The Promise Of TV Everywhere Is Doomed For Failure, Here’s Why
A few weeks ago, I got to get hands-on with Comcast’s TV Everywhere service, dubbed “Comcast On Demand,” via a friend that’s in the trial. (I’m not in the Comcast trial personally but am in the Verizon’s TV Everywhere trial and will blog more about Verizon’s trial when I am allowed.) While Comcast continues to make a lot of noise about the service, I think consumers are going to be very disappointed when it rolls out to all 24 million Comcast subscribers by January 1st.
While I know the beta offering I saw is going to change by the time it rolls out in the New Year, the lack of any underlying business model and user limitations won’t be changing. The biggest problem is that these offerings are not truly “TV Everywhere”. You can’t get the content outside your home, when you travel, to any device other than the PC and whatever you stream with Comcast On Demand counts towards your cap.
When Comcast announced their plans, their press release said that the content will be available to any Comcast subscriber on any Internet connection which leaves one to believe that if you are on the road and traveling, you can access the offering online even if you aren’t using Comcast for the connection. But the fact is, that won’t be possible. In a call I had with Comcast a few weeks back, Comcast acknowledged that the service won’t be available to anyone outside of Comcast’s network. So if I can only get this content when I’m at home, where my TV is, why would I watch it on my computer? The value in a TV Everywhere service is the ability to get the content outside of my home, when away from my TV.
Not to mention, full channels by the broadcasters won’t be available and the overall content inventory will be limited. I have spoken to almost half of the 24 content partners in Comcast’s trial about their selection of content and the vast majority of them have said they plan to only make a small fraction of their content available online. Many of them honestly didn’t seem too excited about the service and some mentioned they are in the trial simply to test this whole idea out and collect intelligence on the market.
When consumers go online expecting to be able to find all of their favorite shows, they are going to be extremely disappointed when most of them are not there. When Comcast and Time Warner announced their “framework” for the offering, they listed very vague principles that they agreed on, one of which was “programmers should make their best and highest-rated programming available online.” That sounds nice, but Comcast and Time Warner have no control over the volume of inventory since they don’t own the content, so it does not matter if they agree to it, all that matters is what the content owners agree to.
Putting the technology and content issues aside, the fact remains that no one knows how this service is going to be paid for, including Comcast. No cable company can afford to offer a TV Everywhere product if they aren’t recouping what it costs them to operate it. While Comcast and others have talked about using online video advertising as a way to pay for it, let’s be real. Video advertising alone will not pay for the costs associated with a TV Everywhere offering. In the end, cable companies will either raise our bills each month to pay for the so-called “free” offering, or they will charge an additional fee per month on top of our cable bill. While there is nothing wrong with them offering a new service at an additional price, the majority of consumers won’t pay for the service with its current limitations.
When I spoke to Comcast about the business model and how they plan to cover their costs to deliver all this content, they said they didn’t exactly know how the business model would work. For a service that is going to roll out to 24 million subscribers, in 70 days, that’s a pretty scary statement. They are willing to say in their press release that the new offering will “…grow our business“, but then don’t know, or are not willing to say how.
The most confusing part in all of this is the licensing terms that will need to be negotiated between content owners and MSOs. Who gets paid in the TV Everywhere model? Do cable companies have to license the content from broadcasters for online viewing? Are they given the content for free for TV Everywhere offerings in exchange for having to sell advertising and giving the majority of the revenue to the content owner? While all of the cable companies have said their TV Everywhere service will be free, some of the content owners participating in the trials have told me they expect to be paid in some way. So who’s paying whom for a service that’s supposedly free?
It’s pretty clear that part of a TV Everywhere service is a defensive offering on the part of cable companies as a way to try and block online video offerings like Hulu and Netflix. If the cable companies can restrict the reach of this content by requiring it to be tied to a cable subscription, it is a huge win for them, but will be bad for the consumer. Online video offerings like Hulu are showing some strong signs of success, and clearly the cable companies are taking notice. If the cable companies can make it appear as if they are trying to appease consumers and look like they are trying to innovate in the market, it may give them a leg up with content partners. Cable operators clearly want content owners to provide them with the content, as opposed to putting it on a free site like Hulu. Doing a TV Everywhere trial gives them more ammunition to try and get content to only be available within their walled garden.
Then of course there is also the threat of disruption to their business from direct-to-consumer offerings by their content partners. Content owners no longer rely on cable operators’ on-demand offerings to get their content seen, and the content owners themselves have started to compete with the cable operators with their own channels online. While most content owners realize that ad-supported online entertainment is not compelling from a monetization standpoint, they are very interested in having a direct relationship with the consumer-a relationship that for the longest time has been held by the MSO that has been charging for access to content.
And if you take it to the next level, what if sites like Hulu start offering a subscription service with content owners directly, thereby bypassing the cable companies all together? If you’re a cable executive, you would have to be concerned about the possibility as such a service would greatly expand Hulu’s content licensing reach. An offering like this would quickly erode the cable companies’ perceived value proposition. This would not lead to consumers cutting their cable, but would make it harder for cable companies to continue to raise rates and claim they’re offering added value with their services.
The problem for cable operators is that, with or without their help, the content is going to end up online, since content owners are seeking new affiliate fees. So it truly is in the MSOs’ best interest to figure out a way to do this and, most importantly, find out what consumers want. For all the talk of TV Everywhere, I have yet to see a single cable operator release any data that shows what consumers want and, more importantly, what they are willing to pay for. If the cable companies’ only reason to talk about TV Everywhere is to try and entice content owners that just maybe there could be some affiliate or ad revenue available from being in the service, then the offering won’t work.
The bottom line is that cable operators could get creative and make the service work, but only if they are truly willing to understand that they have to change the way they think about their business, something that I’m not sure they are yet truly willing to do. I think come this time next year we are going to have a very clear picture on whether Comcast On Demand has a real shot at changing the way we consume content or is just another over-hyped offering in the market that truly never takes shape.
– Cable Companies Hyping Over-The-Top Video, But Where’s The Business Model?