Blog Post

The Problem With TV Everywhere: There’s No Business Model

Some cable providers and networks have been busy creating so-called TV Everywhere services that let subscribers log in and view on-demand video content online. But despite some early enthusiasm from select networks, these services have been slow to catch on. One reason for that, according to some cable and network execs, is that there’s no real business model for distributing content online through an authenticated service.

Comcast (s CMCSA) and Time Warner (s TWX) led the charge for TV Everywhere services beginning last year, announcing a partnership that would make additional cable content available to consumers who verify that they pay for a cable subscription. Since then, pay TV providers like Time Warner Cable, Verizon, AT&T, and Dish Network have made plans and rolled out their own TV Everywhere services.

But one thing that’s been missing from these services is real compelling content. Much of the early authenticated content that appears on TV Everywhere sites like Comcast’s Fancast Xfinity TV or comes from Time Warner properties like TBS, TNT and HBO. Even for those networks, only a limited amount of video is available to subscribers who log in. But outside of Time Warner, few programmers have made the investment to bring their cable content online behind a pay wall.

One reason that other networks have been slow to introduce TV Everywhere offerings of their own is that there’s no financial incentive to do so. Multichannel News reports that Bruce Eisen, Dish Network’s vice president of online content development and strategy, said that programmers don’t have a clear revenue path when rolling out TV Everywhere services.

“I’ve found most of the networks aren’t jumping into this with two feet. For good reason — there’s no business model,” Eisen said.

Discovery (s DISCA) is one company that has held back from widely making its content available through TV Everywhere services. According to a separate report in Multichannel News, Discovery CEO David Zaslav said at a conference last week that the programmer was not opposed to rolling out its own TV Everywhere initiative, but that any such project has to make money.

“We have been very careful about not putting our content out onto other platforms when the economic model doesn’t support it. TV Everywhere is actually something we are very encouraged by. If we can get our content through TV Everywhere authorized out onto the Web, and Nielsen can measure it or someone can measure it so we can monetize it, it would be very attractive,” Zaslav said.

I’ve been pretty pessimistic about the future of TV Everywhere ever since I got my first taste of what an authenticated cable service is like late last year. At least in its first iteration, TV Everywhere services have been difficult to use and so far lack really compelling content. But there are deeper, more fundamental issues, as I wrote about a few weeks ago:

“[S]o-called TV Everywhere services miss the point: the existing audience paying $100 a month for TV doesn’t care about watching True Blood on a laptop. The people watching True Blood on a laptop aren’t going to shell out $100 for a cable subscription.”

For a programmer like Discovery to make money off a TV Everywhere service, it will have to find an audience for that service. It’s a chicken-and-egg problem, for sure — how to attract an audience without content and why to put up content without an audience — and one that TV Everywhere proponents will have a difficult time answering in the short term.

Photo courtesy of Flickr user skpy.

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8 Responses to “The Problem With TV Everywhere: There’s No Business Model”

  1. Paul Sweeting

    Spot on, Ryan, as far as the consumer market goes. That’s why I think the networks will eventually hit on the expedient of trying to monetize TV Everywhere on the backs of service providers, through higher carriage fees.

    As for the incumbent service providers, I’m not sure why they would go along with it at this point except as a purely defensive move against new entrants (which I’d bet the government ultimately won’t let them get away with). In the long run, I think service providers are running a real risk in promising subscribers additional access at no extra cost because they’re just handing leverage to the networks that the networks will eventually use against them.

  2. Forme Toknow

    You are so right with this observation that the laptop user won’t pay a cable subscription. What’s interesting is that content owners and distributors are playing with the viewer to see how much they can offer pc and mobile platforms without giving them enough to risk losing a residential customer.
    The cable companies make around 70% of their revenue from subscriptions, the cable companies make 95% of their money from subscriptions. That’s a whole lot of netflix and iTunes to make up for one lost residential customer.
    P2P does not seem to have made significant inroads into the market, not if my ever increasing cable bill is any indication.

  3. TV Everywhere wasn’t driven by consumer demand or market research. It was driven by Jeff Bewkes of Time Warner and Brian Roberts of Comcast, who saw the inroads that Hulu and websites run by the various networks and studios were making into their audiences, and wanted to head off customer defections to over-the-top video. It’s purely a defensive reaction, not a well-thought-out service. TV Everywhere was originally Bewkes’ idea, and that’s why Time Warner is so active in the initiative.

    If TV Everywhere had started as a market-driven initiative, it either wouldn’t have launched or would have launched as a much better service. Instead, a few executives assembled teams (at one time, Comcast had development teams in Silicon Valley, Seattle, Denver and Philadelphia) and told them to build what became TV Everywhere. Think about it–the people who think that atrocious Electronic Program Guides and ten-year-old set-top boxes are perfectly fine came up with TV Everywhere.

  4. Scott Jensen

    I agree that the problem is the business model. The entertainment industry is having a very hard time trying to force a round peg into a square hole. Internet users are the round peg and the industry’s old business model is the square hole. Hollywood acts as if the only thing they need to do is hammer the peg harder and eventually it will fit.

    And it isn’t just the internet where Hollywood is having this problem. It is the same problem with DVRs where people simply skip over or have their program not even record commercial breaks.

    There is a business model that can work for both. Sponsorships and product placements. Sponsorships was the business model for the Golden Age of Television. Product placements is an ever growing revenue stream. That’s the best business model I can think of that enables TV shows to be given away free over the net while still making money from advertisers. Unfortunately, the advertising world is stuck on commercials and commercial breaks. It is easier. Make one commercial and aire it on numerous TV shows. Unless impact but bigger audience. Don’t have to get into producing shows. Just in picking which to run one’s commercials on.

    But something is going to have to give and it isn’t going to be the free internet. It is here to stay. Peer-to-peer networks are here to stay. So if the internet isn’t going to give, the entertainment industry is going to have to give and change its business model. The entertainment companies that can make the shift will succeed and the ones that cannot will go the way the buggy whips.

    • I really hope the industry doesn’t further the trend of blatant product placements in TV shows. Sometimes I feel like I’m watching 30 minute infomercials with products forced into the underlying storyline. This detracts from the continuity of a show, stifles the creativity of the writers, and is not entertaining. I’d rather sit through actual commercial interruptions than have advertisers try to subversively convey their message as if the viewers weren’t smart enough to understand what’s really going on.

      I think some of the burden should fall on advertisers to create commercials that people might actually want to watch rather than skip through via their DVR. The advertisers do it during the Superbowl, why not apply that level of creativity all year long.

  5. As more people cut the cord, and more content is available through non-traditional distribution methods, the Cable and Satellite companies have to really deliver compelling value.

    We’re close to the point where for $20 or so a month you’ll get Hulu and Netflix on your Apple TV. If that saves you $80 a month, and you can watch 80% of what you want, that’s a compelling argument.

    If I’m paying an extra $60 a month, I better be able to take it with me wherever I want.