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Amazon, Netflix, Hulu, and more are at risk of seeing content cut off by secret backroom deals

It's a seeming golden age for streaming.  Many customers are turning to streaming services to get their fix of favorite TV shows without having to (necessarily) pay for expensive DVRs, or remember to record programming.  Streamed episodes are available from Hulu,, Inc. (AMZN), and Netflix, Inc. (NFLX) -- among other services.  Other tech giants such as Apple, Inc. (AAPL), Intel Corp. (INTC), and Google Inc. (GOOG) are waiting hungrily in the ranks with new set top boxes and service plans of their own.  

I. Cable Companies Want a "Fair Shake" at Streaming

A Feb. 2012 report suggested 100 million Americans (nearly 1 in 3 Americans) watch streaming video, and it suggests cable should be worried.  Well apparently they are, and they're taking serious action looking to snatch up rights that could allow them to both unleash streaming services of their own, or block new market entrants.

The LA Times is citing anonymous comments from "several industry executives" as revealing that DirecTV (DTV), Time Warner Cable Inc. (TWC), and Charter Communications, Inc. (CHTR) are putting in bids to win "over-the-top" rights from multichannel video program suppliers.  Those involve are reportedly billing the effort as a "defensive" move, despite their being no current plans to deploy streaming services (versus traditional cable box services).

So what's the true motive?  The report instead suggests that cable companies may try to sneak clauses into their programming contracts to install financial barriers to licensing to new streaming services (such as Intel's proposed service).

The bids could also be contingent on programmers dropping their streaming partnerships with other services like Netflix -- although that seems unlikely.

fiber optics
Cable companies are reportedly looking to cut off Netflix. [Image Source: AP]

Some fear that big cable may use these OTT purchases to try to dam the stream, so to speak.  They argue that big cable's interest seems focused on depriving their internet-age rivals -- and customers -- from streaming content, and in the process forcing customers to continue pricey cable subscriptions.

This is not the first such assault on streaming.  Content providers famously "banned" set-top boxes and SmartTVs, such as Google TV from accessing their online content after cable companies pressured them to stop directly providing content.  Many networks have cut the number of episodes available on their websites to be streamed to users' PCs.

Verizon expensive
Big cable argues that it loses a lot of money to streaming. [Image Source: Flickr/Exif]

A DirecTV spokesperson insisted their company's goal was not to drive out the competition, stating, "Our programming deals are confidential so we can't specifically comment, but our one objective in these deals is not to restrict access but to ensure we get equal or better treatment with both existing and new competitors."

Some industry sources say that the content providers won't part so easily with OTT rights.  Comments one source, "Most of the major programmers don't agree to it."

II. Government Report Warns of Multiple Anti-Streaming Tactics

But a recent report by the Government Accountability Office (GAO) suggests that programming providers may have good reasons to try to minimize the amount of content they license to streaming service providers, when most of their revenue comes from traditional cable ("multi-channel... distributors").  The report states, "While content providers are interested in providing some content to online video distributors (OVD), their incentive to do so is somewhat constrained by the potential effect on subscriptions to traditional multichannel video program distributors."

The GAO report also indicates that cable companies may exert their control over the internet to try to block streaming, by charging customers extra fees on streamed content.  The GAO comments, "MVPDs may have an incentive to charge for bandwidth in such a way in such a way as to raise the costs to consumers for using OVD service."

Netflix control
Cable companies have multiple tactics to try to combat streaming. [Image Source: UNL]

Currently, such actions would violate the U.S. Federal Communications Commission's net neutrality policies and could result in fines, under laws passed by Congress.  Several such investigations are currently open.  But Republicans in Congress are pushing hard to remove that net neutrality roadblock, allowing companies like Time Warner or Comcast, Inc. (CMCSA) to freely charge you extra fees for using bandwidth to stream Netflix or throttle your connection to prevent streaming.

If a "doomsday" scenario of mass exclusive ownership of OTT rights by cable providers did occur, it would dramatically cut subscriptions to Netflix and other services; it would also damage set-top box makers like TiVo Inc. (TIVO) whose value is partially based on the ability to easily access a compiled collection of streaming services.  However, customers could hope in such a scenario that cable companies might opt to eventually offer their own additional subscription streaming services, competing against each other.

But for all the challenges, some fresh faces in the streaming world are charging on.  Intel has reportedly turned heads with some very high bids for content and may soon be able to roll out its service.  One executive said it was just a matter of time before many of Intel's proposals went through, while another comments, "They are very aggressive."

Intel sign
Intel's bid for a streaming success is reportedly nearing fruition. [Image Source: etechmag]

So for now it looks like cable will have to keep dreaming and scheming when it comes to stifle streaming.

Sources: GAO, LA Times

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RE: Typical Cable...
By FITCamaro on 7/8/2013 2:56:30 PM , Rating: -1
You'd do the same thing if you were in business and that business was threatened.

RE: Typical Cable...
By BRB29 on 7/8/2013 3:06:15 PM , Rating: 5
You'd do the same thing if you were in business and that business was threatened.

True but we're not so we can talk all the smack we want.

RE: Typical Cable...
By Mitch101 on 7/8/13, Rating: 0
RE: Typical Cable...
By Adonlude on 7/12/2013 4:20:33 PM , Rating: 3
People will eventually just switch their cable company to The Pirate Bay Cable Network.

RE: Typical Cable...
By Flunk on 7/8/2013 3:11:42 PM , Rating: 5
No, a lot of people wouldn't. The first cable company to launch a real, competitive VOD system that adequately replaces time-slotted TV would be unbelievably profitable. They could sell access to the service AND make money off bandwidth charges (set to a reasonable level).

There is absolutely no reason for cable companies to try to keep the status quo and as soon as one of them realizes that the industry is going to change very quickly. This is big opportunity for the cable companies and they're squandering it. Intel (or someone else) is going to jump in and steal away their lunch if they're not careful. Big cable could be the next Blockbuster Video.

RE: Typical Cable...
By Etsp on 7/8/2013 3:32:18 PM , Rating: 4
Sadly, it's the big media conglomerates that prevent this. They only offer their channels to cable companies in bundles, and so cable companies are forced to pass these unwanted channels to the consumer.

Not saying that the cable companies aren't anti-competitive as well, and using their monopolies to pull shenanigans that the consumer wouldn't accept if they had a choice... that whole industry is screwed up beyond belief.

RE: Typical Cable...
By rudolphna on 7/8/2013 8:10:42 PM , Rating: 1
Yes. The broadcasters and media companies are the primary reason that a la carte does not exist. You think cable company rate increases are bad? You don't even want to know the extortion that goes on behind the scenes. Media conglomerates pretty much blackmail the cable company demanding outrageous rate increases usually around 300% higher than the year before. And then there is "negotiations" and then they decide that they want to shut off the service. And then the company ends up having to cave and accept higher rates. And then people bitch that their cable price went up. Guess what, what the company pays to provide that service increases a hell of a lot more percentage-wise than the bill does.

RE: Typical Cable...
By karimtemple on 7/9/2013 8:21:10 AM , Rating: 2
This doesn't seem like a viable defense, considering the context of this article. If "Big Media" was beating up cable, why wouldn't they beat up streaming?

A more likely scenario appears to be this: The Internet is breaking old business models in half, and cable is next. Hilariously though, cable seems to be able to fight back a lot harder than some other industries could.

RE: Typical Cable...
By BRB29 on 7/9/2013 8:54:53 AM , Rating: 2
Sadly, it's the big media conglomerates that prevent this. They only offer their channels to cable companies in bundles, and so cable companies are forced to pass these unwanted channels to the consumer.

It seems that way doesn't it? I wish it was that simple.

RE: Typical Cable...
By ipay on 7/8/2013 3:33:12 PM , Rating: 2
No. The only thing you can claim with any certainty is that's what *you* would do.

RE: Typical Cable...
By SAN-Man on 7/8/2013 3:45:10 PM , Rating: 2
No, I wouldn't.

I would try to innovate to keep my customers, rather than strong arm them.

RE: Typical Cable...
By bodar on 7/8/2013 5:59:33 PM , Rating: 1
Aaaannd that's why none of us are running Fortune 500 companies: we're not soulless, unethical meatbags. ;)

RE: Typical Cable...
By SAN-Man on 7/8/2013 6:39:03 PM , Rating: 2
Some are bad, but not all.

I work for a Fortune 100 which takes care of its customers. :)

RE: Typical Cable...
By danjw1 on 7/8/2013 6:33:53 PM , Rating: 2
Yes, but they are opening themselves up for a lawsuit for anti-competitive practices. You may not feel that consumer should be protected when companies try to quash competition, but not everyone agrees. This is no different that Apple and Microsoft working together to try to attack Android. It hurts consumers and needs to be stopped.

RE: Typical Cable...
By tayb on 7/8/2013 8:10:04 PM , Rating: 2
No I wouldn't because I'm not a greedy scumbag. If I felt Netflix was a threat I would introduce a competitive offering and beat Netflix. What is being discussed here is illegal and just another attempt by big cable to monopolize consumer choice and force citizens into overpriced cable packages or watch nothing at all.

As usual, this will back fire. If they succeed at defeating streaming with illegal anti-consumer monopolistic practices the market will simply adjust and pirating will increase exponentially. Eventually these greedy morons will learn but it will likely be at the bankruptcy hearing.

RE: Typical Cable...
By rudolphna on 7/8/2013 8:11:42 PM , Rating: 2
I'm sure you'd love that. All 50,000+ employees for each company kicked to the curb, and suddenly you have no more internet access except for the phone company DSL or satellite. Have fun! :D

RE: Typical Cable...
By tayb on 7/8/2013 8:45:19 PM , Rating: 3
If Comcast disappears someone else will take its place. People want internet. Google Fiber anyone?

RE: Typical Cable...
By ven1ger on 7/9/2013 5:18:55 PM , Rating: 2
That's an idiotic statement. So we protect the thousands of jobs of companies that are scamming millions of customers, instead of protecting the millions of customers that are being swindled by anti-competitive crap like this.

RE: Typical Cable...
By PerrinAybara162 on 7/10/2013 6:01:25 PM , Rating: 2
I'm sure you'd love that. All 50,000+ employees for each company kicked to the curb, and suddenly you have no more internet access except for the phone company DSL or satellite. Have fun! :D

1. Some other company would swoop in and scoop up the business before they went bottom up and everyone lost their jobs. I seriously doubt that any competitor would let that opportunity pass. Then the situation would even out and the example would be set.

2. "Too Big To Fail" is an idiotic concept. Why should a company be exempt from failing just because they have a certain number of employees? Markets change, people gain new skill sets and move on.

3. The concept that we dont want to hurt those 50,000 people is a pretty convenient excuse for not wanting to ensure that laws are followed and millions of consumers are protected.

"We don't know how to make a $500 computer that's not a piece of junk." -- Apple CEO Steve Jobs

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