The Web video showdown: Content providers, cable companies and the users stuck in the middle

The Web video showdown: Content providers, cable companies and the users stuck in the middle

Summary: There's a looming showdown over Web video as content providers wrestle with the future as the television business model that has paid the bills for years becomes strained. In the last day or so, Hulu has been on a tear as it rips down its content from other sites (Techmeme).

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There's a looming showdown over Web video as content providers wrestle with the future as the television business model that has paid the bills for years becomes strained. 

In the last day or so, Hulu has been on a tear as it rips down its content from other sites (Techmeme). First up, Hulu pulled content from TV.com, which is run by CBS Interactive, the parent of ZDNet. I wrote off the skirmish between TV.com and Hulu as big media theatrics--these massive media companies are always pulling content down to prove some point. But then there was Hulu's move to rip its video down from Boxee. 

For starters, Hulu has every right to make such a move. Hulu--a joint venture between NBC and Fox--didn't have a formal relationship with Boxee. In an explanatory blog post, Hulu chief Jason Kilar spoke like a man caught in between two behemoths he can't control. 

Later this week, Hulu's content will no longer be available through Boxee. While we never had a formal relationship with Boxee, we are under no illusions about the likely Boxee user response from this move. This has weighed heavily on the Hulu team, and we know it will weigh even more so on Boxee users.

Our content providers requested that we turn off access to our content via the Boxee product, and we are respecting their wishes. While we stubbornly believe in this brave new world of media convergence — bumps and all — we are also steadfast in our belief that the best way to achieve our ambitious, never-ending mission of making media easier for users is to work hand in hand with content owners. Without their content, none of what Hulu does would be possible, including providing you content via Hulu.com and our many distribution partner websites.

The big question here is this: Why was the request made now? Peter Kafka asks if the cable companies were behind Hulu's put-the-Web-video-back-in-the-bottle attempt. 

Jason O'Grady: Hulu’s fantastic suicide

The answer: You bet. 

Here's the deal: Cable companies pay content providers like Viacom and Disney big money to carry channels. When the economy was better cable companies weren't going to sweat Web video experiments. It's a different story today. Here's what cable companies are facing:

The Wall Street Journal a few days ago chronicled how consumers are saving by ditching the cable service (they're keeping the broadband service though). And Comcast's fourth quarter results tell the tale. The cable giant actually saw a net subscriber decline. A lot of the cable problems are tied to the housing market--when you can't afford to pay the mortgage chances are you're not paying the cable bill either. Meanwhile, housing inventories are bloated and that also means a bunch of empty homes without cable service and customers that certainly won't upgrade service. Here's a look at Comcast's customer metrics:

Comcast CFO Mike Angelakis acknowledged the troubles on the company's earnings conference call:

The weak economy is impacting the consumer particularly on housing growth, vacancies and moves, providing us with fewer opportunities to sell new services.

Comcast operating chief Steve Burke expanded on that theme:

This earnings season everybody seems to be talking about the economy for obvious reasons. Instead of talking about the economy, what I’d like to do is be a bit more specific and talk about our marketplace. Our marketplace is affected by the economy and also by the ebb and flow of competition. In talking about our marketplace I’d like to highlight what we’re seeing, what we’re not seeing and also importantly what we’re doing about it.

In terms of what we’re seeing, first of all there’s more competition from the telephone companies, 10% of our footprint a year ago was over built, and today that number is more like 22%. Secondly, we’re seeing more price sensitivity particularly since the month of October. Third, its simply harder to make the phone ring with marketing and sales, customers appear to be defensive, they’re less likely to go out and subscribe or call up for upgrades or new services.

Hence our connects, the people coming into our business our connects are lower then we had planned. Finally, we’re seeing a very difficult ad sales environment that is currently showing no signs of improvement. Those are some of the things we’re seeing.

Burke then went on to list a few positives and noted Comcast can weather the storm--and it can.

But put yourself in the shoes of Mr. Cable mogul. You're paying carriage fees to content companies that try to squeeze you for more money almost every year. Meanwhile, these content companies are showing video on the Web and kinda sorta monetizing it. Consumers are beginning to use Web video as a cable replacement. It's only natural that cable companies would apply some pressure on content owners, which have to cave because Web video experiments aren't paying the bills. 

In the context of dollars, the Hulu moves are perfectly logical. The rub: The Web video genie is out of the bottle and isn't going back in. But in a rough economy there will be many more video skirmishes in the day ahead and users will be stuck in the crossfire. The television business model is complicated and has been under attack for years. The recession--or perhaps more accurately the decession--will push the content-cable-Web tug of war to the forefront.

Topics: Mobility, Hardware, Networking, Telcos

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20 comments
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  • Bye Bye Cable

    I seem to be in this boat. Paying $500 a year for basic cable which I was barely watching. Decided to go to HD Antenna and get 8 channels for the price of an antenna. Right now, the cable company seems to be avoiding my requests for a disconnect. 4 hours on hold with their support line before I hung up and sent an cancellation email. Polite email back, saying to use the support line. Sent a snail mail instead. 1 month and still waiting for a disconnect. Funny - you can buy their services over the internet but can't disconnect over the internet.
    kurio99
  • No sympathy for Comcast

    I view the entire battle with great personal satisfaction. Comcast has been draconian, indifferent, monopolistic, gouging - you fill in your preferred pejorative. After reading your article, I am switching to AT&T partly due to price competition (it costs slightly less for the services I prefer) and partly due to the feeling that perhaps if I throw my weight behind the telcos, I can do a tiny bit to improve the overall marketplace.

    I'm old enough to remember that one paid for cable in order to avoid commercials and access other programs. Now, I feel like I pay for access to commercials, which grates when I realize that I can find other, uninterrupted programming elsewhere, be equally entertained, and retain a couple thousand dollars a year in cash.

    You said it best: the Web video genie is out of the bottle. Watching Comcast bleed is well worth the discomfort during the transition to better services.
    noogrub@...
    • RE: No Sympathy for Comcast

      I too remember the time of paid TV with no commercials. Now cable is loaded with sponsored based programming of not much value.
      I'm close to putting back up the antenna and use my money on entertainment when I want it. Our area is still waiting for competition for TV service and I have experienced the download slowdown with Comcast.
      gonecornin@...
  • RE: bring the cost of cable DOWN

    Bring The cost down on cable. !!
    Me,, I don,t see way It Is so High anyway. :-(
    I do like It for Internet, and tv..But, It Is
    a little high price to pay for TV. Now that
    The free Tv has HD, Channels..

    I hope that will bring the cost of cable tv down.. If you have a older vcr, like I do,
    1 cable line In tv, and, 1 cable In the vcr..
    and, your ready to watch, and, record..you
    don't have to leave the vcr set on ch, 3 or 4.
    It will record any channel up to 90 I think..
    dennis_44149
  • I will enjoy watching them die ...

    They have abused consumers so regularly over the years we've come to accept it like broken slaves. They have fought new technology and innovation that would benefit both consumers and providers, all in the name of protecting their outdated business models and profits. And they have shamelessly engaged in anti-competitive and monopolistic tactics that would make Rockefeller, Gould, or Morgan blush (the old American Robber Barons, to the uninitiated).
    terry flores
    • Watching them die

      Hear!hear!
      Lets not forget Time-Warner even worse than comcast with their arrogant monopolistic insanely overpriced screw-the-customer attitude and actions. Yet they still raise prices with no justification every year--$70.00 a month for basic cable? Hurry up with the fios verizon.............
      thirstywhale
  • Arrrgh

    Just 2 days ago I set up my Apple TV (bought the AppleTV and HD Tivo
    about 6 months before I could afford the HD TV - 1 piece at a time :P )
    and hacked it with Boxee mainly for Hulu.

    Oh well, back to bittorrent (yes, I'm that lazy that I will download a show
    via BT when if it's on my tivo and the remote is out of reach).
    Gritztastic
  • Time to move away from old, protectionist, stale business models

    Instead of these stagnant cable companies
    fighting to maintain the status quo and
    vicariously screw the end users (us), why are
    they not innovating? They can provide cable and
    internet on the same interface (1 price for
    all) or a la carte where users can choose only
    the channels they want. I'm sure they are
    thinking 'why innovate when we can squeeze more
    money from users and maintain our monopoly.'
    Absolutely disgusting. Looks like it's getting
    to be the time to start some boycotting.
    cliff101
    • boycott

      I'm all for boycotting cable, But I don't think it will work.
      A while ago comcast raised rates around here and many people either couldn't afford it, or simply decided they didn't need it at that price. Instead of sensibly recalculating and reducing fees to win back the customers, they went on a 'cable piracy' kick.

      I seldom watch television, but for the longest time in order to get cable internet I -had- to get cable TV with it. (not sure if that's changed, haven't checked, DSL works just as well for about 1/3rd the cost. I may not have the maximum speed of cable while using DSL. But reliability is much higher. I haven't had a single outage in the year plus since I've switched. With comcast I could -COUNT- on two extended outages a year, around the 2nd week of February I'd have an outage that would last up to 10 days, and towards the middle of june I'd have another of 2-5 days. Would also have a temporary outage lasting 2-3 hours or more at least once a month, often 2 or three times a month.

      Cable is there to make money, anything that threatens that money making will be blamed on theft and result in higher rates to cover that theft.


      Ken.
      merc2dogs`
    • Boycott, of a sort...

      I've already boycotted cable, in a way. A few months ago I went with the Verizon package - already had DSL & phone, added DirecTV, paying $95/month (+ taxes, of course) for all 3, saving about $65/month over having cable. Of course, I lost the Phillies about every nite, but that's the price I'm willing to pay...
      rmazzeo
  • Cable shot themselves in the foot by raising prices

    Prices should be going down. Lower prices, and their
    connects will go up.
    Hameiri
    • Cable Prices to HIGH

      You have a real good point there. !!!
      If they only will !!

      prices go down, connects will go
      up... the cable CAN'T DO THE MATH.!!

      dennis_44149
  • Comcast will get what they deserve from the market

    Even if there are only two choices - the end users will not forget getting screwed and will either do without or choose the other provider.

    At the end of the day, the market will reward the business model that makes sense to the CONSUMER.

    ATT has improved their customer service a good deal in my experience as a DSL user from day one with Pacific Bell-SBC-Cingular and now back to ATT.

    At least now their techs know how to install and configure their DSL service and I now have 6 MBPS service for $29.95 per month.

    Just buy a Magic Jack for your own simple cheap VOIP over your DSL. I would never buy Comcast phone service based upon their record.
    acad2kman
  • The economy throttled their consumer bandwidth

    To hell with them.

    Charter declared bankruptcy last week. Who's next?
    snafu_77
  • RE: The Web video showdown: Content providers, cable companies and the users stuck in the middle

    Cable REAPS what it has SOWN - There is justice in the end
    d_habot@...
  • RE: The Web video showdown: Content providers, cable companies and the users stuck in the middle

    Here we are either stuck with Cox or Sprint (Embarqe) Dsl. While Cox is high Embarqe service is very bad as one never knows exactly what speed one will have doing anything. I just received notice tha Cox is going to limit speeds when one downloads and that means anything downloaded (program updates) and give priority to things like IM's, and people surfing the internet. Duh, is something wrong here. When is a instant message more important than updating your system specially security updates? Plus they nickle and dime you every month with the small increases that they seem to think people do not notice.

    As much as I detest government I feel the cable business has to be regulated to cut down on the monopolist ways of cable companies. I mean if one is watching a on line movie they actually slow down the streaming by knocking down your bandwidth to a crawl at speed the same as dial up.

    I actually have a letter from Cox telling me my 1gig ethernet connection card is illegal and it is what comes with this Intel board. I already replied telling them to sue me and lets see who wins in court.

    Cable is very afraid media is moving to the internet and they are going to lose out with their cable tv. My question is why are they not adapting to this? Why? How about greed!
    PeterPac
  • RE: The Web video showdown: Content providers, cable companies and the user

    and what behaviour is growing more than any other
    activity on the Internet - download, up 141% last year.
    Why? Because we are starting to see the end of advertising
    as we know it. Many people, not the majority yet, would
    prefer to avoid ads then get free and, as others pointed
    out, the cost of free ad supporting content keeps going
    up. Over $90/month for free TV on somebody else's terms
    with ads. That is 540 episodes of TV programs on paid
    download terms - or 45 seasons of your favourite
    program. I only have time to watch 15-20 of these. I can
    see the way to save money and give me control, so can
    others.
    Akumal
  • RE: The Web video showdown: Content providers, cable companies and the users stuck in the middle

    Cable has been a monopoly for too long. While there is quasi-regulation, the cable companies get away with MURDER.
    I think they should all burn.
    bob@...
  • Comcast cuts their own throat

    by screwing their customers with bad service. American companies are learning that even "Stupid, Rich Americans" have a limit to the crap they will continue to pay for (and pay for ...). Maybe the economy crashing has been a good thing - think about where resources are going and what ultimately is important.
    silversidhe
  • Web video = Internet fundraisers for new content

    Yes kill off the old networks and studios.

    Substitute direct Internet appeals to the public for traditional funding video. Let us judge what gets produced and audition who stars and who directs. Let us reduce the salaries and artistic influence of producers and focus them on being professional enablers for their assigned projects (permits, permits, mundane union workers, etc).

    Let us set up slush funds for given stars and story genres -- but let us rank and veto the proposals sent to each slush fund.
    Musicians just fall back to the pre-1950s model and earn modest livings by personal appearances and memorbilia. Stop funding their posses and endless drug binges and they might do more quality work.

    wellduh