Next month, Olympic hopefuls gather in Melbourne, Australia, for the artistic gymnastics world championships. The championships have never been seen in their entirety in the United States. But a new service, World Championship Sports Network, will show the whole three-day tournament.
But it will not distribute the competition over cable. For $9.95, customers can view the championships over the Internet.
Welcome to the brave new world of cable-network programming, where not all the content is delivered through the set-top box. Savvy startups that don't make operators' regular channel lineups, like WCSN, are finding new homes on video servers, sending their shows on request to viewers who may be looking at a computer screen.
Established programmers are all figuring out how to profit from the second box in the home — the cable modem or digital phone line adapter. MTV Networks now programs three “channels” — MTV Overdrive, VH1 VSpot and mtvU's Über — solely aimed at computer users.
MTVN has also fashioned a video Internet play for toddlers and tweens who can't get enough of Dora the Explorer and SpongeBob SquarePants on Nickelodeon, and will launch Web-based video services from Comedy Central and Country Music Television.
ESPN is serving Internet purveyors with live college-sports programming and highlight packages through its innovative ESPN360 service, while Court TV is charging $4.95 a month to let viewers see high-profile and obscure trials alike, straight from the courtroom.
Video shorts from Scripps Networks-owned channels — from Home & Garden Television's tips on how to redesign your kitchen to simple chicken soup recipes from Food Network — even appear on Microsoft Corp.'s MSN news and information portal, as well as on the services' own Web sites.
Starz Entertainment Group is making available over 300 movie titles like The Incredibles and Kill Bill Vol. 2 for download to PCs through its Starz! Ticket On Real Movies service. For $12.95 per month, the year-old service allows users to download and watch an unlimited amount of Starz-licensed movies to as many as three devices, including computers and portable media players. The movies remain on the devices for as long as the network retains the rights to the film. The 24-hour Starz linear channel feed is also available for streaming as part of the subscription price.
With 61% of all Internet users accessing the Web via high-speed connections, according to Nielsen Media Research data from August, programmers want to reach potential viewers through any screen they might be sitting in front of. But network executives trying to pursue both computer and TV monitors must perform a balancing act.
Cable programmers want to fully explore the financial potential of reaching viewers anywhere, anytime, over the Internet. But in doing so, they want to maintain their bread-and-butter relationships with traditional cable and satellite distributors that have put their brands, in some cases, in front of 90 million households — and that provide most of their revenue base.
As content providers continue to struggle to thread this needle, several issues arise. For one, negotiating for content rights has become more difficult for programming aggregators and distributors alike, according to executives on both sides of the table.
And that begs a pair of questions:
- How do programmers structure rights agreements when not just cable programmers or dish distributors are on the other side of that table, but big Web site operators like Yahoo!, Google, AOL and MSN, are as well?
- And how do operators protect the exclusivity of what is coming down their pipes, when marquee networks like MTV and ESPN are creating their own robust, self-branded services on the Web?
LIMITING RIGHTS, WINDOWS
Operators, hoping to protect their license-fee investments in content rights, are asking for limits on the amount of programming a given network can air on the Web. These alternate-distribution restrictions vary from network to network and refer mostly to original programming created by the programmers.
While neither networks nor MSO executives would reveal specific deal terms, such restrictions mostly manifest in delayed windows in which shows can appear in cyberspace, typically after they air on the traditional linear channel.
Also, operators are trying to place limits on the number of minutes per hour that a network can offer its branded programming on the Web for marketing and promotional purposes.
“The cable operators have been anticipating this broadband distribution, so they exclude it in their contracts,” said an executive at an independently owned programming network. “You cannot distribute a network on both cable and broadband, so you have to make a decision which way you're going to go. Their attitude is a cable subscriber shouldn't have to pay for something that they could get for free on broadband.”
But the explosion of new-media distribution opportunities — including such platforms as the Internet, cell phones and portable media players — is making it much harder for operators to achieve their goals in setting deals with programmers.
“Everybody wants to [limit distribution of content over the Internet], but it's hard to try to encapsulate that language with everything that's out there,” said an executive with one small cable company who asked not to be named.
“How do you even begin to limit the amount of programming that can be offered to different platforms? I think it's a balancing act for programmers to amortize the investment return on a show through other platforms and insure that they don't damage the individual parts.”
Indeed, network executives say they don't want to bite the hand that feeds in an effort to chase broadband's potential.
“The cable operators are very concerned about protecting their value of their channel — which they should be,” said Harry Jenkins, vice president of technology and emerging media at Scripps Networks.
But at this point, programmers can't ignore the fact that consumers increasingly turning to the Internet for their video fix. So they're tailoring content to reach out to those viewers.
“Are we in a time of tremendous change? Without a doubt,” said MTV: Music Television president Christina Norman. “But I think we're all adaptable and I think we all have to keep focused on what the consumers want and deliver the best experience for them.”
That often means creating new and proprietary programming for the Web. MTV's Overdrive service provides exclusive entertainment and news content and premieres such shows as a recent Unplugged episode with Alicia Keys, weeks before its Sept. 15 debut on the channel.
MTVN's TurboNick service has also provided proprietary fare to Internet users since its launch in July, including first-run, short-form content from shows like Mr. Meaty and Making Fiends; and exclusive shorts from Rugrats producer Klasky Csupo Productions, dubbed Schmutz.
For their part, Scripps's Food, Home & Garden Television, Fine Living and Do It Yourself Network all have been very aggressive in delivering various types of content for different kinds of media, from the Internet to cable television to satellite services.
And next year, Scripps will launch two to three Internet-exclusive broadband channels that will combine high-quality video with interactive space planners, three-dimensional graphics packages and other tools on topics such as crafting, woodworking, gardening and more. The first will focus on kitchen remodeling.
Scripps's Jenkins said such proprietary programming could pacify operators by providing unique and unduplicated programming, while still providing a robust broadband offering for consumers.
“On-air content will be different for cable content, which will be different from mobile and broadband content,” he said. “That way you don't cannibalize one show from one platform from another.”
Turner Broadcasting System Inc. next year plans to launch a pair of video- enhanced broadband services — within its TNT.TV and TBS.TV — that executives say will complement their linear cousins with ancillary programming derived from original movies and series, as well as exclusive programming created specifically for the Web.
Those sites — along with Cable News Network's ambitious Pipeline, a fully operational interactive page that features four continuous, live video feeds showcasing content from current stories the organization is following, like the potentially destructive path of Hurricane Wilma — will provide viewers with an opportunity to access those Turner brands outside of the linear space, while providing program distributors with product to help push broadband subscriptions.
Turner also recently launched an Internet-based video game site, GameTap, which will feature around 300 games and some original programming.
“Our strategy is to have different product for different form factors because we absolutely don't want our high-speed business to cannibalize our television viewing,” Turner executive vice president of business development Dennis Quinn said.
“It may look similar in some areas, but it's different and distinct,” he added. “We know this is a high-margin business for our cable operators, and we want to create real, robust, media-rich applications that drive folks to the premium [broadband] packages.”
Offering varied fee-based models for video broadband might be another way to temper operator angst, according to Playboy Enterprises Inc. president Jim Griffiths. He notes that such fee-based models could provide incremental revenue for operators, as well as programmers.
“It certainly could be a subscription model, or a model where one plays $50 for an allotted amount of time,” said Griffiths, who said his network is talking to Yahoo!, Google and America Online about offering adult-targeted lifestyles and entertainment programming. “It's still time, but the Internet and the distribution platforms are far more flexible in how people can use that time. I'm sure we haven't begun to scratch the surface in how people will consume the product.”
Court TV is currently testing a $4.95-per-month streaming service that launched last May in which consumers can see gavel-to-gavel coverage of both high-profile and obscure trials. Court TV chief strategy officer and executive vice president Galen Jones said the service provides the network with a platform to give additional trial coverage that will bolster brand awareness and loyalty.
Whatever the pricing model, operators are desperately seeking ways to build value for their fledgling $40 to $50 per month high-speed Internet services, which currently reach about 22% of all cable households.
Comcast Corp. and Time Warner Cable are hoping proprietary video services will draw more subscribers, while simultaneously thwarting inroads from the likes of Google, Yahoo!, MSN and AOL TV.
To that end, Comcast two years ago debuted its “The Fan” video portal, part of the comcast.net portal for its high-speed Internet service. The Fan delivers nine specialized “channels” with more than 10,000 video items ranging from news and sports clips to music videos from such networks as E! Entertainment Television, Fox Sports Net, The Weather Channel and Bravo.
For sports fans, it also streams two live National Hockey League games each night, as part of Comcast-owned OLN's two-year, $135 million cable-TV rights deal with the hockey circuit.
Liz Schimel, senior vice president of content development for Comcast's high-speed services, said the MSO is working with networks to provide its Internet subscribers with exclusive video packages for cable programming, like Showtime's upcoming drama Sleeper Cell. The Fan will stream the first episode of the terrorist-tinged series, plus create a preview package of interviews with the show's stars, as well as behind-the-scenes footage, that will air three weeks prior to the show's bow on the linear premium service.
Last August, The Fan created a dedicated channel proffering behind-the-scenes looks at Home Box Office's original series Rome.
“A big focus for Comcast has been cross-platform experiences that include exclusive content, streaming of shows on the Internet and adding more behind-the-scenes content to deepen our customer's experience of the shows they love on linear television into a broadband experience,” said Comcast High-Speed Internet senior vice president, content development Liz Schimel.
While not on the same scale as Comcast, Time Warner is also seeking to boost its Road Runner high-speed Internet service by securing video deals — it already has pacts with A&E Network, C-SPAN, Hollywood.com, CNN and Bloomberg Television — with more cable services.
Not to be outdone, Verizon has secured video rights for its Verizon Online service, along with overall distribution rights for its startup FiOS TV service. Its most recent carriage deal with The Walt Disney Co. netted the phone company exclusive Internet rights to Disney's Internet-gated content, from such brands as ABC News Now, Disney Connection, ESPN360, Movies.com and a yet-to-be-launched SoapNet service.
That follows the content deal with Viacom that gave Verizon access to content from the Nickelodeon and MTV brands.
“We already have some limited video content on our portal, and you can download movies for rent through our portal, but obviously these other deals expand the real-time streaming content possibilities,” Verizon spokeswoman Bobbi Henson said. “It's compelling programming and people are looking to their broadband portals for more entertainment. We're really always insisted in expanding the value for our customers and they see a lot of value in this content.”
Much like cable companies building their on-demand TV business, operators and other video broadband players want much of this new proprietary content free of charge.
Predictably, network executives are wary of giving away content to boost a new, potentially viable business.
“Generally speaking, the people trying to build the broadband business typically like to strike deals where the deals are free to them, which is one of the reasons why we don't have more deals in place,” said Court TV's Jones. “We're cognizant that we need to have a viable business model. It doesn't make sense on any level for us to be in a place where we're charging our affiliates a license fee for content and then not charging others for that content.”
Video broadband may still be a promotional outlet for most established networks, but it could serve as the main platform for new outlets looking to build awareness and identity — not to mention viewership.
Independent startups that have been unsuccessful in gaining distribution from operators, such as Middle East news service Al Jazeera International, are considering the Internet as a way to reach audiences they believe are underserved.
There's significant interest in the global news service, Al Jazeera International commercial director Lindsey Oliver said recently — more than 85% of e-mails and visits to the network's Web site (http://english.aljazeera.net) are from Americans.
“If you're not providing the news and information that people want then the industry will lose out,” Oliver said at last month's National Association for Multi-Ethnicity in Communications Diversity conference.
WCSN CEO Claude Ruibal said the network — which holds exclusive U.S. rights to more than 20 domestic and international athletic federations, representing over 20 Olympic sports — could conceivably survive as a broadband service, particularly if such technology allows the network to black out certain events to countries around the world as such rights dictate.
Still, Ruibal said that video broadband is placeholder, while carriage on cable and satellite systems remains the network's ultimate financial victory. “We've seen good support and we see it as a viable outlet for us, but nonetheless, in today's age, we still believe it's important to have traditional distribution in the form of cable and satellite, and we're still pursuing that.”
Given the network's subscription-based model — the network charges an average of $10 for access to each of its world championship tournament events — operators haven't discouraged WCSN against broadband service.
“I'm cautiously optimistic that the traditional distributors understand that we're not undermining their offerings, but instead are offering a complimentary service to our linear channel that will future-market our brand,” Ruibal said.
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