While there has been a lot of talk about the TV Everywhere trials being rolled out by cable companies (Comcast, Time Warner Cable, Verizon), the sad reality is that none of them have figured out how they are going to pay for the service. While many want to proclaim TV Everywhere offerings as being the future of the cable industry, it’s not. No cable company is going to simply give this away and lose tens if not hundreds of millions each year, just so consumers can get cable TV programs on their computer.
No cable company can afford to offer a TV Everywhere product if they aren’t recouping their costs to operate it. While Comcast and others have talked about using online video advertising as a way to pay for it, lets be real. Video advertising alone will not pay for the costs associated with a TV Everywhere offering. In the end, cable companies will either raise our cable bill each month to pay for the so called “free” offering, or they will charge an additional fee per month on top of our cable bill. While there is nothing wrong with them offering a new service at an additional price, the majority of consumers won’t pay for it.
If there is one thing that consumers have clearly told content owners is that they are not willing to pay for the same piece of content multiple times. I already pay for cable, now I have to pay more each month simply to get that same content to a different device? Consumers won’t stand for that. Sure, the cable companies would get some users to pay more each month for the service, but not in the numbers they would need to cover their costs. Just think how much it costs to deliver a 500Kbps video on the internet today and then multiply that cost times six for a TV Everywhere offering that would probably deliver video at around 3Mbps.
In addition, one of the hidden secrets of these TV Everywhere trials is that the more cable executives I speak to, the more of them talk about how not all programming from a station will be available online, even once the offering is out of beta. When we think of TV Everywhere, most of us probably think of being able to turn on a channel on our computer and see the exact same programming we see on TV. Cable execs continue to tell me that popular shows from a station will be made available, but that the offering will not be the same 24 hour channel like you see on your TV. Notice that all of these announcements by the cable companies say consumers will be able to watch “programs”, not channels.
If cable companies could keep the price of such offerings really low, say $4.95 a month, then they would have a shot at getting some traction, but even that will be hard to come by. But what I really don’t get about this whole TV Everywhere debate, is why consumers would not just buy a Slingbox instead? For a one time cost of about $250, you can get HD quality video to your PC and have the exact same channel experience on your computer, instead of just a limited number of shows via a TV Everywhere offering. Maybe some folks would not want to pay $250 upfront for a Slingbox, but as a consumer who has one, I can say it’s well worth it.
I’m sure I’m probably in the minority in the industry since I’m not hyping the TV Everywhere trials and not talking about how it will “revolutionise” the industry like everyone else seems to be. But the one thing I don’t those folks in the industry explaining is how such a service will be paid for. If anyone thinks the cable companies will simply do it to retain customers, or be forced to do it to “save their business” then I think they are fooling themselves. If you notice, cable companies are not losing a lot of subscribers and for all the talk of consumers cutting the cable in favour of online video, that’s just not reality.
Maybe the cable companies will try different levels of a TV Everywhere offering, say one that is free for SD quality content but charges for HD quality video. Maybe users will be able to download some shows to own and that would pay for the service overall. But the bottom line is that all cable companies will need to cover their costs of a TV Everywhere offering and until such a business model exists that allows them to do that, no adoption or speedy roll out will take place.
More from Dan Rayburn’s Business of Online Video blog:
Take A 2-Minute CDN Pricing Survey: Chance To Win Apple iPhone 3GS
Recent Analyst Research On The CDN Market Needs To Be Questioned
The Importance of Good Reporting and Analytics In The Video Ecosystem
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