IPTV vs Me-Too TV

PALO ALTO, Calif. -- Content may be king, but can phone companies become king of content?

That's the big question everybody has about telcos and IPTV. They will have to strike the right content deals and partnerships and open up their networks if they want to profit from new technology such as IPTV, according to a group of executives here at the 13th annual Symposium, “Next Generation Media Networks," presented here by the Stanford Networking Research Center and Accel Partners.

It won't be easy. Already, the entertainment industry is entwined in a web of complicated and often exclusive licensing deals, and getting the right content will be a challenge for the telcos.

For example, Bob Greene, senior vice president of advanced services for Starz Entertainment Group LLC, took the audience here through the complex series of licensing agreements involved in acquiring movies:

First, movies are released to theatres. About six months after that, the movie is sold and rented on home video. It is only after that, about 1.5 months after the home video release, that the movies become available on pay-per-view networks, usually though exclusive relationships with cable providers and their content partners such as Starz. In fact, movies are typically licensed on an exclusive basis for about eight or nine years, says Greene, after which licensing is finally opened up to general broadcast rights.

Greene said that breaking into these exclusive relationships is the biggest barrier to folks that want to deliver content over broadband. "Exclusivity and ownership of rights are very important."

In digital music distribution, the licensing issues may not be as complex as with movies, but they are substantial. Rob Glaser, chairman and CEO of RealNetworks Inc., said the music publishers need quality and security guarantees from service providers in order to sell music online.

Glaser -- on a panel called "New Media: Is Content Still King?" -- held out the most optimism for the telcos, saying they have a window of opportunity to partner with the entertainment industry.

"Service providers have a very substantial opportunity to play a big role, especially if they take on a role such as DoCoMo in being the gatekeeper," said Glaser.

He said Japan's NTT DoCoMo Inc. (NYSE: DCM) has developed the best model for marketing entertainment content through new telecom networks by taking a cut of revenue in exchange for helping new content providers market their services over their network.

Proponents of more open, Internet-based models said that plenty of new content and business models will crop up if telcos employ an open, IP-based video platform. Jeremy Allaire, the founder and president of Brightcove, an IPTV content startup, says the emergence of open IP networks will create a new generation of content providers.

"An open platform gives content providers control over the brand and customer relationship," says Allaire. This, he feels, will create an explosion of niche content that folks can access directly over open, IP-based systems. "Nearly every small niche can be economically supportable."

Can telecom carriers, which have little experience with content and licensing, pull it off? Optimists such as Glaser, say yes. But others, such as Greene, say they should leave it to partners and just focus on the pipes themselves.

Later in the day, on a panel called "The Battle for the Living Room," executives from companies such as Microsoft Corp. (Nasdaq: MSFT), Yahoo Inc. (Nasdaq: YHOO), Sony Corp. (NYSE: SNE), and Netflix Inc. (Nasdaq: NFLX) debated the future of IPTV and its impact on consumers.

Reed Hasting, founder and CEO of Netflix, said the industry had reached a crucial juncture, where it would be choosing between "freedom and control." He said that closed, proprietary TV systems such as those present on cable systems represent control, while open, IP-based networks represent freedom.

Hastings said that the industry will thrive only if multiple access networks develop and service providers pursue innovative products based on open technology. But Hastings said telcos are going down the wrong path if they are out to copy cable offerings:

"The tragedy is that the telcos are going to spend billions of dollars to do me-too TV."

Meanwhile, Moshe Lichtman, corporate vice president of Microsoft TV, showed the power of the Microsoft marketing machine with a flashy demo of Microsoft TV, navigating through a dizzying array of video content, including showing as many as five streams of video on one screen. Word on the street is that this "wow" demo is how Microsoft sold Microsoft TV to SBC Communications Inc. (NYSE: SBC). But don't hold your breath -- Lichtman said the day when you can buy a set-top box with a plug-and-play version of Microsoft TV that could be instantly activated by service providers is still two years away.

— R. Scott Raynovich, US Editor, Light Reading