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Cable Technology Feature Article

March 31, 2014

Prices, Contracts, Unwillingness Continue to Hamper Streaming Business

By Gary Kim, Contributing Editor

Content fragmentation caused by content rights agreements and release windows is among the non-technical reasons why widespread video streaming replicating linear video content offerings is taking so long to reach commercial status.

But rapid and continuing content rights fees are putting increasing strain on the ecosystem. Of course, one might argue, that has been the case for 20 years, as sports content rights were cited as a growing problem in the 1990s, with annual prices for sports content growing at double-digit rates for the major leagues in basketball, baseball, football and ice hockey.  Nothing much has changed, in that regard, over the past couple of decades.

At least so far, the threat of alternative distribution, now a reality for movie and TV series pre-recorded content, has not affected real-time video content such as news or sports.

Ironically, content providers might well have even more reason to raise prices if online video ad spending in the United States continues to grow. Payments from distributors are one way to recoup advertising revenue lost to online competitors.

That might not be a major revenue issue at the moment. Though online video ad revenues might grow 41 percent in 2014 to reach $5.8 billion, according to eMarketer (News - Alert), TV networks will haul in $68.5 billion. In other words, the online TV advertising market is less than a tenth the size of the broadcast and linear video channel ad market, in terms of revenue.

Viacom (News - Alert), for example, apparently wants price hikes for its broadcast TV signals of 100 percent, from small market distributors.

Observers keep predicting a breakthrough, wondering when a shift to online, over the top distribution gets a good foothold. To be sure, technology, as such, no longer is the issue. Nor is consumer familiarity with how to stream video an issue.

Content owner reluctance to jeopardize lucrative linear distribution revenue models really is the issue. That is less the case for pre-recorded content such as movies and TV series, since both have had alternate distribution for decades, in the form of pay per view, packaged media distribution and now online viewing.

Instead, it is content rights that are the key barrier, both in terms of overall cost, but also in terms of content fragmentation. Because of exclusive licensing deals, no single online provider will be able to show “everything” a consumer might want.

So even if content owners become more comfortable with streaming delivery, a consumer wanting to see most available content will have to have multiple subscriptions. And that is a “nice to have” problem, in any case. Right now, most TV programming is not available for a la carte streaming. 

Edited by Alisen Downey

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