Web video future at heart of Comcast, NBC review

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Cable companies such as Comcast worry that easy viewing of Internet video on TVs could lead customers to drop their monthly subscriptions in favor of low-cost online alternatives. Comcast’s 22.9 million cable subscribers pay an average of $71 per month for cable TV.

Broadcasters, meanwhile, fear Internet video could cannibalize revenue from television commercials, which are far more lucrative than online ads. They fear cable cancellations, too, because cable companies increasingly pay them per subscriber for the rights to carry stations on their lineups.

The threat is still small, but real: Research firm SNL Kagan projects that 8.1 million households, or 7 percent of all U.S. homes with a TV, will substitute Internet video for a traditional video service such as cable by 2014.

David Krall, president of Roku Inc., said online video may appeal particularly to viewers who want to pay for programs one at a time rather than subscribe to the large bundles of channels that are the cornerstone of the cable industry’s business model.

But online video will never become a true alternative unless a broad programming lineup is available on both computer screens and TV sets.

One measure regulators are considering would require Comcast to make NBC’s broadcast and cable channels available to rival online providers at reasonable prices. Under current rules, cable TV companies have to share programming they own with rivals such as satellite companies, but not Internet distributors. Although any condition would apply only to Comcast and NBC content, it would establish an important precedent and could open the door for the FCC or Congress to extend this mandate to others later.

Regulators may also prohibit Comcast from requiring a cable subscription to get online access to NBC Universal’s shows and movies. That would keep NBC content out of the industry initiative that offers online viewing of such hit shows as HBO’s “True Blood” and “Entourage,” but only for subscribers of cable and other video services.

Comcast and others market the service as an added benefit for customers who want another way to watch premium video they are already paying for, but critics say the program ties online video to cable subscriptions.

In addition, the government is weighing whether to force Comcast to sell NBC’s 32 percent stake in the Internet video service Hulu, which has become a major Web platform for NBC, ABC and Fox shows and offers a model for other programmers as they expand online.

So far, Comcast has indicated that it could accept a ban on pressuring independent programmers into restricting online distribution of their content in exchange for a spot in its cable lineups. But the company is resisting other conditions, arguing they are unnecessary.

Comcast Executive Vice President David Cohen insists that the company has no reason to limit NBC content to its own subscribers because that “would close off access to so many other customers.” (Although Comcast is the nation’s largest cable TV provider, only a fifth of all U.S. households with a TV now subscribe to its cable TV service.)

Executives at Comcast and NBC both say they want to distribute programming across all types of platforms, and Comcast points to its service that lets subscribers watch cable shows online as an example.

But Harold Feld, legal director for the public interest group Public Knowledge, adds a caveat: “They want to do it in a way that doesn’t disrupt their highly profitable traditional business models.”

So perhaps it’s telling that NBC Universal General Counsel Rick Cotton sees online video as a complement rather than a substitute for cable. “Consumers can sample shows and catch episodes they missed online,” he said, “but they are not trying to replicate traditional video services.”

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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