Internet Video: Cable’s Game to Lose?

9/19/2007 5:37 AM Eastern

New York -- The perennial question of whether broadband video is the cable industry’s buddy or bête noire got another chewing-over Wednesday here by a panel of cable, programming and Internet-media executives.

And once again, the consensus of executives participating in the discussion on “Over the Top TV: Can Broadband Video Be Cable’s Newest Opportunity?” was that the Internet won’t dramatically disrupt the traditional cable TV business anytime soon. 

For cable programmers, broadband video is still in the experimental phase, said Bruce Campbell, Discovery Communications’ president of digital media, emerging networks and business development, during the panel, presented by the New York chapter of the Cable & Telecommunications Association for Marketing. “We’re trying to find out what really works in terms of broadband to build loyalty and engagement around our brands,” he said.

Last month, for example,Discovery’s Animal Planet debuted the second season of the popular Meerkat Manor series online, as part of a promotional push leading to the show's premiere on linear TV>

Such forays have been, by and large, to support traditional cable channels. Comcast senior vice president of new media Matt Strauss said the content providers that form the core of the subscription-TV business are not suddenly going to abandon the business model they rely on for the bulk of their revenue today.

“There is, at the end of the day, a paid model and free model,” Strauss continued. “You’re not going to see any rational programmers do anything to jeopardize that economic engine [of fees from multichannel video distributors]… I think it creates an incentive for us to work together and not be at odds with each other.”

As a case in point, Strauss proffered this thought experiment: “If a movie studio decided to make a movie free on the Internet that was ad-supported, and they saw it start cannibalizing DVD sales, it would be yanked before you would have a chance to say, ‘Wow!’”

Discovery’s Campbell is looking for “more distribution over more platforms” while also ensuring there are no conflicts with the interests of its traditional distributors. He noted that Discovery has a signed deal to distribute video through Comcast’s online-video and entertainment site, Fancast, which recently launched in beta form.

Broadband video may still be in the proverbial first inning, but cable operators will need to find ways to integrate Internet-based video content into their service offerings, said Dallas Clement, Cox Communications’ senior vice president of strategy and development.

“If cable just focused on satellite and the [phone companies] as our competitors--and doesn’t keep a watchful eye on the Internet--we’ll lose more of our share of the pie,” he said.

On the other hand, Clement said, “I don’t know that the way consumers watch programming on TV will materially change over the next five years. Consumers like the known quantity [of linear TV]. They like to surf. They’ve been trained to do that for the last 25 years.”

There will be changes on the margins, Clement added, “as far as access to the best niche or short-form content to the TV…. Distributors will compete on how they deliver that to consumers.” The opportunity to tap into broadband video, he said, is “cable’s to lose.”

Google vice president of content partnerships David Eun echoed the sentiment that it’s still the early days of broadband video. Panel moderator Will Richmond, president of consulting firm Broadband Directions, asked him whether the Internet will replace the traditional cable-subscription model. “The quick answer is: We don’t know,” Eun replied, but he added, “We don’t think it’s a zero-sum game at all.”

Eun continued, “It’s only been two weeks since we launched our first in-display ad product [on YouTube]. There’s not the point where there’s standardization of ad formats. It’s still so new, we’re not sure yet.”

What is certain, Eun said, is that the Internet has reinforced users’ expectations that they can control their viewing experience. The mission for Google and YouTube is to work with traditional distributors and content producers of all stripes “to create the impression of infinite choice.”

“We want to offer everyone a space on YouTube,” said Eun, adding, “If our partners aren’t successful then we aren’t successful. We actually need for the cable operators to thrive.”

While cable will be around for a long time, the way audiences consume content is changing in fundamental ways, said Herb Scannell, CEO and cofounder of Next New Networks, who previously ran MTV Networks’ Nickelodeon for 10 years. Scannell's new venture is aiming to create 101 niche-programming “micronetworks” online.

“’Content is king’ used to be the mantra. Now it’s, ‘The consumer is king,’ ” Scannell said. “What we used to do is try to get an audience to come to our stuff. We now want to go where the audience is. If there’s a sea change, that’s the sea change.”

Comcast’s Strauss acknowledged that viewing habits are indeed changing, with more people expecting instant, on-demand access to their favorite TV programming. He gave an example from first-hand experience: “I was reading a book to my son, and he said, ‘Daddy - pause,’ because he had to go to the bathroom. I don’t think he even knows what live television is.”

But he argued that cable operators have already moved to meet that trend with video on demand and digital video recorders. Comcast, for one, is on track to deliver 3 billion VOD views in 2007.

Ultimately, Strauss said, broadband video is just “one slice of a much larger value proposition” from a cable operator.

“I don’t believe just streaming video from the Internet and making it available on TV is the value proposition,” he said. “The first thing I’m thinking about is not streaming ‘Obama Girl’ [a popular YouTube clip] to my big-screen television.”

The value is combining linear TV, broadband, voice and other services in new ways. “If I’m watching a show, and I want to pause it and watch it on Comcast.net, I should be able to do that,” Strauss said. “The infrastructure is there to offer all these services in a very cohesive way, and it’s the natural evolution of where the cable industry is going.”