News

Box[e]ed In

2/21/2009 2:00 AM Eastern

The Internet was alive late last week with the sound of conspiracy theories about whether the nation’s largest cable operators might have pressured content companies in Hulu from cutting ties to an upstart Internet company called Boxee.

But cable operators may only look like bullies — they’re actually very scared.

In a blog post, Hulu CEO Jason Kilar said that his company was pulling content from Boxee, which provides a free application allowing users to view video from networks such as ABC, CBS and Comedy Central, as well as movie services such as Netflix. “Our content providers requested that we turn off access to our content via the Boxee product, and we are respecting their wishes.”

What made tongues wag was this: Several cable networks have begun to stream entire shows on their Internet sites, and it’s no secret the big cable operators don’t like it one bit.

They sweat a little more as they pay escalating programming fees, while some of the hottest programming is made available online for free. And as every week passes, there’s a new gadget invented that makes it easier to view the Internet over a television. At the recent Consumer Electronics Show, the aisles were filled with Internet-ready TV sets.

Moreover, consumers have been trained to think of content as portable. We want to watch what we want, when and where we want it. Think music. To think that consumers won’t gravitate to the easiest and cheapest way to watch content — or that other companies won’t rush to offer it — would be a big miscalculation on the part of cable operators. Already, Charlie Ergen’s Dish Network will offer TV online through Slingbox, built by a company he now owns.

At the moment, cable networks make far more money for themselves — and for cable operators — through good old-fashioned TV, compared to any revenue they could pull in for the advertising on their streaming videos.

But there will inevitably be a bigger audience as issues such as bandwidth, ratings and copyrights are untangled. And while operators hold some sway over the programmers, they’re wise to embrace some kind of online business model — fast.

Cable operators and TV networks are already exploring the idea of putting cable shows online, accessible only to cable subscribers. Comcast and Time Warner Cable are among those considering the idea along with network owners Viacom, Time Warner Inc. and General Electric’s NBC Universal, among others.

Some networks have already migrated toward a new business model. Liberty Media’s Starz premium network recently licensed its “Starz Play” broadband service to Netflix, making its movies, TV shows and concerts available to Netflix subscribers via streaming video.

All players in the TV business are trying to figure out the right financial model for online shows. But cable operators don’t have much time. Other business models — or competitors — loom large.

Thirty years ago, broadcasters had the chance to help create a new platform called cable TV. Most ignored it. Many fought to kill it. Finally, when most of the riches were made, they embraced it.

November

Next TV

Affinia Manhattan, New York, NY