Cable Companies Try to Catch Up to Online TV

PHILADELPHIA – HBO on your PC? It could happen sooner than you think.

Wary of the growing number of consumers watching TV shows online for free — and yet reluctant to upset viewers by yanking shows from the Internet — the nation's largest cable operators are in talks with media conglomerates to take back control.

They would create a platform to release cable TV shows online, but exclusively for paying subscribers.

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It's a delicate dance for those involved, which include Comcast Corp., Time Warner Cable Inc., Cox Communications Inc., Cablevision Systems Corp., General Electric Co.'s NBC Universal, News Corp., Viacom Inc. and Time Warner Inc.

Cable networks considering the project include Time Warner's HBO, Viacom's MTV, Discovery Communications Inc., owners of Discovery channel, TLC, Animal Planet and others; Cablevision's Rainbow Media Holdings, the owner of AMC, IFC and Sundance; Turner Broadcasting, owner of CNN, TBS and TNT; as well as Scripps Networks, owner of Food Network and HGTV.

Potentially at stake is the business model of cable TV operators. They pay networks a per-subscriber fee each month for the right to carry channels.

But the cable companies have groused that they are paying for content that programmers are giving away for free on the Web.

Jeff Gaspin, president of NBC's Universal Television Group, said the idea of collaborating with cable operators on online video has been floated for a while but talks began in earnest this year.

"There's pressure on all of us," he said, referring to TV networks. "We get paid quite a bit of money from cable operators. ... It's important we find ways to do business that protects that business model."

At the same time, "consumers want content where they want it and when they want it," Gaspin added. If the networks don't provide it, "they'll get it any way they can."

Gaspin and others familiar with the project said the new service likely will be free to cable TV subscribers. But it's also possible a small fee might be assessed.

Sam Schwartz, executive vice president of Comcast Interactive Media, said the company isn't looking at the effort as "some enormous new revenue opportunity" but wants to add value that will keep customers from leaving. Comcast calls its initiative "On Demand Online."

One model being discussed is for Philadelphia-based Comcast to expand its lineup of cable shows on Fancast.com, its Web site that aggregates TV shows and movies for free viewing, much like Hulu.com. But only subscribers could access the shows.

It's not yet clear how subscribers would be authenticated; it would be easier if the customer also buys high-speed Internet service from the cable company.

The other cable operators wouldn't create a new Web site, but they would steer subscribers to the cable networks' Web sites, such as HBO.com, where they would be able to see an expanded array of shows.

These plans could still change because negotiations are preliminary.

Denise Denson, MTV Networks' executive vice president of content distribution and marketing, called the discussions "a new and necessary testing ground for the industry."

Cable operators and the networks have to walk a fine line between preserving their business without standing in the way of the online video revolution.

About 34 percent of adults who go online at home watch videos over the Internet at least every week, up from 25 percent two years ago, said a survey released Monday by Leichtman Research Group.

People aren't yet cutting the cord en masse — the Leichtman survey found that people who watch recent TV shows online every week are not more likely to give up TV service than other people. But the industry is heading off what could end up as a troubling trend. After all, the availability of free content online has befuddled other media industries, from music to newspapers.

Hulu, a joint venture between NBC and Fox that streams free TV shows and movies, already has felt pressure from content providers.

It recently ended access to its shows from Boxee, a startup's free program that lets viewers watch online shows easily on their TV sets. Industry executives say Hulu is losing money, but Hulu declined to comment on its financial status.

The cable companies and others involved in the talks for a TV service said their goal isn't to kill the online video goose, but to work out a plan that keeps everyone's business intact.

"A TV-everywhere solution could give consumers more for their money while also helping to preserve the current business model that is generating and delivering popular branded shows viewers want," said Keith Cocozza, a spokesman for Time Warner Inc.