3rd Week Hogging the remote

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Online television

Hogging the remote

Old-media firms are firmly in control of internet video

Sep 2nd 2010

Some prefer old-style television

LIKE stallholders in a busy market, technology companies hawked their online-video services this week. In Berlin, Sony announced it would begin selling films over the internet to Europeans. In San Francisco, Apple unveiled a smaller, cheaper Apple TV, a set-top box designed to play videos. It also said some television shows would be available a la carte for 99 cents. YouTube, a video-streaming website owned by Google, is trying to cut deals with studios that would allow it to rent newly released films. Amazon too is reportedly trying to build a subscription service. But while technology companies are making all the noise, old-media firms are quietly steering the market.

The main reason for all the activity is the abrupt appearance in shops of televisions that can plug into the internet, either through cables or wirelessly. NPD, a research firm, reckons that 12% of all the flat-screen televisions sold in America in the first seven months of this year were “connected”. That share is likely to soar. Technology firms spy an opportunity to bypass old-fashioned distributors and bring online video directly to the living room.

And media firms spy a threat. Even the most diversified companies have become dependent on people’s willingness to pay hefty bills for multi-channel television each month. Cable and satellite TV supplied fully 71% of News Corporation’s profits in the second quarter of this year. Any video distributed outside the current, lucrative pay-TV framework worries the media firms. They merely have to look at the music business, or the newspaper business, to see the dire consequences of losing control of their content online.

But there are only a few big film and television producers, and they have applied the brakes. Apple has been unable to set up a subscription service for television and films. Its efforts to persuade companies to drop the prices of TV shows have been rebuffed by all except News Corporation and Disney, on whose board Steve Jobs, Apple’s head honcho, sits. Hulu, an online video aggregator owned in part by the studios, has similarly failed to obtain many shows from cable TV or from CBS, America’s most popular broadcast network. Its owners have pushed it into setting up a paywall.

Even Google, the arch-disrupter, is looking tame. The firm is building its browser and search bar into high-end televisions, hoping that couch potatoes will use it to look for programmes. If some of them can be directed to shows on YouTube, Google will be able to siphon advertising away from television. It would be a fine plan if YouTube had lots of high-quality programmes, but it hasn’t. (The Onion, a humorous website, once imagined a YouTube contest challenging users to make a “good” video.) So YouTube will probably have to pay top dollar for films, limiting its appeal and turning a once subversive force into a humdrum distributor.

Old-fashioned television is hardly being swept away. At present people watch online video for three hours per month, according to Nielsen, compared with 158 hours for old-style television. And the early evidence suggests that those whizzy new connected sets are not always connected. A recent poll for Forrester Research found that many people didn’t fully understand the devices they had bought, and only a few had recommended them to their friends. They may learn. But such apathy from early adopters suggests that content owners will have plenty of time to prepare for the revolution.

One outfit is steadily gaining ground. Netflix, which rents DVDs through the post, has been amassing subscribers: 15m so far. It is gradually moving into online distribution, and is becoming popular on connected TVs. It will be built into the new Apple TV. Netflix has a pot of money to spend on rights, and wants to acquire some content exclusively. Although it stayed quiet this week, it is the company to watch—and, if you are a television or film executive, to worry about.

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