Light Reading
MSOs still don't think over-the-top video's about to devour their video business model, but they're clearly bracing for that threat

Cable Downplays 'Cord-Cutting' Threat

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
7/23/2009
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Hey, Chicken Little, take a pill already. The sky on cable's video business is not falling in the midst of a growing market for over-the-top, Web-sourced quality movies and television shows.

At least that's a generalization on how execs at Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Cox Communications Inc. view the world today, even as the concept of "cord-cutting" -- a trend that refers to a growing, but small number, of consumers that are forgoing their traditional multichannel video subscriptions in favor of using broadband to fulfill all of their video needs -- starts to make some ripples.

Cord-cutting just simply isn't happening in a big way, MSO execs insisted today at a Cable & Telecommunications Association for Marketing (CTAM) "teleseminar" on multi-screen video migration strategies

"We at Comcast have not seen any cord-cutting today," said Amy Banse, the president of Comcast Interactive Media (CIM Labs) , the unit behind Comcast's Fancast.com Internet video hub and OnDemand Online initiative. "It's not a true phenomenon yet."

"It's a margin of error," added Cox SVP of strategy and product management Dallas Clement. "There's no discernible number of people doing that."

Online video may not be eating cable's lunch yet, but video streaming usage continues to grow and remains skewed toward youngsters who will be cable's customers of the future. Recent CTAM study data shows that 40 percent of broadband users in the 18-year-plus category are heavy users, accounting for 80 percent of the video-streaming minutes per month. That group streams about 350 minutes per month of online video, followed by mid-range users (64 minutes) and light users (36 minutes).

Even if cable appears to be downplaying the threat of Web video, MSOs are at least preparing for it.

Comcast, for example, is getting ready to kick off a tech trial for OnDemand Online, a WebTV service that "authenticates" video subs to access more shows via the Internet and is offered as part of their traditional subscription TV package. The initial trial will involve about 5,000 customers, and Comcast began testing it during the past week, Banse said. Comcast is offering it in tandem with Time Warner Inc. (NYSE: TWX)'s "TV Everywhere" initiative. (See Time Warner, Comcast Team Up for TV Everywhere, More Nets Join Comcast's Internet TV Test, CBS Joins Comcast's Internet TV Trial, and Starz Joins TV Everywhere.)

Cox, meanwhile, is placing a priority on inking licenses that let the MSO offer an increasing number of popular TV shows on its existing video-on-demand (VoD) platform. (See Most Subs OK With Disabled Fast-Forward.)

Clement said Cox's "My Primetime" service is becoming increasingly important because the older pay-per-view and the more recent movies-on-demand model are "low margin" businesses with too many outlets for that content. However, subscription-VoD services "have helped the price value" of the premium category.

Although much of Cox's near-term additions will be TV-centric, the MSO "is thrilled that others are looking to the Internet and other devices" to consume video, Clement said.

Mobile video taking a back seat
Some of that delight stems from cable's budding wireless ambitions centered on WiMax and Long Term Evolution (LTE). (See Cox Wireless: Soup to Nuts and Comcast Maxes Out in Portland.)

Cox, which is taking the LTE route on its own, expects to have wireless services launched in a couple of markets this year, though video "won't be the primary focus." Cox, Clement said, will be looking to mobilize other apps, such as voice mail and email, at the start.

The story's similar at Comcast, which just introduced an app for iPhone and iPod Touch devices that provides access to the subscriber's messaging applications, in addition to TV listings and some movie trailers, but nothing in the way of long-form video. "Video will come, but it will come later," Banse said. (See Comcast's TV-Free iPhone App .)

But back in the wired world, Banse said growing broadband consumption represents a "huge opportunity" for cable operators. However, she echoed a warning we're used to hearing from Time Warner Cable Inc. (NYSE: TWC) chief Glenn Britt: that programmers should be careful about putting a bunch of their content on the Internet. Networks, she said, won't be able to preserve their business model without the additional fees MSOs pay them.

"Hoping to put... content online for free and monetize [it] through advertising isn't going to work," she said.

Rainbow Media Holdings SVP of broadband David Evans agreed that the programmer, which has networks such as AMC and We in its stable, is "restricted" on how much content it can offer via the Web for free. "It's critical to stay within the ecosystem," he said. "We really have to work with our cable partners."

But a well-executed Web TV strategy works, too. NBC offered thousands of hours via the Internet to provide extensive coverage of the 2008 Summer Olympics in Beijing. "We actually drove up our television consumption," said Perkins Miller, SVP of digital media for NBC Universal 's Sports & Olympics division.

Mobile access to content is also continuing to pay a role at NBC in terms of news scores and video clips, but not yet with long-form programming. Miller said his company has seen growth in the range of 300 percent to 900 percent on the mobile platform.

"If we're not there, we'll be missing something," he said. "If you don't think that [mobile's] competitive to a media business, you're crazy."

— Jeff Baumgartner, Site Editor, Cable Digital News

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