Boxee CEO: MSOs Should 'Go Over-the-Top'

NEW YORK -- Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC), and other major cable operators should abandon their decades-old strategy of only offering video services within their own footprints, and market competitive video products delivered via the Internet nationwide, Boxee CEO Avner Ronen said here at a broadband video event Monday night.

“They need to go-over-the top themselves. That’s what they should do. They should offer [Comcast’s] Fancast [Xfinity TV] and whatever is going to be the brand… to anybody who has a broadband connection,” Ronen said at panel session featuring cable and Internet video executives hosted by VideoNuze.

“They shouldn’t be afraid of cord-cutting. They should encourage it,” Ronen added, suggesting that selling tiers of faster broadband Internet connections could become the core business for many cable operators. (See Indie MSOs Plug ‘Dumb Pipe’ Video Model.)

Turner Broadcasting System Inc. SVP of business development Jeremy Legg said his company would be open to supplying its programs to what he described as a “virtual MVPD" (multichannel video program distributor) and pointed out that Apple Inc. (Nasdaq: AAPL) or Microsoft Corp. (Nasdaq: MSFT) could also try to take the lead in delivering over-the-top (OTT) video.

“We’re agnostic from a distribution standpoint as long as the business model delivers what you want to deliver,” Legg said.

But Legg emphasized that he believes charging viewers subscription fees for long-form online video is the best strategy, and he teed off on top Internet video site Hulu LLC for offering hit TV series and movies for free.

“I personally don’t think it’s been good for the industry. It’s taught consumers that you can access content for free with virtually no ads in it.”

The Turner executive also suggested that the reason Hulu is now looking at ways to charge for content is because the company, which is backed by NBC Universal , News Corp. (NYSE: NWS), and Walt Disney Co. (NYSE: DIS), has failed to make money under its current, ad-supported business model. (See Hulu Plans Paid Subscriptions.)

“We think there’s a reason that they only report video streams and not revenue,” he noted. “When the models really change, people will start touting that they’re making money, and they [Hulu] don’t.”

Teeing up 'TV Everywhere'
Much of the panel session, moderated by Broadband Directions founder Will Richmond, also featured executives from ESPN and VEVO, and centered the debate on distributing subscription- or advertising-supported Internet video, and the potential of cable-backed TV Everywhere sites such Comcast’s Fancast Xfinity TV. (See Comcast's 'Xfinity' Goes Live .)

Legg said two factors affecting the cable industry’s rollout of TV Everywhere sites, which allow viewers to access content from their cable subscriptions, are Hulu’s broad offering of free ad-supported content and NBC Universal’s pending merger with Comcast. (See Comcast to Take Control of NBC Universal.)

“The TV Everywhere rollout has been complicated by the presence of Hulu and how Hulu is going to evolve. The Comcast-NBCU merger also becomes an input into this, given that the largest distributor will also own part of Hulu,” he said.

But he added that Turner and parent Time Warner Inc. (NYSE: TWX) will continue to hit the accelerator on their own TV Everywhere plans. “Irrespective of that, we are going to charge forward. We believe at the end of the day someone needs to lead this initiative.”

Another topic of debate was gauging how many consumers may be willing to cut the cord on their cable TV subscriptions and rely on Internet video delivered via a broadband connection for home entertainment programming.

Yankee Group Research Inc. CEO Emily Nagle Green shared results from a Yankee survey that found 7 percent of consumers have considered cord-cutting but haven’t yet canceled cable subscriptions, and that 2 percent have already cut the cord.

Green also said 47 percent of consumers said they haven’t thought about cord-cutting -- which, she observed, means more than 50 percent have. And she said 21 percent of consumers that Yankee surveyed said they would never cut the cord on cable.

“We start to see this phenomenon take root over the next five years in certain demographics,” Green noted, adding that consumers that own gaming consoles and other broadband-connected CE devices would be the first to cut the cord.

Another issue that could influence the future of Internet video are rules governing network neutrality. Legg said Turner supports network neutrality, and is opposed to distributors charging consumers “by the bit” or “any situation where content is being gated or turned down or throttled down.” (See Net Neutrality Ruling: FCC Loses, Comcast Wins.)

— Steve Donohue, Special to Light Reading Cable

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