Pay TV providers are increasingly seeing competition from online video services like Netflix and Hulu Plus, but they’re coming up with different business strategies in an increasingly digital world: While Comcast says it has no interest in building streaming-only offerings for customers that don’t live in its cable network, Dish Network is trying to secure rights from its content partners to offer its own over-the-top video services.
Of all the cable operators in the U.S., Comcast has the most robust platform for delivering video online, mobile devices like the iPad — and soon, even on connected TVs. But despite its heavy investments in making cable TV programming available as part of its TV Everywhere initiative, Comcast CEO Brian Roberts said in an interview with the Wall Street Journal that the company has no plans to extend those services to customers outside its cable footprint. When asked about the possibility, Roberts said his company’s goal instead was to provide more value to existing subscribers rather than trying to grab new ones solely online:
“Where we can add value, at least in the world that I see today, is taking our existing customers and giving them full access to all content online because they’re subscribers. So, today, we have that enabled for networks like HBO, Showtime, Cinemax, and Starz. We just made a deal with Time Warner and Turner. I hope we will be able to add to that quickly with NBCUniversal content and others.”
While Comcast is sticking to a strict cable model for delivering pay TV services, satellite operator Dish might be more open to offering an online version of its pay TV product. On the company’s fourth quarter earnings call last week, Dish CEO Charlie Ergen told investors that Dish was talking to cable networks about acquiring rights for a streaming offering. At the same time, Ergen noted that programmers had to be careful of undervaluing their content by making it available online.
“My gut feeling is that some programmers will grant some over-the-top Internet rights and probably undermine their core business. I think Starz probably is a good example where they sold some over-the-top rights fairly expensively and we know that, that’s hurt our Premium business for them, far more than they’re getting paid for it.”
Starz famously licensed much of its programming to Netflix for $25 to $30 million a year, helping the subscription DVD rental firm to grow into the streaming powerhouse it is today. Those kinds of mistakes will be made, Ergen said, but the hope is that programmers don’t “take too much money out of the ecosystem while [they're] figuring it out.” At the same time, Dish needs to remain ahead of the curve or risk losing out to more secular trends. Ergen cited the wireline phone business as one that didn’t adapt when wireless came along:
“[I]f you were in the phone business and wireless came along and you kept on putting in a twisted pair of lines, that was still a good business for another 10 years, 15 years, but at some point that wasn’t a very good business. So I’d rather be on the leading edge of that than the back end of it.”
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