Cable execs debate value of jumping into streaming

When video delivery via the Internet, aka streaming media, started gaining attention four or five years ago, it was hailed as a media revolution that would forever alter television as we knew it. Streaming techies predicted that within five years televisions and computers would be one and the same. High-capacity hard-drive television would make video-on-demand ubiquitous. Interactive commerce would have couch potato shoppers pointing and clicking the tiny Tahari suit right off Ally McBeal's body. The discussions at Tuesday afternoon's Western Show session on streaming media and the pre-show luncheon discussion on the same topic illustrated why that model remains a carrot on a stick: The triad of video delivery-traditional television networks, streamers and distributors-are at cross purposes.

Streamers depend on broadband distribution from cable operators, who depend on the revenue model provided by networks, who are leery of the competitive potential of streamers. The relationship may seem to be one of keeping your friends close but your enemies closer.

"There may be a wonderful value of streaming video to the viewer, but will they pay for it?" asked Henry Schleiff, chairman and CEO of Court TV. "I'm not so sure. And will an advertiser support the kind of numbers in terms of niches? I don't know. I personally wouldn't want to test it."

Jessica Reif-Cohen, first vice president and managing director of Merrill Lynch, countered that the question of value to the cable network also needs to be weighed as well. "Isn't [the cable network] more valuable to the viewer once they return to the television? Aren't they a more valuable viewer?"

To Jonathan Taplin, CEO of Intertainer, a broadband entertainment-content aggregator, the bottleneck is at the headend-the one connected to the neck bone-of networks and distributors who are threatened by the renegade streamers. He rejected a widely held notion, fueled by the infamous Victoria's traffic jam, that streaming is being held back by inadequate infrastructure. The capacity is available, he said, it's just not being used. That cable operators are more likely to pick up yet another iteration of a Discovery channel rather than allot that space to broadband delivery demonstrates their resistance to streaming, he said. Most cable operations allot 6 Mhz, the equivalent of one analog channel, to broadband delivery.

"If [John] Hendricks [chairman and CEO of Discovery Communications] starts the gorilla channel, can he really program it 24 hours a day? Why not give that to the streamer for even six hours a day?" Taplin asked.

One reason may be that viewers still prefer traditional television to streamed video, ventured Richard Wolpert, strategic adviser for RealNetworks. "Social adaptation takes time. People still want to be entertained."

"Oh, that's Disney brainwashing," Taplin countered. "There are 220 channels out there.."

"So why do three or four channels own 90% of the audience?" Wolpert parried, eliciting agreement from George Bell, chairman and CEO of Excite@Home.

"Media is built for inertia," Bell said. "People take only a small number of channels out of the first 20, maybe one out of the next 20, and after that they replace channels. People are locked into channels because of inertia."

Competition, however, could remove that inertia, according to John Billock, president of HBO U.S. Network Group. "There is one thing that can upset the apple cart, and that's competition. Things like DSL will force timing of changes, because you can't wait and evolve at your own pace, and I think, frankly, that is what is going to happen in the streaming world."

And while many in the video-streaming business may be a bit gun-shy given the recent travails of record companies and peer-to-peer networking companies like Napster, Taplin dismisses the assumption that streaming will lead to content pirating of video.

"Where are you going to store a terabyte in your house for 100 movies? People tend to watch movies once-they rent them. They own music," he said.

Bell was not so sure. "The risk is driven by simpler behaviors. American consumers always get what they want, even if it's illegal."

And the movie industry itself may take an approach of piracy be damned, especially if what Paul Sagan hinted at happens. Sagan is president of Akamai, a provider of Internet infrastructure servers that allow for the moving of content. "There are several studios that will download movies overnight to laptops, full length in about half a gig, and that's your new set-top box. And there are a couple of big companies with offices in this city that are going to try, and they're going to open a window and try to rent their movies."