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Summary:

The battle between Time Warner Cable and Disney over retransmission fees required to carry ABC and ESPN channels is heating up, with both companies already appealing to the public through websites designed to sway opinion in their favor. But where does online video fit in?

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The battle between Time Warner Cable and Disney over the retransmission fees required to carry ABC and ESPN channels on the MSO’s cable systems is heating up, with both companies already appealing to the public through websites designed to sway opinion in their favor. But as I write in my latest piece on GigaOM Pro (subscription required), the availability of that content online could be one reason that both Time Warner Cable and Disney have taken the fight public so early.

Time Warner Cable has brought back its “Roll Over or Get Tough” marketing campaign, which it originally launched during its retrans spat with Fox at the end of last year. Disney, meanwhile, is reminding consumers they could always switch providers with its own newly launched “I Have Choices” campaign.

While Time Warner Cable is trying to woo the public by showing how increases in retransmission fees eventually get passed on to the consumer, Disney is urging consumers on Time Warner Cable systems to find alternative service providers if they are afraid of losing access to ABC content. On its “I Have Choices” page, Disney suggests viewers tune into its programming on AT&T, Verizon or DirecTV in affected markets.

But how does online video affect the current retransmission debates? Well, consumers can find more content than ever before free online, with more than 90 percent of broadcast television shows over the last two seasons made available online, according to a study by Clicker released earlier this month. And it’s difficult to see Time Warner Cable — or any cable company — wanting to pay more for content that is made available for free through another distribution channel.

So far, the networks have argued that online video is complementary, not cannibalistic, to their broadcast properties. And to this point, short-term worries over the possibility of consumers “cutting the cord,” or even canceling their cable subscriptions, seem overblown. After all, more consumers in the U.S. pay for subscription TV services than ever before.

Networks are cautious about proposing online video as a substitute for the broadcast content. Even in its marketing campaign to let users know that they “have choices,” the one place that Disney is not telling users to go is online, where much of its programming is available for free on ABC.com or Hulu.

Even so, if Time Warner Cable does stop carrying ABC, users may take to watching their favorite shows online rather than switching providers, which is a precarious situation for both companies. Time Warner Cable would still make money from broadband subscribers, but those users won’t carry the same value as those that subscribe to higher-priced cable packages. And Disney would still make advertising revenue from its web video business, but not nearly as much as it does off the broadcast.

Both companies should tread carefully as their Sept. 2 deadline approaches to reach an agreement on keeping Disney’s content on Time Warner Cable. If the fight eventually drives users to watch more content online, Time Warner Cable and Disney could both lose out.

To read the full piece on GigaOM Pro, click here. (subscription required)

  1. Both of these companies are making money hand over fist and yet they’re still dragging their customers into an ugly fight that should stay internal. What kind of industry thrives by taking out commercials against a partner instead of actually advertising your goods or services? If Time Warner or any of the cable operators were smart they would be building HD Antennas into all of their set top boxes. Even is you assume that it would cost them $10 a box to do this, it would be far less than paying $1.50 per month to the major networks. I’m not saying that they should ever update the DVRS to let the HD Antenna’s be turned on, but rather if they had this option they could make Time Warner happy with a .25 royalty instead.

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  2. I only have 2 things to say about this: Modern Family, and SportsCenter.

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  3. @Davis Freeberg
    Actually my Semzi system already has this. It has an HD tuner built in for all the local channels. This way they don’t have to pay the local networks for carrying their channels. It’s pretty cool as I only pay $20 a month which also includes 25 cable channels.

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  4. Davis Freeberg Friday, July 30, 2010

    @Gonzo yes, but Sezmi is actually bad for the cable cos. They’d much rather charge you $50 a month for TV, then to let you pick and choose the channels that you actually want. In reality, cable would never want to give this kind of technology to consumers because they might realize that with an HD OTA and a DVR, you don’t really need 100 channels, but if the broadcasters felt like it would be easy for cable to bypass them without consumers being impacted, then it essentially removes any leverage that Disney has. The threat alone would be enough to minimize the payments that they make for access.

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  5. It is time to stop forcing the cable companies to carry local OTA stations. This gives unreasonable leverage to Disney, Fox, etc. because it is a federal mandate not market force that is putting the channels in the mix.

    If the Feds would only mandate public service channels or a local area update option rather than force local channels the market would stabilize to real prices.

    Local update options could work like e911 requirements, where the device needs to be identified as to the location where it is connected, and then all emergency broadcasts would pop-up on all channels should there be a need (tornado, weather, other emergency) it works in radio and should not be hard to do in cable.

    The alternative is to drop the local rebroadcast requirements and let the actual consumer choose a more ala-cart option, say allowing them to take the Disney package with Disney channel, ABC, and what ever else is bundled in. This way Disney gets paid for what people use not for every user on the network.

    Lets find a solution that is not right out of the 1980′s, we have the technology to handle VOD and bidirectional communication, or even pay per view/channel options.

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  6. [...] mobile devices like the Apple iPad. According to earlier reports, online video was one of the key sticking points in the negotiations of the deal, which we now know includes the introduction of a TV [...]

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  7. [...] distribution of broadcast content was reportedly one reason why Time Warner and Disney entered a prolonged and public battle over carriage fees for multiple ESPN and Disney brand channels, as well as some local ABC [...]

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  8. [...] watching episodes of The Simpsons and Monday Night Football. Retransmission fights have been getting more contentious lately, and this one is no exception, with Fox threatening on Friday to cut off Cablevision’s [...]

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