Television That Fits In Your Pocket

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Missed this week’s episode of Desperate Housewives? Don’t try to find the latest installment of ABC’s hit series in your cable system’s video-on-demand library.

Instead, you can find it at iTunes, the online store started by Apple Computer Inc., to feed the hard disk drive-powered media players it calls iPods.

In a shot across the cable industry’s bow, Apple last week released a version of the iPod that will store and play back video programs, not just music and photos. Filling the 2.5-inch screens of the portable players will be content from The Walt Disney Co., owner of the ABC Television Network.

Available will be new episodes of the revitalized alphabet network’s top shows, Lost and Desperate Housewives, less than 24 hours after they are broadcast over the air.

DISHING OUT PORTABILITY

Apple wasn’t the only purveyor of programming to take a shot at cable with a portable device that could play back video. Also taking aim at the increasingly mobile market for watching TV shows, movies and video clips of all types was satellite broadcaster EchoStar Communications Corp., which debuted its own PocketDish player. It allows a viewer to pull programming not from an online store, but from practically any digital video recording machine.

If storing programs on portable devices and watching shows on the move — or on TVs not connected to a cable or dish — takes off, the new viewing habit could force cable and satellite distributors to rejigger how they deliver programming.

“Let’s face it, with wireless options in the home and the business, cable operators have to be pretty darn concerned, because what you’re doing is creating another business that can take away the need to have a cable line into the home,” said Jimmy Schaeffler, senior multichannel research analyst at The Carmel Group in Monterrey, Calif. “A lot depends upon what cable does in its future alliances.”

Comcast Corp., the nation’s largest cable-system operator, may get active in changing how it’s delivering video programs. Comcast is talking with Google, the Internet giant which has started its own video search service, about taking a minority stake in AOL, which operates a Web information and entertainment portal (See page 6). Such an alliance could provide additional programs for Google and Comcast’s own on-demand video services.

EchoStar’s rollout of its PocketDish player marks another aggressive move by the No. 2 satellite-delivery service to pick off viewers from other media companies. Two years ago, EchoStar saw potential in the emergence of digital video recorders from, in particular, TiVo and began selling its own. In August of 2003, EchoStar offered DVRs free to all customers.

The PocketDish player, which can also act as a recorder when connected to a cable box, will sell in three different versions, for as much as $599. Apple’s video iPod sells in two versions, for $299 and $399.

“PocketDish is a natural extension of our business,” said corporate communications manager Mark Cicero. “We wanted to be able to offer our subscribers an additional resource to be able to enjoy the programming they’re already paying for.’’

'RAVEN’ ON DEMAND

Disney and Apple did not disclose how they will split revenue from downloads of video programming.

However, Apple — through the iTunes online store — will sell episodes not just of the second seasons of the popular Housewives and Lost series, but episodes of a new series, The Night Stalker, at $1.99 each, a day after they debut on ABC, said Disney executives.

Viewers will also have access to the prior season of both hit shows, which are currently being sold on DVD. In addition, episodes of Disney Channel’s popular tween series That’s So Raven and The Suite Life of Zack and Cody will be available for purchase.

“When you think about how life continues to change for people, it really serves to enhance viewer’s experience with ABC and with the show,” said Disney-ABC Television Group president Anne Sweeney. “If you miss an episode, you can download it at 8 a.m. the morning after the broadcast.”

The potential loss of subscribers to more flexible and portable media players worries some cable operators. “With each multimedia deal, the obvious concern to any distributor is that it could potentially lessen the value of the product that we provide,” said Frank Hughes, senior vice president of programming at the National Cable Television Cooperative, a Lenexa, Kan., group that negotiates programming and hardware contracts for 1,100 independent cable operators.

“There’s certainly a concern that a customer of Disney Channel may say, 'Why watch it on Disney Channel when we could watch it on an iPod?’ ”

Indeed, consumers are already contemplating a life of on-demand viewing without cable bills or set-top boxes attached to their TVs. Corey, a 29-year-old Seattle blogger who describes himself as a network administrator, writes on his The Pandrake site (spaces.msn.com/members/thepandrake/blog/) that he would drop cable “in a heartbeat” if Apple is able to offer his favorite shows. In his case, they’re Sci Fi Channel’s Battlestar Galactica and Stargate SG-1.

The deal also could open up a cornucopia of options for program suppliers. With Comcast leading the charge, cable system operators have been trying to secure rights to marquee broadcast and cable fare for their own video servers, to deliver up to customers on demand. Comcast says its subscribers have already logged 1 billion on-demand program views in 2005.

LITTLE THAT’s New

But most on-demand titles have consisted of existing titles from numerous cable networks, such as Turner Network Television, Hallmark Channel and ESPN, as well as movie-studio programming.

Content providers and MSOs have failed to come to terms on licensing fee, program copyright and security issues over top broadcast and cable titles. Cablevision Systems Corp. five years ago did offer Fox’s popular series 24, as well as FX’s breakthrough The Shield for free via on-demand, but no other broadcasters have since waded into cable VOD waters.

Disney’s decision to provide Apple with its most valuable broadcast properties for a fee, compared to the free on demand world Comcast has fashioned, may have tipped the content distribution scales away from cable to Steve Jobs’s Apple model.

“CBS, NBC, Fox and UPN will all do the same thing eventually because they all want to maximize the reach of their programming,” said Schaeffler. “That’s not to say that they won’t do VOD deals, and both platforms can co-exist and broaden the consumer viewing experience.”

For Disney’s part, Sweeney said the iTunes deal does not preclude a potential video-on-demand deal with operators for ABC, Disney Channel or other company content.

Currently, Cablevision Systems Corp. offers a Disney Channel subscription on demand service for $5.95.

“We see all of these platforms co-existing, because they’ll be used by different consumers for different reasons,” she said.

But a Comcast executive who requested anonymity added that Comcast’s free on-demand offerings have thrived without premium primetime content. “It’s going gangbusters without it,’’ the executive said. “So I say we’re not that concerned.”

Not all content distributors, though, were quick to dance to Disney’s and Apple’s tune. Scripps Networks has adopted a wait-and-see stance.

Even Disney-owned network ESPN hasn’t determined whether to play on the iPod. “We are at the forefront of utilizing technology to better serve our fans … however, we are not involved in this deal at this time,” said ESPN associate manager of corporate communications Catherine Brett.

Assuming programmers will eventually flood the iTunes video library with content, Carmel Group’s Schaeffler says consumers must adapt to the idea of watching programming on a video iPod’s 2.5-inch screen.

“Even if you have ABC delivering next day videos of programs that show the night before on primetime to a downloadable iPod player, it’s still going to take people a while to get used to what that is and how it works, and that’s several years away at best.”

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