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Summary:

Online TV viewing is about to get a whole lot more complicated soon, as Fox.com and others are introducing pay-TV walls that force consumers to authenticate themselves as paying customers. It’s like DRM for online video — and, once again, consumers are getting screwed.

Lock DRM

Missed yesterday’s episode of Master Chef? Don’t worry, it’s already online. All you have to do is look up your latest TV bill, then go online and get a web account with your pay TV provider, leave that site, go to Fox.com and log in with your pay TV credentials. And then keep logging in again and again every month. Welcome to the new world of TV Everywhere, where TV watching is as complicated as online banking.

Fox is the first broadcaster to introduce this kind of authentication, by mid-August, but similar requirements are already in place for anyone who wants to watch anything on HBO Go as well as new episodes of some cable shows on Xfinity.tv and DishOnline.com. Expect other broadcasters to follow suit soon, and be prepared to show your cable customer ID at the door of the majority of TV-content catch-up sites.

It’s not about cord cutting

Fox executives have said that the fear of cord cutting motivated them to put up the pay-TV wall around their online assets. Content needs more protection to keep people from freeloading: Does that argument sound familiar? Right, it’s exactly what music companies said about Digital Rights Management (DRM) back in the day.

And just like back then, the argument seems to backfire: Protected music files certainly didn’t stop anyone from using KaZaA, LimeWire and BitTorrent. TV Everywhere could also drive a substantial number of customers back to piracy, simply because an unlicensed download is more convenient than a stream that’s only available behind a pay-TV wall, for a limited amount of time, with unskippable ads.

“People don’t like to be inconvenienced when they are playing by the rules,” said Eric Garland, from the media measurement company BigChampagne, when we recently talked about the impact the Fox restrictions will have on piracy. In other words: If you treat people like pirates, they might just take you by your word and walk the walk.

However, all of this is beside the point. TV Everywhere isn’t primarily about cord cutting, just like DRM was never primarily about piracy. Both schemes are simply means to lock down and control markets. The best example of this is Apple’s iTunes music store, back in the day, when Steve Jobs hadn’t discovered his love for unprotected music yet.

Apple used to use its own Fairplay DRM scheme to protect its music and refused to license the technology to anyone else, in effect securing that anyone who bought music at Apple could only play it on an Apple device. Even more important than this direct effect on consumers was the lock-in for music companies dealing with Apple: If you were a content provider who believed in the necessity of DRM, the only way to get your content protected on an iPod was to sell it through Apple’s iTunes store and give Steve Jobs a 30 percent cut. That, coupled with really good hardware, is how Apple got to dominate the digital music market.

Broadcaster’s favorite new cash cow

The same is about to repeat itself in the realm of online video, with a twist: Much like piracy was a pawn to force the market to adopt DRM back in the day, the bogeyman of cord cutting is now used to force everyone behind the pay-TV wall. And once again, it’s not about what consumers do or don’t do but about dividing a market and cashing in on the results. Case in point: CBS announced on Tuesday that its earnings are up, in part due to the growing importance of retrans fees. Retrans fees are the money that cable and satellite operators have to pay to carry the family of CBS channels.

Carrying broadcast channels used to be free, but in recent years broadcasters have discovered retrans fees as a new revenue source, and they’ve been pretty successful at forcing providers to pay up. One powerful weapon in their arsenal has been blackouts: Fox blocked Cablevision’s access to its programming for 15 days last fall, until the cable operator finally gave in.

Of course, these blackouts aren’t really much of a threat if viewers can simply go online to watch all the things they missed on TV, which is why Fox also briefly forced Hulu to block Cablevision customers from accessing their shows. The move foreshadowed things to come with TV Everywhere: You’ll be able to access all of your shows online, as long as you are a pay-TV subscriber — and your pay-TV provider writes big-enough checks.

The losers of these chess games are obviously going to be consumers. Not only will watching TV online become much more complicated; prices are also likely to go up as operators hand down some of the carriage fees to their subscribers as well. The good news is that the reign of DRM, at least in music, didn’t last forever. Companies like Amazon and record labels wary of Apple’s online-music-market dominance eventually embraced DRM-free audio files, and the price of much of the music offered online went down as a result.

Image courtesy of (CC-BY-SA) Flickr user Ben Cumming

  1. If TV networks are making it harder for program providers to reach owners, and the traditional role of TV execs as (terrible) gatekeepers erodes, and you can get your show funded via crowdsourcing/presales, why would someone like Joss Whedon even bother with a network? Dr. Horrible was a highly successful experiment as it was, but now the landscape is even more amenable to independent funding and distribution. If people aren’t watching on TV, and they can’t easily keep up with the shows being broadcast, who needs a network that’s just going to pull your show and replace it with the latest reality idiocy?

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  2. Nothing about this is good for their customers. They are giving the finger to the people paying their bills.

    I think it’s about time to give them the finger right back.

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  3. Personally, I think that Pay TV/Cable TV/Satellite TV is the best entertainment value in the USA. “Cord Cutters” are just rebellious. Generally, I support rebellion but sports are my passion thus I need my Cable TV!!!

    The Internet & Napster crushed the music industry b/c the music was already bought & owned by the music consumers then shared freely amongst consumers via Napster. DRM was powerless vs Napster.

    The most valuable TV shows, sports & movies are not & will never be shared on the Internet for Free. DRM is Video’s savior.

    Lastly, TV Everywhere is all about giving the consumer the opportunity to also watch Cable TV programming on a computer & a mobile device. “All 3 Screens” as the MVPD Exs say. The MVPDs know what they are doing!!!!!

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    1. TV, sports, and movies ARE being shared, so I really don’t understand what you mean. Maybe you mean legally shared? Anyway, these shows aren’t free, they have ads attached to them, which is the way networks get payed for programming. FOX is just money hungry, which will be their undoing. Network viewership is down anyway, so restricting viewers is couterproductive. Less viewers mean less ad revenue.

      Btw, Billy, your post is a little self-righteous. Cord-cutters are rebellious? Have you heard of a little thing called a world-wide recession that’s going on right now?

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      1. Doug, I said the “most valuable.” There is a difference.

        The term “Cord Cutting” refers to people who discontinue cable TV b/c they want to get their TV Programming OTT. Thus “Cord Cutting” is a very new term & occurrence

        Historically, Subs who discontinue their service due to financial restraints are NOT defined as “Cord Cutters.” Ex-Customer is what they called.

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    2. Billy, I would disagree with two fundamental points:

      1) The definition of cord cutter should not be limited to just those who are opting to watch video online. There are many reasons why people decide not to pay for cable service, and the combination of a down economy and rising rates can’t be overlooked. Ultimately, cord cutters include anyone who decides that the cable value proposition isn’t worth it, regardless of where they get their content afterward or what they do for entertainment without pay TV, and

      2) TV Everywhere is no longer just about cable programming. It’s also now about broadcast programming from companies like Fox.

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      1. Ryan, thank you for the response!

        Having read your response, I don’t think that you can disagree with my points. The issue is that my points are just simply “outdated.” I was an IPTV Entrepreneur, I ceased following the industry just a mere few months ago. I understand now from your response that in this short time, definitions & services are expanding. I just took some time to “catch up” & clearly, your 2 points are accurate!

        Thank you Ryan, keep up the great work!!!!!!!!

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    3. Still not understanding what you mean by ‘most valuable’. I watched the Suberbowl live online in Feb. What’s more valuable than that event?

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  4. Christopher Levy Wednesday, August 3, 2011

    Whack usage of DRM moniker. The author shot himself in the foot when he forgot to mention DRM is the standard and required for licensing all premium content. Ever heard of NetFlix or HBO GO or iTunes for starters? There’s a reason Content Owners want file-level DRM in place on their digital media assets and that reason is because it’s one piece of a larger security practice. It’s that simple. In the past three years the DRM technology licensing business has literally exploded with connected TV and BluRay OEMs taking licenses like fat kids at a cake convention. You can’t throw a bowling ball down the alley of CE OEMS without hitting 20 or 30 that have deployed Microsoft’s PlayReady DRM.

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  5. So let’s get this straight, “All you have to do is look up your latest TV bill, then go online and get a web account with your pay TV provider, leave that site, go to Fox.com and log in with your pay TV credentials. And then keep logging in again and again every month.”

    -or-

    I download the same show off usenet in 5 minutes sans commercials.

    Wow, that’s a difficult decision.

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  6. If you’ve used HBO GO, it’s a pretty simple process – just like logging into any website (including this one). Plus the media streams to all my devices. To compare TV everywhere to clunky DRM schemes where files were locked to individual devices seems a pretty inaccurate business comparison.

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  7. All this false drama about signing up for an account on a website? Y’all act as if you’ve never used the internet before.

    “Oh noes! I need a username to get stuff for free! I don’t understand!”

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  8. There’s an old truism: Most people want to do what’s right and most people want to do what’s easy; however, when required to choose between the two, most people will pick what’s easy over what’s right.

    On the other hand if you make it easy to do what’s right …

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  9. I’ve already cut my cable. I watch whatever free content I want to watch online. If the greedy networks want us to pay for online then forget it. I’ll find content from somewhere else. In my area over the air antenna TV works fine and it’s free.

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