Web Video Brings Opportunities for Many Industries, Disintermediation Risks

The surge in types of video available online and in the sheer amount of it offer opportunities for broadcasters, cable operators, DBS providers and newer Internet and other new-media companies, executives from those industries said on a panel Friday. Executives from Disney and the NCTA said they see such trends as adding to the total amount of time consumers spend viewing video, not subtracting from it. “We view it as an opportunity for established media companies,” and Google TV represents one such product, said an executive of that company. An underlying concern expressed by some at the event organized by the Media Access Project is that “disintermediation” of content bundling could threaten the business models that pay for high-quality content.

Cord cutting, in which pay-TV subscribers cancel service, is one possibility as more consumers turn to the Internet for content, some panelists said. Dish Network “recognizes that the penetration rate” for subscription-video “probably has plateaued,” said lawyer David Goodfriend of Weiner Brodsky, who used to work at that company and still is affiliated with it. The Web video market means “either you change or you're dead,” he added. “Consumers view video as a single entity” no matter how they receive it, “so the mode of entry is secondary, at best” in importance to customers, Goodfriend said. Dish’s partnership with Google TV is partly a recognition that people don’t really care “how much is coming over a broadband connection, how much is coming over satellite,” he said.

Established media companies like Disney should understand that Google TV, in providing TV searchability for video available online and elsewhere, isn’t “doing anything else besides … making available what’s [already] on the Web available on your TV set,” said Senior Policy Counsel Johanna Shelton. Among “undeniable trends” is that “the quantity and sources of creativity” for content are expanding, with Nokia predicting that by 2012 a quarter of the world’s entertainment will be user-generated, she said: “We're going from passive to active” and “I think the vast wasteland is going to get vaster” as more content is available online and Google’s search product indexes more of it.

"A lot of the [online] viewing is complementary” to TV programming and “is actually expanding the pie” of video that’s watched, said Vice President Susan Fox of Disney. “We do have a while before we figure out which business models stick” and online viewing hasn’t been sapping time spent watching traditional TV, she added. Fox agreed with other panelists and with moderator Associate Director Matt Wood of the Media Access Project that News Corp.’s brief blocking of Fox broadcast network video on fox.com and hulu.com from Cablevision broadband subscribers during a retransmission consent dispute isn’t a net neutrality issue. “What Fox teaches us is that Hulu is a bona fide distribution platform,” Goodfriend said.

"I don’t view what happened from a net neutrality view,” NCTA President Kyle McSlarrow said.

Though “I'd be lying if I didn’t say there was a certain delicious irony as an ISP representative,” it’s not just broadband providers like cable companies that can make choices about blocking content, he said. In online video, “the enormous innovation that’s taking place isn’t a threat, it’s an opportunity,” he said, pointing to Comcast introducing last week an application for Apple’s iPad.

"I think the evidence is murky” on whether “cord cutting is a phenomenon” since as the cable industry has lost basic-video subscribers it’s added broadband and phone customers, McSlarrow said. “So what is happening is the mix of services is changing, and we think broadband is going to be our future. We don’t just see ourselves as video companies.” Bundling still “works well for consumers,” because most of them “want someone to aggregate content,” McSlarrow said during a Q-and-A. Disintermediation should be embraced, Goodfriend said. “What’s the right policy to adopt to allow this pro-consumer trend to continue?”