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IN PERSPECTIVE: Half a loaf

Fri, 07/31/2009 - 8:30pm
Brian Santo, Editor

What’s the justification for charging separately for bits
that end up on a TV and bits that end up on a PC?

You could hardly get through a session at Cable Connection - Spring without someone bringing up cord cutting. Cable execs said they weren’t worried because: a) there isn’t much evidence of the phenomenon yet, and b) cable is selling the most popular broadband product.

Brian SantoThat seemed like whistling past the graveyard to me. My kids and their friends are watching more and more video online, and less and less on the TV. That behavior is already established among a generation of consumers now entering adulthood.

And yes, cable modem service is a good one. But broadband + video = $90 a month, and broadband alone is $45 a month, and $45 is less than $90.

While there is a lot of content online, most of it has always been freely available from broadcast networks, and much of the rest is long-tail stuff. That was never going to inspire a flood of video service cancellations.

Those unworried execs probably also knew that services like TV Everywhere were coming. The idea is to offer content from providers that never had any intention of giving away their content for free – anywhere.

Cable customers are already paying for access to that content with their video subscriptions, so why not offer it online, as well as on the tube? That’s the concept behind TV Everywhere, and it’s a savvy product inasmuch as it gives customers an incentive to continue to subscribe to both video and broadband – $90 is better than $45.

Meanwhile, Comcast’s deal with ESPN to give its data subs free access to ESPN360.com is a smart way to sweeten its broadband package. But Comcast is apparently eating whatever ESPN is charging. Will other premium Web sites similarly negotiate for payment? And when do the costs add up enough to pass along to subscribers? (And what about smaller competitors that can’t afford to eat the costs?)

And that just leaves another question begging.

With converged all-IP networks, what’s the justification for charging separately for bits that end up on a TV and bits that end up on a PC? Will consumers figure that out and start demanding a single monthly access fee? And here’s the key question: Will they allow themselves to be billed $90 a month or $45 a month?

brian.santo@advantagemedia.com

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