News

For Streaming Issues, the Floodgates Are Open

7/15/2001 8:00 PM Eastern

Perhaps the greatest dilemma faced by cable operators as they promote high-speed Internet access is that they could end up fostering broadband media outlets that compete with their bread-and-butter: cable video programming.

In other words, operators could be supplying the rope to hang themselves.

As the Internet blossomed several years ago, operators debated this issue openly. At the time, digital savvy executives — including the acquisitive Brian Roberts, president of Comcast Corp. — concluded that for cable, the Internet was more business opportunity than threat.

But now the threat part of the equation is again up for debate: Charter Communications Inc., recently fired the opening salvo in a potentially explosive battle over broadband streaming of cable programming.

In a highly publicized feud with ESPN, Charter — whose chairman is the forward-thinking Paul Allen — has sought language in its carriage contract for ESPNews that would limit video streaming of the channel's sports news and highlights-driven programming.

ESPN has declined to include such language. The company has said it will not jeopardize its relationship with affiliates, but it also won't limit its ability to take advantage of emerging distribution technologies.

Amid finger-pointing and conflicting accounts, ESPNews went dark in the homes of nearly a quarter of a million Charter subscribers.

Charter and other operators have tried to keep the debate narrowly focused on contractual matters. For now, the issue likely will be played out through private negotiations.

Sources at other MSOs said streaming restrictions are being written into new carriage deals for programmers other than ESPN, but it's unlikely that current pacts would be reopened to add such language.

Streaming also raises many issues beyond contractual matters — and could become a political football.

Speaking of football, here's a potential nightmare situation for both an operator and programmer: Let's say it's the year 2010 and a new, wealthy Internet service provider, MegaMedia.com, is able to stream clear, crisp video. Through open-access concessions, MegaMedia is carried via cable high-speed access.

MegaMedia then trumps the major TV networks by buying rights to the Super Bowl, which it streams exclusively and, in the process, brings the TV industry to its knees.

Sound far-fetched? It's about as far-fetched as ESPN acquiring National Football League rights, cable-network viewership surpassing the broadcast networks, or America Online Inc. buying Time Warner Inc.

Implicit in operators' support for the Internet is the notion that they can control the beast by providing a converged platform of TV and Web content that all flows through cable's broadband pipes.

But when it comes to issues of access to programming or the Internet, cable operators have come out on the short end. Operators watched in disgust as Congress gave competitors the right to access networks that MSOs had helped to build.

It's risky when companies seek to establish legal boundaries for a business that doesn't exist. But the Charter-ESPN matter is emblematic of companies' struggles to come to grips with the uncertainties created by the Internet.

On a grander scale, the Internet is a gigantic cable system. Currently, most streamed video on the Web looks rather herky-jerky. Improved technology is expected to create a mass audience for streamed media, though likely not before the end of the decade.

Already, you can visit programmers' Web sites to download music provided by MTV: Music Television and view sports highlights from ESPN or news clips from Cable News Network. Programmers can provide extraordinary new consumer options for content that is no longer constrained by time or place.

But what becomes of a cable operator's rights in that scenario?

"We don't want our customers to be charged for something that could be distributed for free or at a reduced price over the Internet," said Charter senior vice president of communications David Andersen. "We're not opposed to video streaming. What we're concerned about is the value of that license fee."

The flip side of the issue for programmers: Is it fair to restrict a programmer from taking advantage of a new distribution technology?

ESPN notes that at present, it would not make business sense to stream its networks on the Web. The company has been developing new media that it says will be mutually beneficial for operators, including the new ESPN Broadband, which can be co-branded with a cable high-speed service.

Charter has "signed long-term contracts with video streaming language" with Viacom Inc. and other programmers, said Andersen, though the company declined to disclose the terms of the privately reached deals.

Meanwhile, the streaming-rights arena is likely to become more crowded. Sports leagues, studios, program producers, actors, writers and on-air talent will want terms and conditions to either protect their turf or get their share of the action.

The consumer's best interests are often overlooked in these debates over rights. When operators and programmers can join together to meet the public's needs, the Internet clearly will be more of a business opportunity than a threat.

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