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Summary:

By implementing TV Everywhere–type authentication for broadcast content online, Fox is eliminating some of the friction that’s cropped up in its negotiations with cable and satellite providers. But it could also use access to online video as a way to drive ever-higher retransmission fees.

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Earlier this week, Fox shocked many by announcing that it would introduce TV Everywhere–type authentication to broadcast content online that used to be available for free the day after a show aired on TV. We’ve written about the effect Fox’s decision will have on consumers, but what about its distribution partners? After all, they will be the ones working to actually implement the authentication scheme, and as a result they could end up paying a lot more to broadcasters.

Much of the rhetoric being bandied about so far seems to imply that Fox is acting in the interests of its cable and satellite distribution partners: By implementing TV Everywhere–type authentication for broadcast content online, it’s merely eliminating some of the friction that’s cropped up in its negotiation over retransmission fees. No one was happy that Fox was demanding more compensation for content that appeared on cable and satellite when, let’s face it, the network was essentially giving the same shows away for free on Fox.com and Hulu.

But adding authentication could also be a clever negotiating tactic as Fox seeks even higher fees from those distribution partners. Let’s say you’re Comcast, Time Warner Cable, DirecTV or any number of other major distributors that haven’t yet signed up for Fox’s mid-August launch of online authentication: Fox comes to you and says that it’s finally implemented a sign-in system that will ensure that only pay-TV or Hulu Plus subscribers will have access to its content the day after it airs online. But now that it has, it would like to get paid a little more in retrans fees, because, after all, it will be providing more value to your subscribers.

Do you pay up? Or do you risk disenfranchising your subscribers, who were once able to watch shows on Hulu the day after they’ve aired but can no longer do so because their cable provider isn’t a part of Fox’s exclusive next-day club?

This is all theoretical, of course, but Fox’s use of Hulu as a negotiating tool is not without precedent. It was Fox, after all, that blocked access to Hulu streams from Cablevision subscribers as part of its bitter dispute over retransmission fees last year. So using next-day access to online content as a way to extract even more retrans dollars wouldn’t be totally out of the question.

And Fox is unlikely to be the only broadcast network to do so. Once it has proven the model that authentication equals more retrans money, you can expect CBS, ABC and NBC to jump on board as well, using next-day access to Hulu and network sites as an incentive to rework their deals with pay-TV providers.

The big loser in all of this will be consumers. They will not only be used as pawns in the next round of retrans fights but as a result will also lose access to a service they’ve been accustomed to getting for free. And as broadcasters use access to online video as a way to squeeze ever-higher retrans fees from distributors, those costs will eventually get passed on to subscribers in the form of higher cable bills.

Fox and other broadcasters might justify the introduction of TV Everywhere–type logins as just extending the existing cable model online. But at the end of the day, it seems “authentication” is just a fancy word for charging users more.

Photo courtesy of (CC BY 2.0) Flickr user pasukaru76

  1. Alberto Plantilla Thursday, July 28, 2011

    Maybe I’m naive, but aren’t consumers getting more? Just like piracy happens on the fringe and means little to the bottom line, when online access becomes huge then content owners should have a way to monetize right?

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    1. tetracycloide Thursday, July 28, 2011

      You’re naive. TV Everywhere is about putting content that used to be free or ad based, and by ‘free or ad based’ I do not mean illegal, and charging for it. It’s appauling that they’re even characterizing these moves as ‘value adds.’ Subtracting value from one thing and leaving it in place for another, more costly thing, isn’t value additive.

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  2. OK, if I have to be a paying cable customer to access FOX’s content online, fine, but in that case I demand they drop the “day after air it appears online.” That argument holds (albeit very little) water if the content is given away for “free,” taking into account that internet ad-revenue is much lower than TV-based ad revenue, but now that I am actually paying for it, I demand to watch it the moment it airs on my TV. After all, it then becomes just a change of media (TV vs. computer) because the cost is the same …

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