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Editorial

Era of Free Internet TV Coming to a Close

When times were good and the Internet was hot, the TV networks experimented with mechanisms to draw in more customers via the Web. Those services, like Hulu.com and TV.com, have been free because they remained minimally ad supported. However, in the current economy, with cable subscribers dropping their subscriptions in droves, experimental, free Internet TV is being rethought. It may be coming to a close.

According to the Wall Street Journal on February 20, the top cable providers, including Time Warner, have finally figured out a solution to the threat of on-line TV.

Boxee

Boxee Home Page:  Soon just a memory

Only current cable subscribers will be able to access on-line TV services, but they'll be able to do it from wherever they wish. Presumably some kind of authentication mechanism will ensure that the viewer on the Internet is a current, paid up cable subscriber.

Not only does this help stem the tide of people forsaking cable to watch TV on the Internet, but it provides cable a competitive advantage over satellite services and monetizes what was once (if plans proceed) a free service.

Business Models Reign Supreme

For some time now, the TV networks have been struggling with the control and revenue streams of their content. The love affair with YouTube has come and gone, and Hulu, after a slow start, has taken hold. In a recession, however, experimental, free techniques must cede to a business model that makes sense. For example, Netflix, with nearly 10 million subscribers has a sound business model that generates more than a billion dollars a year in revenue.

This probably explains why Hulu's CEO Jason Kilar announced last week that the Hulu service would no longer be accessible with boxee. The stage is being set.

The current thinking by the networks also explains why the Apple TV is and will remain a business model driven box. That means that prime content will remain for sale and that the Apple TV won't be opened up to things like a Safari browser, boxee, Miro and other general Internet access that allows free video viewing. (Except YouTube, Flickr, of course.)

As a result the home hobby of connecting a Mac Mini to an HDTV and surfing free Internet TV content will give way to managed, subscription content. For example, back in the late 1980s, people used their old first generation, 3 meter satellite dishes to pick up all kinds of free content from the Clark Belt, multiple NFL games, east and west coast network feeds, and so on. In time, all that came to a halt, and now we have DIRECTV and Dish Network systems with encrypted feeds and a solid and controlled business model.

End of an Era

Lots of things are going to change dramatically during this deep recession. Cars will move sharply to hybrids and then pure electric as battery technology, driven by hybrids, improves. Along the way, the experiment with free Internet TV will also end. Now, all that remains is for the satellite companies to figure out how to combat that new business model by the cable companies.

While there will always be a lot of 3 minute "snack" videos on the Internet, and the TV networks will likely put some older TV shows out there as enticement, this experiment between the TV networks and cable providers portends a future in which you'll end up, once again, paying for the things you really want.

Whether you pay on Apple TV for commercial free content or pay a cable subscription fee to watch ad supported content, or some other mix, there is a huge revenue stream at stake, many billions of dollars, and the days of watching all the hot new TV shows for free on the Internet appear numbered.

6 comments from the community.

You can post your own below.

graxspoo said:

I think this article misses something: The cat is out of the bag, and its not going back in. Just as has happened with digital music, most TV shows are now freely available through torrents. You can easily download these shows with programs like T.E.D. and Transmission.

So, the only hope that the networks have is to make watching online more appealing and easier than illegal downloading. In trade, we will watch their advertising. That’s the new paradigm that they need to wake up to. The more they fight against it with short sighted moves like disabling Hulu access through Boxee, the quicker people will seek alternative access methods.

http://www.ted.nu/
http://www.transmissionbt.com/

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dontmindpaying said:

Content doesn’t get made for free and the production costs are paid for by advertising or subscription.  If the revenue stream goes away, then eventually the content will go, too.  There may be stuff to download for free, but it will likely be worth the price.

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John Martellaro said:

Out of the bag? Once access is blocked sufficiently and channeled into licensed, for-fee services, then all that remains is home-brew hacking, bit torrent, and outright theft. Some prominent lawsuits are then launched by the networks for effect.  That slows the unlicensed streams to a trickle, while Time Warner and Comcast offer up plans for millions of customers.

-J.M.

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brett_x said:

I’m not convinced yet. Maybe I’m just hopefully optimistic. I don’t spend much time thinking about this topic (vs other topics on this site), but here are my thoughts:

Cable and Satellite providers have been shooting themselves in the foot for years- “upgrading” (via a monthly fee) their subscribers to DVR systems that their viewers can use to skip over advertisements.  The result is that the advertisers aren’t getting the same result out of their investment. The proliferation of DVR’s would be nowhere near today’s levels if it hadn’t been for providers ‘pimping’ these boxes. To the consumer, a small line item on their bill means they don’t have to be on time to watch their favorite show. In fact, if they’re late, they can regain that time skipping over advertisements.

To me, it would seem that the C&S providers have really given up a lot of their bargaining power. Advertisements are less effective partly because they have been collecting monthly fees to rent out DVR’s. I think that was really short-sighted thinking on their part.

Now, content providers have a way to connect to us directly (albeit… though a cable internet connection in many cases.. but that’s another discussion…). They can allow us to stream directly to our computers on our own time, and make us watch the advertisements that pay their bills. Most people are very comfortable with this idea. I’d much rather watch a few ads than pay for content in most cases.

I know I’m fed up with paying over $60/month for basic cable. That could buy quite a bit of content in iTunes (content that I actually want to buy, not what Cable wants to feed me). I’m also tired of the cable company’s tactics to force upgrades. I recently got a flier in the mail that said they were moving their TV Guide “listings” channel to a range that you need digital cable and a cable box to get. But once you get the cable box, you don’t need that channel because you have built-in listings.

The writing is on the wall for C&S providers. They’ve held us hostage for years without realistic alternatives. But now, in this economy, you’re right John.. some drastic things will happen.  All it will take is an iTunes store type one-stop shop for us to pick our own content.. ‘a la carte’ like we consumers have been asking for for years from C&S providers. Maybe it will be iTunes, but their model isn’t quite there yet. They’d need to offer complete content from individual channels for it to be the last nail in the coffin. Imagine if you could get each of your favorite basic cable channels for $5-$8/month (streamed, with advertisements.. but available anytime).  Wouldn’t you rather do that than pay for what they want to give you?

Just my thoughts…

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Casius King said:

This is what net neutrality is about. Too bad it’s such a crappy term and nobody has been able to explain the problem in words of one syllable. Here goes: when ISPs are also content providers, they will naturally favor their own content.

The problem addressed by this post wouldn’t be an issue if nobody got their internet from Comcast or Time Warner. If ISPs were independent from content providers—a division that ought to be law—then the content providers would compete for your attention.

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daemon said:

The arguements as made in this article sound suspiciously familiar. Oh yea, radio. You see, the owners of music never wanted their content to be played, for free, on radio. They wanted people to pay for their content. Course, 80 some years later and the only subscription based radio I know of is Satelite radio which is on the verge of complete failure, otherwise it’s *free*.

Here’s what’s going to happen. Hulu is going to do fabously well because it will show all the current shows from over-the-air broadcast channels, along with some really great old shows that most people love, but haven’t seen in forever. HBO and Showtime will hook-up with Netflicks to offer subscription based downloads of their shows, and life will continue on.

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