Getting nowhere on TV Everywhere

The Media Wonk is en route to Las Vegas for the Consumer Electronics Show as this is being written, where I expect to be inundated with all things 3D. Between taking off from Washington, DC and a stopover in Minneapolis, however (there’s a reason Delta Airlines went bankrupt awhile back, by the way), my BlackBerry was bombarded with “urgent” communiqués from all sides of what looks to be shaping up as a nasty policy fight over TV Everywhere.

The hoo-hah appears to have started with an item in the Washington Post Monday about calls on federal antitrust regulators by various public interest groups spearheaded by Free Press to begin immediately to investigate TV Everywhere. The calls were ostensibly prompted by a “study” paid for by Free Press, which purportedly discovered that TV Everywhere is actually a plot by “giant cable, satellite and phone companies,” along with Time Warner, to “eliminate the threat of online competition,” so they can continue to gouge consumers.

“This is a textbook antitrust violation,” thundered University of Nebraska law professor Marvin Ammori, the study’s author. “The old media giants are working together to kill off innovative online competitors and carve up the market for themselves…The antitrust authorities should not stand by and let the cable cartel crush Internet TV before it gets off the ground.”

That prompted a pair of cutting ripostes from industry-backed Arts + Labs, including, somewhat incongruously, a blog post by Rick Carnes, head of the Songwriters Guild of America, which on first blush would not appear to have a dog in this particular fight.

And yet:

To date, lack of access to some premium content has routinely been cited as an excuse for the fact that the vast amount of music and movie content is illegally downloaded using P2P services. With the advent of new and exciting services like Hulu, Vevo, and now, TV Everywhere, the chance to view and listen to the very best content legally is here. No more excuses.

That is why the protests by Free Press and others against TV Everywhere are so confounding to a Songwriter like myself. These groups allege “collusion” to “keep video content behind a subscription-based pay wall.”

That ‘Pay-Wall’ always seems to be the problem for these groups. They want it all, they want it now, and they want it for free. But I’ve never written a free song. Every one cost me something: a couple of years without being able to heat my house; a future hanging by a guitar string; no health insurance; no pension; writer’s block; and the occasional broken heart. I always kept coming back for more because I knew that if I put the right words and music together then I could get paid enough to make it all worthwhile.

Where to begin? To professor Ammori’s point, given that no one I’ve talked to in the industry seems to agree on what, ultimately, TV Everywhere will consist of, or even whether it will consist of only one thing, it’s hard to see at this point how it’s a textbook case of anything. Nor has any giant cable, satellite or phone company, to date launched anything worth competing against. What, exactly, should antitrust authorities investigate? Comcast’s Fancast Xfinity? I couldn’t even get the player to install, and the content available is paltry.

Yes, I know. The cable industry has a long and distinguished history of gouging consumers with monopoly pricing and fiercely resisting competition, so suspicion of cable operators’ motives is always warranted. But notwithstanding the question of whether you can pin an antitrust charge on companies merely for thinking evil thoughts, the premise underlying the purported conspiracy in this case is questionable.

The danger, as I understand it, is that by limiting online access to premium content to those maintaining a current subscription with a cable or satellite provider, would-be over-the-top (i.e. online only) distributors would be unable to compete with the online services operated by cable and satellite providers. If that were to happen, and especially if there were an agreement among programmers and cable operators to deny access to the content to online-only distributors, it might well stifle competition. But is it likely to happen?

To answer that, you first need to ask why most pay-TV content is not available online today. The answer is obvious. It’s not in the programmers’ interest to make it available, despite manifest consumer interest in viewing TV content online. Pay-TV networks get roughly half their revenue from per-subscriber affiliate fees paid by cable and satellite operators. Were they to make the same content freely available online it would undercut its value to cable operators and affiliate fees would eventual be undercut. At a time when advertising revenue is stagnant at best, few programmers are willing to risk undercutting their affiliate fees.

The idea of making the content available but limiting access to subscribers is obviously an effort to square that circle, to meet as much of the consumer demand as possible without undercutting the value of affiliate fees. While it may be true that such an arrangement would prevent a distributor that is not also paying affiliate fees from competing, where is the incentive for the programmer to give such a distributor access to the content in the first place? How would prohibiting a TV Everywhere-like arrangement between a fee-paying distributor and a content owner change the underlying incentives? It still wouldn’t make sense for the programmer to make the content available online.

The obvious answer to that objection, of course, is that programmers should make the content available to any would-be distributor willing to pay a fair price to carry it, including over-the-top, online-only distributors. Fair enough, but if such online-only distributors existed and were offering to pay money to license the content, why assume content owners wouldn’t listen to them? Why wouldn’t any content owner want the maximum possible number of distributors competing to license its programming? What incentive would a programmer have in such a competitive scenario to exclude any potential competitor by dealing exclusively with another?

Some pay-TV programmers, in fact, are clearly already thinking along those lines. Disney, which owns ESPN, one of the most valuable cable networks in the industry, has been notably cool toward TV Everywhere. Rather than throw in its lot with cable operators, Disney chairman Bob Iger has made it clear he intends to keep his online options open.

Which brings us to the other problem with Free Press’s theory of the case: As I discuss at greater length in a report on TV Everywhere for GigaOm Pro (appropriately enough for this discussion it’s behind a pay wall), the interests of programmers and cable/satellite operators with respect to online distribution are not aligned. So why assume they would collude?

To programmers, TV Everywhere looks like nothing so much as a golden opportunity to squeeze higher affiliate fees from cable operators. While Comcast and other operators may argue that their current carriage agreements give them all the rights they need to distribute premium content on digital platforms, that certainly isn’t going to be the case once those agreements come up for renewal. Programmers will naturally demand higher fees for broader rights.

That might be OK with cable operators if they could pass the higher fees onto their subscribers. But if the point of TV Everywhere is to discourage cord-cutting, hiking subscriber fees would seem a counterintuitive approach.

By far the most likely outcome is that “TV Everywhere” is going to end up being a hodge-podge of discreet deals, involving different rights to different programs among different distributors. While the motives of all the parties may indeed be impure, I don’t know how you hang a conspiracy on a hodge-podge.

As for Carnes’ argument, I’m still not sure what point he thinks he’s making. Songwriting is hard? The pay sucks? Piracy sucks? Free Press sucks?

All may be true, but what do they have to do with TV Everywhere?

I have other problems with Carnes’ argument, not least his apparent assumption that the world owes artists a living more or less on the same terms as they’ve earned it during a discreet 100 or so year period from the invention of mechanical recording to today. But that will have to wait for another day.