected CE devices
Low

Product/Technology:
Sezmi
How Does It Work?: Hybrid broadcast/Internet-delivered service with access to
local TV stations, some VOD and Internet content and cable programming
Pricing & Availability: TV Receiver system $150;
broadcast-only service $4.99/mo. available in 36 markets; $19.99/mo. with
23 cable networks in Los Angeles only
Partners *: Local TV
stations and groups; Best Buy; major movie studios; some cable programmers
Cord-Cutter Outlook: Service designed as cheap alternative to cable/satellite
TV but traction to date is unclear

Low to Medium

Product/Technology:
Sony PlayStation 3

How Does It Work?: Net-connected gaming console provides access to Internet
video content, including some original programs

Pricing & Availability: From $299; available now

Partners *: PlayStation
Network service provides rentals/purchase of movies and TV shows; as well as
Twitter, Facebook and other apps; Netflix streaming

Cord-Cutter Outlook: Device's main selling proposition as a game machine
rather than TV service

Low

Product/Technology:
TiVo Premiere DVR

How Does It Work?: Digital video recorder that provides access to
Internet-delivered movies, video clips, TV shows and apps

Pricing & Availability: Starts at $299; available
now

Partners *: Amazon,
Netflix, Blockbuster, YouTube, Music Choice, Hulu Plus, 1,000-plus Internet
content publishers

Cord-Cutter Outlook: DVR's core value still relies on traditional TV

Very Low

Product/Technology:
LG NetCast

How Does It Work?: Internet-delivered TV shows, movies on-demand and
information

Pricing & Availability: Free with select HDTVs, Blu-ray Disc
players; available now

Partners *: Netflix,
Roxio CinemaNow, Yahoo Widgets, Pandora, Vudu, YouTube

Cord-Cutter Outlook: Content lineup not differentiated from competing
Internet-connected CE devices

Low

March