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Broadcasters see Web plans leading to more carriage fees

29 июня 2009

Broadcasters, facing declines in advertising revenue, view cable television industry's push towards a subscription model for online video as a potential opportunity to grab more carriage fees from cable operators and their competitors.

While cable companies show signs of rallying around a plan to keep online video programming behind a subscription wall in order to preserve their TV service business, broadcasters continue to put some of the most popular TV shows online for free in pursuit of more ad revenue.

But despite early successes with offerings like Hulu and TV.com, analysts say web video poses long-term threats to the broadcast business as well as cable, and broadcasters may be persuaded to join the push towards a subscription model - known as authentication - if they can share more in the spoils.

"To the extent that authentication represents an additional way for CBS as a broadcaster to get paid, I think that's very interesting," said Quincy Smith, president of CBS Interactive.

This issue is particularly sensitive for CBS Corp., which depends on its broadcast network more than other network owners, which are larger, more diverse companies.

CBS and other broadcasters have recently won higher subscription fees from pay-TV providers in return for access to their programming, as increased competition among cable operators, telecommunications companies and satellite providers has strengthened their hand in negotiations.

Still, the vast majority of the revenue reaped by broadcasters - possibly as much as 90%- comes from advertising, which is suffering due to the recession. Their cable counterparts, meanwhile, make over half their revenue from carriage fees paid by distributors from their pot of consumer subscription revenue, which has continued to grow despite the downturn.

Without much in subscription fees to protect, broadcasters have little incentive now to cooperate with the industry's push towards a so-called "TV Everywhere" model, which would require viewers to demonstrate through a log-in, or authentication process, that they subscribe to a pay-TV offering in order to watch their TV programming on the Internet.

Instead, they have put TV shows online for free in order to reach the broadest possible audience to power their ad revenue. eMarketer estimates that online video will be the fastest-growing ad category this year, with spending up 43.5% to more than $1 billion. By 2013, the firm projects online video ad spending to reach nearly $4.1 billion.

Currently, however, online TV boasts far fewer ads than traditional TV programming, and its profitability has yet to impress investors.

Sanford Bernstein estimates that a show like "The Simpsons" in prime-time on Sunday night generates about 54 cents per user for Fox Broadcasting, which like this newswire is owned by News Corp. The show packs in 18 commercials at a rate of about $30 per thousand viewers.

By comparison,"The Simpsons" on Hulu makes one-third of that amount even though it charges advertisers at a higher rate because it only has three commercials.

Broadcasters hope to add more inventory to their online programming and use online ad targeting techniques to bring the business into parity with its TV business as digital video becomes mainstream. But getting there could prove difficult, and Hulu is already mulling a subscription model of its own.

"We think that if Web usage of broadcast content increases, content owners will need to improve their economics by shifting to a subscription model or by increasing the advertising loads," said Michael Nathanson, analyst at Sanford Bernstein.

In the meantime, broadcasters say digital video recorders, which are sold by pay-TV providers and allow viewers to skip through commercials, are a greater threat to their ad business than the growth of online video.

Many broadcast companies express support for "TV Everywhere," but haven't said whether they'll participate. If popular broadcast content continues to be available for free, some consumers could be increasingly tempted to go without a cable TV subscription.

Some of the largest media conglomerates - like News Corp., NBC Universal and Walt Disney Co.(DIS)- own both cable networks and broadcast networks, complicating the issue. A spokesman for News Corp. declined to comment for this story, while Karen Hobson, a spokeswoman for Disney, said the company was learning more details about the industry's authentication plans.

"We remain open to the adoption of a consumer-friendly authentication system that could provide enhanced offerings, such as a simulcast network or more robust content," said Hobson in an emailed statement.

NBC Universal spokesman Joe Libonati also emailed a statement saying it's interested in authentication plans.

"We believe in providing opportunities for consumers to enjoy content on the Internet, while maintaining and continuing to grow the dual revenue business," said Libonati.

Time Warner Inc. Chief Executive Jeff Bewkes, who oversees a host of cable networks and announced an early test of the "TV Everywhere" concept with Comcast Corp. this week, told reporters that the proliferation of broadcast content online isn't a concern for the cable industry.

He noted that the vast majority of viewers subscribe to a TV service and predicted that "TV Everywhere" usage would surpass broadcast offerings on Hulu and elsewhere.


Источник: Total Telecom

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