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Operators, Content Owners At 'Strange Crossroads' For Online TV

Pay-TV distributors and programmers are "at a very strange crossroads" as they adapt to changing viewer demands and try to negotiate deals for Internet-distributed video, Scripps Networks senior vice president of digital media Lisa Choi Owens said.

"There has to be a balance and collegial relationship between content owners and distributors," said Owens, speaking on a panel here Wednesday at Bloomberg's Media Summit. "We need to figure out the economic model... I think we're on a path where that's not very friendly." Scripps cable networks include HGTV and Food Network.

David Purdy, vice president and general manager of television products at Rogers Cable -- Canada's largest cable operator -- agreed that the rules have not been fully established for Internet video monetization.

"We still haven't figured out what to pay the guy from Discovery, or the lady from Scripps," he said.

Without missing a beat, Verizon senior programming executive Tricia Lynch quipped: "Nothing extra."

Purdy gestured toward Owens and said: "And, the collaboration begins."

Gabe Sauerhoff, Discovery Communications' vice president of digital distribution, weighed in on the question of monetizing online video this way: "I can tell you where the money is not -- it's not full episodes online in an ad-supported fashion."

Neither will download-to-own become the predominant way people get their TV content, added Sauerhoff. "At the end of the day, television is not about ownership, it's about subscription."

The good news, from Sauerhoff's perspective, is that TV Everywhere initiatives are not a zero-sum game whereas there had been the fear that "the gain of the MVPDs is the loss of another distribution point."

Owens maintained that connected-TV devices will create a big change in market dynamics. She noted that such devices are available for "the cost of a dinner," between $79 and $99. (In New York City, she said, "that's a cheap date.")

For cable providers, Internet-connected TV devices such as game consoles or tablets should provide opportunity to cut their capital spending on set-top boxes as more content is delivered over IP, John Burke, Motorola Mobility senior vice president and general manager of Converged Experiences group. "It's hard for me to imagine an over-the-top player replacing pay TV subscriptions," Burke said.

But Rogers' Purdy said the concern for the industry is the next generation, which is growing up without ever subscribing to cable TV: "The fact that we haven't see cord-cutting in a massive way doesn't give me any comfort."

The value of linear TV channels from a customer standpoint is decreasing every year, according to Purdy. "I don't think you can be too paranoid in this space," he said. "I don't think we can move aggressively enough or move fast enough. And our customers want this stuff... They don't understand why the entire library of Discovery content isn't available to them."

Advertising for online video is another major area the industry needs to focus on to move forward, Purday said. Being able to "harmonize" viewing metrics across all platforms is critical to sustain the content ecosystem. "We need a greater sense of urgency," he said.

Verizon Communications, as a newer entrant into the pay TV arena, has tried to deliver a multiplatform service aggressively, said Lynch, citing the telco's recent TV Everywhere deals with Turner Broadcasting System, HBO Go and MTV Networks.

"We'd love to get to a place... where when you subscribe to FiOS you get the same thing on every platform," she said. "We're doing what we can to expand the notion of what it is to be a multichannel subscriber. But it's still a little fractured even for us" because of rights issues.

She added, "I'm worried about Netflix, too; in that sense I'm the incumbent, too." Netflix has done "very well," Lynch said, with a really good price point, the promise of an endless supply of content and a unique way to get to the content so people feel it's personalized for them.

"I think we have all that too -- but we need to recast that," Lynch said. "We're selling all those same things and we have to figure out what's resonating with customers."

Said Purdy, "Three years ago I sat on a panel and people said, ‘Oh, young people will never pay for content.' Well, they're paying for Netflix. So there are models that the pay TV industry hasn't thought of that work."

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Correction: An earlier version of this story incorrectly attributed the comment "Nothing extra" to Scripps Networks' Lisa Choi Owens. In fact, the comment was made by Verizon's Tricia Lynch, who was jokingly referring to what TV operators should pay programmers for online video rights.