The Promise Of TV Everywhere Is Doomed For Failure, Here's Why

A few weeks ago, I got to get hands-on with Comcast's TV Everywhere service, dubbed "Comcast On Demand," via a friend that's in the trial. (I'm not in the Comcast trial personally but am in the Verizon's TV Everywhere trial and will blog more about Verizon's trial when I am allowed.) While Comcast continues to make a lot of noise about the service, I think consumers are going to be very disappointed when it rolls out to all 24 million Comcast subscribers by January 1st.

While I know the beta offering I saw is going to change by the time it rolls out in the New Year, the lack of any underlying business model and user limitations won't be changing. The biggest problem is that these offerings are not truly "TV Everywhere". You can't get the content outside your home, when you travel, to any device other than the PC and whatever you stream with Comcast On Demand counts towards your cap.

When Comcast announced their plans, their press release said that the content will be available to any Comcast subscriber on any Internet connection which leaves one to believe that if you are on the road and traveling, you can access the offering online even if you aren't using Comcast for the connection. But the fact is, that won't be possible. In a call I had with Comcast a few weeks back, Comcast acknowledged that the service won't be available to anyone outside of Comcast's network. So if I can only get this content when I'm at home, where my TV is, why would I watch it on my computer? The value in a TV Everywhere service is the ability to get the content outside of my home, when away from my TV.

Not to mention, full channels by the broadcasters won't be available and the overall content inventory will be limited. I have spoken to almost half of the 24 content partners in Comcast's trial about their selection of content and the vast majority of them have said they plan to only make a small fraction of their content available online. Many of them honestly didn't seem too excited about the service and some mentioned they are in the trial simply to test this whole idea out and collect intelligence on the market.

When consumers go online expecting to be able to find all of their favorite shows, they are going to be extremely disappointed when most of them are not there. When Comcast and Time Warner announced their "framework" for the offering, they listed very vague principles that they agreed on, one of which was "programmers should make their best and highest-rated programming available online." That sounds nice, but Comcast and Time Warner have no control over the volume of inventory since they don't own the content, so it does not matter if they agree to it, all that matters is what the content owners agree to.

Putting the technology and content issues aside, the fact remains that no one knows how this service is going to be paid for, including Comcast. No cable company can afford to offer a TV Everywhere product if they aren't recouping what it costs them to operate it. While Comcast and others have talked about using online video advertising as a way to pay for it, let's be real. Video advertising alone will not pay for the costs associated with a TV Everywhere offering. In the end, cable companies will either raise our bills each month to pay for the so-called "free" offering, or they will charge an additional fee per month on top of our cable bill. While there is nothing wrong with them offering a new service at an additional price, the majority of consumers won't pay for the service with its current limitations.

When I spoke to Comcast about the business model and how they plan to cover their costs to deliver all this content, they said they didn't exactly know how the business model would work. For a service that is going to roll out to 24 million subscribers, in 70 days, that's a pretty scary statement. They are willing to say in their press release that the new offering will "...grow our business", but then don't know, or are not willing to say how.

The most confusing part in all of this is the licensing terms that will need to be negotiated between content owners and MSOs. Who gets paid in the TV Everywhere model? Do cable companies have to license the content from broadcasters for online viewing? Are they given the content for free for TV Everywhere offerings in exchange for having to sell advertising and giving the majority of the revenue to the content owner? While all of the cable companies have said their TV Everywhere service will be free, some of the content owners participating in the trials have told me they expect to be paid in some way. So who's paying whom for a service that's supposedly free?

It's pretty clear that part of a TV Everywhere service is a defensive offering on the part of cable companies as a way to try and block online video offerings like Hulu and Netflix. If the cable companies can restrict the reach of this content by requiring it to be tied to a cable subscription, it is a huge win for them, but will be bad for the consumer. Online video offerings like Hulu are showing some strong signs of success, and clearly the cable companies are taking notice. If the cable companies can make it appear as if they are trying to appease consumers and look like they are trying to innovate in the market, it may give them a leg up with content partners. Cable operators clearly want content owners to provide them with the content, as opposed to putting it on a free site like Hulu. Doing a TV Everywhere trial gives them more ammunition to try and get content to only be available within their walled garden.

Then of course there is also the threat of disruption to their business from direct-to-consumer offerings by their content partners. Content owners no longer rely on cable operators' on-demand offerings to get their content seen, and the content owners themselves have started to compete with the cable operators with their own channels online. While most content owners realize that ad-supported online entertainment is not compelling from a monetization standpoint, they are very interested in having a direct relationship with the consumer-a relationship that for the longest time has been held by the MSO that has been charging for access to content.

And if you take it to the next level, what if sites like Hulu start offering a subscription service with content owners directly, thereby bypassing the cable companies all together? If you're a cable executive, you would have to be concerned about the possibility as such a service would greatly expand Hulu's content licensing reach. An offering like this would quickly erode the cable companies' perceived value proposition. This would not lead to consumers cutting their cable, but would make it harder for cable companies to continue to raise rates and claim they're offering added value with their services.

The problem for cable operators is that, with or without their help, the content is going to end up online, since content owners are seeking new affiliate fees. So it truly is in the MSOs' best interest to figure out a way to do this and, most importantly, find out what consumers want. For all the talk of TV Everywhere, I have yet to see a single cable operator release any data that shows what consumers want and, more importantly, what they are willing to pay for. If the cable companies' only reason to talk about TV Everywhere is to try and entice content owners that just maybe there could be some affiliate or ad revenue available from being in the service, then the offering won't work.

The bottom line is that cable operators could get creative and make the service work, but only if they are truly willing to understand that they have to change the way they think about their business, something that I'm not sure they are yet truly willing to do. I think come this time next year we are going to have a very clear picture on whether Comcast On Demand has a real shot at changing the way we consume content or is just another over-hyped offering in the market that truly never takes shape.

Related Posts:

- Cable Companies Hyping Over-The-Top Video, But Where's The Business Model?

- TV Everywhere Offerings Will Struggle To Be Successful

Comments

[IntheKnow]

Happy to see that you have come around to my logic that TVEverywhere is mainly a smoke screen and delay tactic by the cable MSOs. For some time, both you and W. Richmond maintained that it was not just a defensive delay. If you really know those cable guys, you know that innovation happens only at gunpoint.

It will take the loss of subscribers through churn to really motivate that group. AppleTV, NetflixTV, Hulu, and a few others could have the chops to do it. TVEverywhere could be great, but needs to really be untethered to the MSOs network. We already get great TV content, linear and on-demand, in our family rooms and bedrooms. We need that experience to be portable, and not in a download model.

Whichever media company figures that out - whether cable MSO, CE manufacturer, etc - who gets the content, nails the price point and empowers the user to control viewing of content completely - wins my subscription dollar.

TVEverywhere and I can't leave the home. Sounds like a cable operator plan from top to bottom.

[Streamtweet]

Dan, I do agree that the TV everywhere model is a total joke, but don't really think that it’s a defense against Hulu & Netflixs. I'm sure the MSO's would love to steel some traffic from these guys but not sold that they are looking to go head to head against these models. It’s my understanding that the TV everwhere model is to open the door for new content and programming choice which the MSO's don't have room for on their traditional channel lineup. The most common example is around foreign language programming. TV everywhere will allow comcast to offer foreign broadcasts a lower price per sub to add their content to the comcast network and leverage their own broadband network to cheaply deliver new programming options to their customers. Which is exactly why the service only works on the Comcast network- If this was a truly an everywhere model the transit costs would make it too expensive to launch. Which to your point “TV Everywhere” is a terrible name for this new service- since it’s really just more broadband TV in your home.

[RichNiche]

Dan,

In my opinion, what Comcast and other cable (Satellite too) companies are missing here is that direct content to the consumers will finally enable consumers to do what the cable companies have repeatedly denied them - the ability to select specific content (channels) they want to get, how & when they want to receive it. For years consumers have asked why they have to pay for hundreds of channels they do not want or watch, soon they will not have too. No doubt Hulu, TwirlTV and other online content distributers will eventually offer subscribition services but, if they are smart, they will enable consumers to select which channels they want. In addition, there will likely be "free" content as content owners look for ways to introduce their content to consumers but in the end the power is shifting from the cable and satelliet companies to the consumer.

TV viewing is becoming alot like Xbox 360 Live. Whe my son first started playing Xbox it was just him and the content (game), he then got connected with Xbox 360 Live and began interacting with the game and others around the world, this is what is happening to TV. Consumers can not only just watch TV via Hulu, TwirlTV and others, they can innteract with (synchronously or asynchronously)their social networks while doing so and thus create a better viewing experiennce. In the past this was only capable by calling someone and simultaneously watching the same show (think Billy Crystal and Meg Ryan watching Casablanca in "When Harry Met Sally"). Instead of the point to point phone call, groups of friends or those interested in the same ypes of content can now watch content, discuss it live with VoIP or post comments via text to their social networks or other sites.

The other two comments here, have it correct - TVEverywhere looks like a typical "top down" idea from the MSOs who likely never ran the full concept past any current subscribers or prospects. I highly recommend they pick up a copy of the book "Tuned IN" by Stull, Myers & Scott and come to understand that knowing your customers and prospects wants then building solutions they are willing to pay for is the only way they can prevent their subscribers from changing the channel to the online providers. They have a line in the book these cable & satellite execs need to learn to start using when the top down or any internal opinions are expressed: "Your opinion, although interesting, is irrelevant." Somehow I doubt they'll make the necessary changes...

[Jason Anderson]

It's absolutely top down and if it's half as dreadful as Dan describes, TV Everywhere is destined to fail. The issue with MSOs is that they want to set all of the rules. This can only happen if they control the content. Hence, Comcast's play for NBCU.

The real thrust of the cablers' efforts should be two-fold: to solidify their relationships with content owners and to snag consumers normally beyond their reach. By capitalizing on their infrastructure to provide the robust three-screen presence content owners cannot/will not build and reaching non-subscribers through stellar walled content, MSOs will survive and thrive.

Lame brain, half crap online TV offerings will only hasten the MSO funeral.

[Mike Berkley]

Great article, Dan!

In short, the only solution that will really work is the MSO charging consumers an additional monthly fee for a TV Everywhere subscription. The MSO would then share this with the content providers via increased carriage fees. Pure and simple.

Rather than fighting against Hulu, Comcast SHOULD'VE BEEN collaborating with Hulu on how to best implement a TV Everywhere experience with consumer-friendly orientation (Hulu's forte). But Comcast didn't and they are now competing against each other, each with their own, new paid content model. This could result in a lose-lose-lose situation.

More on why Comcast should partner, not compete with Hulu: http://www.readwriteweb.com/archives/competing_with_hulu_a_bad_move_for_comcast.php

Oh, and then there's Disney... :-)

-Mike Berkley
http://TVNewsStream.com

[Robert Clark]

How can the cablecos and telcos act as if the service is not being paid for by all of us who pay a premium for our pay-TV service? Get real you pay-TV providers! This is a defensive move to keep at-risk customers that is more than paid for with my exhorbitant monthly payment. If only my wife could give up her stupid older sitcoms and handful of niche channels, the combination of which can only be had through the 500+ channel line-ups of the the pay-TV robber barons...

[T]

guess Dan Rayburn forgot to write a story about Hulu - several years in and they still don't have a business model and are losing money every day they operate yet he is attacking the opening stages of a trial by MSOs! too funny - guess he missed the story this week about how Hulu intends to charge customers in a subscription model beginning next year! no mention of that compared to how MSOs intend to offer for free..

I'm not sure Dan Rayburn has reviewed the Broadcasters' quartely reports lately - they probably can use all the help they can get on developing ANY business model these days! Why do you think NBC is for sale right now and it's an MSO they're talking to!

[Dan Rayburn]

Guess you forgot to actually search on the word "Hulu" on my blog first:

Disney Says Hulu Getting Low On Cash
http://blog.streamingmedia.com/the_business_of_online_vi/2009/04/disney-says-hulu-running-out-of-cash.html

Hulu Already Working On The Technical Requirements For Subscription Service
http://blog.streamingmedia.com/the_business_of_online_vi/2009/09/hulu-already-working-on-the-technical-requirements-for-subscription-service.html

Sources Say Hulu Waiting For Subscription Service Before Launching iPhone App
http://blog.streamingmedia.com/the_business_of_online_vi/2009/10/sources-say-hulu-waiting-for-subscription-service-before-launching-iphone-app.html