While NBCU, News Corp (NYSE: NWS). and CBS (NYSE: CBS) quibble over online programming access via Hulu and TV.com, they have another problem tied to a very real, very major revenue stream: cable license fees. SNL Kagan pegs overall subscription revenue from telecoms, satellite companies and MSOs at around $22.5 billion in 2008. Cable companies want their deals to include online and set-top VOD access to everything they already pay for with cable network license fees or, in some cases, retransmission fees — and they don’t want to compete with services that don’t pay.
That would include Boxee, the media center-like service that easily can deliver HD-quality internet video to the TV screen but is losing access to Hulu content Friday at the request of the JV’s content providers. That access is being pulled, at least in part, because of ongoing negotiations with cable providers. They also aren’t thrilled by Hulu, which has the rights to everything it distributes. The best is Comcast (NSDQ: CMCSA), which has skin in all three games as the largest cable operator, a cable programmer (E!, Style, etc.) and as the owner of video portal Fancast. Time Warner (NYSE: TWX) Cable is in a similar position now as part of Time Warner, which also owns HBO, CNN, TBS and TNT, and produces syndicated programming; that will change when TWC spins off.
The WSJ picks up tonight on one of the possible solutions: make a large amount of that content available only to cable subscribers. That’s already the case with ESPN360, which is available primarily to subscribers of providers with deals. That’s not cable-only, though, and this idea would be somewhat along the lines of NFL’s Sunday Ticket, which is exclusive to DirecTV (NYSE: DTV). WSJ: “The programming available on the proposed Web services would likely be in a streaming format with ads, accessible in and out of the home, and without any additional charge to cable-TV subscribers, the people familiar with the situation said.” The deals being discussed would offer access to more content than is currently available online. NBCU will do a trial; Viacom’s MTVN (NYSE: VIA) told the Journal the idea is “a great testing ground for us.”
Another option: For years, Comcast, Time Warner Cable (NYSE: TWC) and others have seen VOD as a kind of holy grail but networks, concerned about losing destination-and-appointment viewing, have been stingy. One way to appease the MSOs would be to make available through VOD everything they put online — and, in some cases, for longer time periods.