Comcast and Time Warner Inc. Trialing Online Content Distribution Model Using Subscriber Authentication

Comcast and Time Warner Inc. Trialing Online Content Distribution Model Using Subscriber Authentication

It’s been interesting watching the pronouncements of TV programmers and cable operators and their advertisers as the parties come to grips with the over the top video phenomenon. Time Warner Inc. and Comcast Corp., two giants in their respective fields, took a step further into the online video viewing world this week by announcing details of a trial for TV Everywhere initiative.

Not to be confused with TV Everywhere Inc., a company that was profiled by Brian Mahony in an earlier post, the cable industry’s TV Everywhere initiative is about making content available to paying cable customer on their PCs and on other devices using subscriber “authentication” technology—and where only cable subscribers get access to the programming content they have already paid for delivery to their TVs.

Comcast and Time Warner Inc. said they’ll conduct an authentication trial of about 5K Comcast customers as a first step toward wider rollout of this capability to its 24 million video subscriber base. Comcast is calling their service “On-Demand Online.” As part of the trial, Time Warner Inc. said it will make the content assets of two of its ad-supported, basic cable networks TBS and TNT available for “broad distribution” over the online service. Other cable programming networks are also expected to be made available to users and the service will add more content, features and functionality as it moves through subsequent versions of the trial. CBS is reported to have already expressed an interest in providing its content and other cable operators and distribution platforms will also likely emerge in the coming weeks.

Most cable networks main revenue sources come from two sources-- from affiliates and advertising. In the case of TBS, net advertising revenues represent about 57% of total operating revenues for TBS, for example, with the rest coming from fees paid by cable operators and other “multichannel” video providers, including satellite and telco TV service providers to the network to carry their programming over their various distribution systems.

The key issue with providing access to basic or pay TV programming online is to preserve what in the business is called the “dual revenue model” from both these sources. It’s the main source of funding for the production of new shows. The industry argues that if you replace on-air dollars with “digital” online dimes and pennies, they won’t be able to fund quality programming and the whole business model breaks down. So the “TV Everywhere” project is an effort at compromise—it understands people are watching more and more video online. Although, judging by recent research from Nielsen, ComScore and a huge video media consumption study by Ball State University, total monthly online video viewing, while growing, is still under 5 hours total per month. That’s about 10 minutes per day. Not enough to topple the traditional pay TV industry, but it’s obvious where the trend lines are pointing.

Meanwhile, the announcement laid out the guiding principles of the trial:
• Bring more TV content, more easily to more people across platforms.
• Provide access to TV programming to cable video subscribers online for no additional charge.
• Access this content using any broadband connection.
• Programmers to make best and highest-rated programming available for online distribution.
• Networks and video distributors provide high-quality, consumer-friendly sites for viewing broadband content with easy authentication.
• A new process to be created to measure ratings for online viewing—with the goal of extending current viewer measurement systems to include advertiser ratings for TV content viewed on all platforms
• TV Everywhere as a non-exclusive concept available open to cable, satellite or telco video distributors who enter into similar agreements with other programmers.

Not much was discussed at a recent conference call this past week on what the subscriber authentication technology will be, but Time Warner CEO and Chairman Jeffrey Bewkes said that they don’t expect much difficulty or complexity as far as the authentication” issue is concerned. Trender will report back with more details on this as they emerge and as we find them out.