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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, LLCAmazon.com, 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: I largely blame
By Flunk on 7/8/2013 3:13:26 PM , Rating: 2
They need two tiers, one with and one without commercials. Some people would be willing to pay $50 a month for no commercials. It's not hard at all to work out on the technology side.


RE: I largely blame
By Jaybus on 7/8/2013 5:09:04 PM , Rating: 2
Of course, but the providers are in bed with the cable companies. CBS, FX, ESPN, etc. will not release first runs on NetFlix or Hulu. They each make in excess of $3 billion per year selling ads. If everything went to steaming only, who would watch ads? The more shows are streamed and the more people use DVRs, the less valuable an ad is to a company wishing to advertise.

It seems simple, but at the end of the day the providers make most of their money from ads and are perfectly content to make exclusive streaming deals with cable companies because stifling streaming helps keep their ad pricing high. They are not willing to increase their streaming rights income only to have their ad income decimated.


RE: I largely blame
By tecknurd on 7/9/2013 3:52:54 AM , Rating: 2
quote:
Of course, but the providers are in bed with the cable companies. CBS, FX, ESPN, etc. will not release first runs on NetFlix or Hulu.

No. CBS, FX, ESPN, and others gets paid by product manufactures that made the ads. Cable providers have contracts with all the stations. Every stations has their own say on the pricing and where to be position in the channel line up.

quote:
If everything went to steaming only, who would watch ads? The more shows are streamed and the more people use DVRs, the less valuable an ad is to a company wishing to advertise.

The only companies that gets punished by people that do streaming are the stations. Cable providers has their own streaming service, but it has limitations that few people use it. I do not use it because can not pause, rewind, fast forward, so it is not any different than being a slave of the schedule. People that use DVR still have ads recorded, so a DVR does not hurt anybody. Streaming only hurts cable providers because they implemented their own on-demand service which streaming is basically on-demand service. Streaming services like Netflix and Hulu implemented a better on-demand service because can be paused, fast forward, and rewind.

quote:
It seems simple, but at the end of the day the providers make most of their money from ads and are perfectly content to make exclusive streaming deals with cable companies because stifling streaming helps keep their ad pricing high. They are not willing to increase their streaming rights income only to have their ad income decimated.

Cable providers makes money from customers that include add-ons and set top boxes. Also some cable providers has extra service of showing ads from local companies that prefer to be demographic.

The only thing I can imagine why cable providers are making streaming a big problem for them is they hate maintaining the equipment and paying for huge amount of data.


"Google fired a shot heard 'round the world, and now a second American company has answered the call to defend the rights of the Chinese people." -- Rep. Christopher H. Smith (R-N.J.)














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