The stampede to online by some advertisers contrasts with the complicated trajectory for TV programs on the Internet. Display and classified advertising traffic is moving only in one direction. The intersection of cable TV, online, and programming resembles a traffic circle. Things are moving but: who goes first, has the right of way, and how best to avoid a crack-up?
Cable operators see this issue as getting the benefit of a bargain. Operators pay a wholesale cents per sub for network content. If that content is free online, and viewers disconnect cable subscriptions, operators believe they should pay less or programmers should change their online strategy.
How? Operators want online or mobile versions made available for free, if the website can authenticate that its viewer is a subscriber. Alternatively, programmers should make more shows available for cable's free-to-subscriber video-on-demand (VOD) environment, not the five-finger discount world of the Internet.
Compounding the problem for operators: they now pay cash for carrying popular broadcast network stations. The "retransmission consent" obligation underlying these payments has been on the books since 1992. But for its first 15 years many cable operators obtained consent by agreeing to carry new networks created by broadcasters (think MSNBC or HGTV) rather than cash to local affiliates. With explicit cash payments for the broadcaster's channel, operators insist their networks shouldn't put their most popular shows online for free.
Program networks are sympathetic to operators, to a point. Distributors like Comcast and Time Warner Cable (and DBS) are the main sources of subscriber fees, which constitute half (or more, in this struggling advertising economy) of nonpremium program network revenues.
But, argue some programmers, online versions of, say, "The Daily Show" allow viewers to catch up or sample a network, but do not trigger a disconnect order. Second, because the networks are seldom exclusive to only one distributor, there are competitive sources of the programs besides online. Plus, freelancing websites like YouTube routinely make the shows available online anyway.
And broadcast TV shows that populate networkowned sites like Hulu and TV.com are by definition available free over-the-air in the distributor's market. So, it is argued, it's no big deal to make TV series like "Lost" free over the Internet.
There is no consensus by program suppliers to go the authentication route, but there is an openness to discussing it. For it to work it has to be painless for the viewer; the technology is not there yet. Meanwhile the market will provide an answer of sorts: if cable subscribership does decline, programmers get paid less.
Still, despite the sermons of Internet evangelists, homeowners with big, flat-panel living room HD sets will remain TV, not computer screen, viewers, even if some in the household want a laptop option. That means that the existing distribution model has intrinsic value for both cable operators and programmers. But, given how the web has ensnared classified ads, the recording industry, and travel agents, the traditional distribution model will have to adjust to, not fight, emerging customer preferences for online and mobility.