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Time Warner, Comcast Plan to Wall Off Online TV

Amid the rush to make programming available for free online, Time Warner and Comcast are fighting back. The companies on June 24 announced a new model that will require viewers to prove they are cable subscribers before they can stream hit shows online. The announcement puts both companies squarely into the fray of a growing debate over whether people should be forced to pay for content online instead of getting it for free. In outlining their plans at a press briefing, Time Warner ( (TWX)) and Comcast ( (CMCSA)) carefully framed the initiative as just another way to give consumers programming when and where they want it. "This marks the very logical next evolution of cable TV," Time Warner CEO said. "Consumers have spoken, no, more like yelled." What the executives didn't address is the direct threat to their business model because consumers can already get a lot of programming for free, on such sites as, owned by News Corp. ( (NWS)), NBC Universal, and Disney ( (DIS)). The concern for cable is that as more programming becomes available at no charge, consumers will drop pay-TV subscriptions. Such so-called cord-cutting is not occurring yet in big numbers; Time Warner and Comcast want to keep it that way. They hope other TV networks and service providers will join the effort. A big incentive: More than half of cable networks' revenue comes from the fees that service providers such as Time Warner and DirecTV ( (DTV)) pay. Nobody wants to jeopardize those dollars in tough negotiations with angry service providers upset that programming they pay for is also being given away by the channels for free. Trial Run, Then National Rollout Here's how the trial will work: Starting in July, 5,000 Comcast subscribers will be able to see shows online from Turner Broadcasting's TNT and TBS channels, like The Closer and Tyler Perry's Meet the Browns. But first, they each will have to demonstrate that they're a Comcast cable-TV subscriber through a screening called authentication. That most likely will entail a user name and password. Comcast will offer the shows on and, and Turner on and Technology so far is not allowing Turner to stream the shows concurrently when they run on TV but shows will be made available several hours after they air. Comcast CEO says he hopes to roll out what he is calling Comcast On Demand Online nationally by the end of the year. Bewkes and Roberts conceded their partnership is still very much an experiment and that advertising models still need to be worked out. Both companies are talking to ratings giant about coming up with ways to measure audiences for online video that are more consistent with TV measurements. As for TV networks that agree to sign on, their shows will be available exclusively on the cable service providers' sites or on the networks' own sites for a certain amount of time. In other words, you won't be able to see those shows on sites like Hulu, at least for a certain window of time. "It's a windowed approach to reward paying customers and to provide the advertisers with an opportunity to have their commercials viewed across multiple platforms," says Turner's Andy Heller, the executive in charge of an initiative that Bewkes has dubbed "TV Everywhere." The window time has not been worked out and that issue will certainly be at the center of negotiations between the cable providers and the networks. Potential Backlash Either way, the limitations are certain to tick off a vocal digerati, particularly those younger users that Time Warner and Comcast are trying most to reach with online video, particularly because of their appeal to advertisers. Just hours after the June 24 announcement, the ire was already surfacing. "Under the 'TV Everywhere' plan, no other program distributors would be able to emerge, and no consumers will be able to 'cut the cord' because they find what they want online," says Gigi Sohn, president and co-founder of public interest group Public Knowledge. "As a result, consumers will be the losers." Sohn called for the Federal Trade Commission, the Federal Communications Commission, and the Justice Dept. to investigate. The Comcast-Time Warner effort may be the highest-profile effort surrounding the paid-vs.-free debate, but certainly not the first. In increasing numbers, media companies are grappling with how to be compensated for online offerings. What they face is having to change a generational mindset that assumes everything on the Internet should be free. Despite a potential backlash, more and more media businesses are "waking up to the fact that free is bad," says Bernstein & Co. media analyst Michael Nathanson. "That wasn't the case about a year ago, before newspapers started folding." And media outfits may be emboldened by survey results from Bernstein that showed 50% of the 515 consumers it polled in March said they would be willing to be pay for video online—as much as a dollar for a TV show and $5 for a movie. That doesn't mean media executives are any less touchy these days, even amid metaphor-mixing reporters. When Bewkes was accused during the June 24 briefing of ignoring the white elephant in the room—that the media had already let the genie out of the bottle by offering its content for free, the Time Warner CEO snapped back: "There's no elephant. There's no genie."
Lowry is a senior writer for BusinessWeek in New York.

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