'TV Everywhere' and the $2.5B Internet Piracy Problem

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Of the 14 billion videos U.S. households download annually, 12 billion are pirated copies obtained through peer-to-peer file sharing services, according to a new report from In-Stat.

That represents $2.5 billion in lost value, the firm estimated: If “power-user households” could be migrated from P2P to legal video services, content providers and distributors would generate $1.4 billion in subscription revenue and $1.1 billion in ad revenue. (Disclosure: In-Stat is owned by Reed Business Information, which publishes Multichannel News.)

Now consider “TV Everywhere” as part of this equation.

The concept of making long-form TV content available online as an extension to a monthly cable subscription isn’t primarily aimed at the problem of piracy. But in the context of all the “free” video available on the Net — legitimate or not — TV Everywhere has multiple benefits, proponents argue:

1. Consumers get access to cable content and movies for free if they’ve already paid for it on TV, which would inhibit the urge to find that video via pirated sources;

2. Distributors like Comcast can offer incentives for customers to keep paying for cable TV and broadband;

3. Standard cable networks get potentially greater reach by counting those authenticated views as part of Nielsen’s C3 ratings (and unlike DVRs, they’d be able to force the ads to play); and

4. Premium networks like Starz and HBO can deliver a bonus service to their subscribers, reinforcing their paid-content models.

Whether these theories play out in reality will come down to execution: how easy these services will be to use, the quality of the video and the depth of the content lineup — stuff marketing types put under the rubric of “customer experience.”

Of course, TV Everywhere services like Comcast’s On-Demand Online aren’t really free. Some bloggers like GigaOm’s Om Malik have grumbled that tying cable TV subscriptions to a walled-garden Web video service amounts to perpetuating an entertainment “cabal.”

There’s a school of thought that the Internet drives the retail price of digital content to zero (see Chris Anderson’s “Free! Why $0.00 Is the Future of Business”). If, however, you believe people will continue to put a monetary value on content that is packaged correctly — not merely steal it or expect it to be freely available in exchange for a few small ads — TV Everywhere looks like the best option for the pay-TV industry to keep its model afloat.

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