TV Everywhere Offerings Will Struggle To Be Successful

While there has been a lot of talk about the TV Everywhere trials being rolled out by cable companies (Comcast, Time Warner Cable, Verizon), the sad reality is that none of them have figured out how they are going to pay for the service. While many want to proclaim TV Everywhere offerings as being the future of the cable industry, it's not. No cable company is going to simply give this away and lose tens if not hundreds of millions each year, just so consumers can get cable TV programs on their computer.

No cable company can afford to offer a TV Everywhere product if they aren't recouping their costs to operate it. While Comcast and others have talked about using online video advertising as a way to pay for it, lets 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 cable bill 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 it.

If there is one thing that consumers have clearly told content owners is that they are not willing to pay for the same piece of content multiple times. I already pay for cable, now I have to pay more each month simply to get that same content to a different device? Consumers won't stand for that. Sure, the cable companies would get some users to pay more each month for the service, but not in the numbers they would need to cover their costs. Just think how much it costs to deliver a 500Kbps video on the internet today and then multiply that cost times six for a TV Everywhere offering that would probably deliver video at around 3Mbps.

In addition, one of the hidden secrets of these TV Everywhere trials is that the more cable executives I speak to, the more of them talk about how not all programming from a station will be available online, even once the offering is out of beta. When we think of TV Everywhere, most of us probably think of being able to turn on a channel on our computer and see the exact same programming we see on TV. Cable execs continue to tell me that popular shows from a station will be made available, but that the offering will not be the same 24 hour channel like you see on your TV. Notice that all of these announcements by the cable companies say consumers will be able to watch "programs", not channels.

If cable companies could keep the price of such offerings really low, say $4.95 a month, then they would have a shot at getting some traction, but even that will be hard to come by. But what I really don't get about this whole TV Everywhere debate, is why consumers would not just buy a Slingbox instead? For a one time cost of about $250, you can get HD quality video to your PC and have the exact same channel experience on your computer, instead of just a limited number of shows via a TV Everywhere offering. Maybe some folks would not want to pay $250 upfront for a Slingbox, but as a consumer who has one, I can say it's well worth it.

I'm sure I'm probably in the minority in the industry since I'm not hyping the TV Everywhere trials and not talking about how it will "revolutionize" the industry like everyone else seems to be. But the one thing I don't those folks in the industry explaining is how such a service will be paid for. If anyone thinks the cable companies will simply do it to retain customers, or be forced to do it to "save their business" then I think they are fooling themselves. If you notice, cable companies are not losing a lot of subscribers and for all the talk of consumers cutting the cable in favor of online video, that's just not reality.

Maybe the cable companies will try different levels of a TV Everywhere offering, say one that is free for SD quality content but charges for HD quality video. Maybe users will be able to download some shows to own and that would pay for the service overall. But the bottom line is that all cable companies will need to cover their costs of a TV Everywhere offering and until such a business model exists that allows them to do that, no adoption or speedy roll out will take place.

Related Post:

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

  • HmmConvenient

    Dan TV Everywhere is about so much more than just bringing content to consumers. The initiative fundamentally changes how content windows will be defined for years to come as the MSOs in many cases are negotiating these deals as part of their carriage agreements.
    Consider, if TV Everywhere is successful in blocking Hulu, Netflix and others from getting content does that not make it successful for the MSO in concept? If nothing else TV Everywhere is freezing a large swath of content as creators and distributors alike try to figure out the licensing terms.

  • Roadman

    TVE sounds great but the initiative is predicated to windows, not a bad thing but those same said windows are windows of opportunity for the pirate networks, TVE does not address the pirate window.
    You mention that TVE is nothing to do with cable companies not losing a lot of subscribers, but it must be down to some loss or the other, IMOA the loss comes down to viewership and advertising, even if the viewership has’nt cut the cord (some shows are just must watch, football, game shows, baseball, etc..) they must be cutting their viewing habits trendwise for the cable companies to be putting forward this major combined TVE collusion.
    The cable companies look as if they are trying to stop the rot,
    In there minds they get to monetize (subscribe) every pipe at their disposal and at the same time advertise different delivery pipes.
    For the cable TVE consumer the big change looks to be: Paying for their own advertising.
    With TVE content remains fragmented accross different cable TVE providers, the consumer still need’s to be subscribed to the hilt in order to get the VOD experience that has cut their cable viewing habits in the first place.
    This scenario say’s; I like Comcast so I’ll stick with them but I also like Time Warner Cable and Verizon, but “you must be joking if I’m going to be repeatedly TVE’d”.

  • Curious

    Do you have any idea how the cable companies plan to deliver this content? Do they plan on using their own servers, using a CDN etc? Also do you know if say a Comcast customer will have to be on a Comcast connection, or if they are on vacation in Japan will they be able to use it from Japan? If it truly is anywhere I would think they would need to use a CDN as Comcast I’m sure could deliver to their own customers fine with strategically places servers in a few locations across the country but would have problems delivering video outside of their network and especially outside of the US.

  • Dan
    hard to argue with your high level arguments regarding pricing and ability of online advertising to provide sufficient revenue in the short term. But I’m curious to understand the underlying cost economics and how these will change as MSOs and Telcos deploy private CDNs of their own and move to all IP delivery over the next few years? Could it be that TVE comes for (relatively) free in their projections?

  • Dan, I actually see the potential for a positive policy byproduct, as a result of the TV Everywhere debate. The FCC can revisit the topic of consumer a-la-carte channel selection — similar to the PCCW model in Hong Kong.
    The U.S. MSOs have been reluctant to innovate, because there was no motivation to change the status quo — clearly, consumer desire for progress doesn’t count.
    The threat of disruption from direct-to-consumer offers by their content “partners” seems to be one of the few things that may get us past the legacy mental roadblock of channel-tiers within the U.S. pay-TV industry.

  • BobS

    Dan, Shot on goal. You’re absolutely correct. The MSO’s are clearly aware of the battle for the living room and are in a unique position to extend their business model as the gatekeeper for subscription revenues for content. Their business model is extremely attractive to content owners who realize that ad supported online entertainment is not compelling financially. The MSO already has a relationship with the consumer, they already charge for access to content …that btw a consumer could also get for free on terresterial. The interesting battle will be not only in what the costs are to consumers but what the carriage deals will look like between content owners/licensees and the MSO’s as their traditional audience shrinks (and their ad revenues along with this) and their on demand audience increases. One could see the subsidy coming from this side of equation as the MSO’s claim limited price elasticity to consumers and increased costs of delivery. It still probably looks better to content owner/licensee than the current ad supported online ad model.

  • Stephen F

    In the consumer entertainment sector, please show me a major online video business model that is indeed sustainable. It isn’t Hulu yet. Apple maybe, but I suspect it makes its profit from devices and iPhone telco partner revenues. YouTube has potential to get there, due to volume and owning its own CDN and ISP peering.
    So, cable’s TVE may have its challenges, but the industry continuing free online distribution of studio-produced entertainment content will eventually destroy professional production of entertainment content. It’s the golden goose. Video advertising will always survive but there are not enough ad dollars to make up for potentially huge losses in programming fees if we devalue content long term by giving it away for free. Sure, free content works for a handful of OTA TV channels per market, but that’s not the long tail opportunity of personalized content choices that the digital media revolution provides.
    Best wishes to the success of TVE. Maybe we’ll keep getting good TV content if it succeeds. Biz model deficits are not sustainable in the long term. The US government and its citizens will learn this law of economics within a decade or two, and I suspect online entertainment video providers will learn it sooner too.

  • jesus

    TV everywhere is so cool! I just got the Sling Link adapter from my job at DISH!