Pay TV goading media companies to withhold on Web?

Bloomberg reports Time Warner Cable and other pay-TV operators are using tactics to staunch the spread of Web-based entertainment.

To discourage media companies from proliferating Web-based entertainment, pay-TV operators such as Time Warner Cable are using tactics like offering higher payments or threatening to drop programming, according to a report by Bloomberg, citing unnamed sources.

Such goading is meant to keep programming out of the hands of digital entertainment services that companies like Intel and Apple are pursuing.

As cable companies negotiate distribution agreements with content providers, a chief interest is keeping as much hold on exclusive content as they can. That gatekeeper status has long been a cable company strategy to keep customers and fend off digital competition.

Richard Greenfield, an analyst for BTIG, tipped off the development Tuesday in a note, saying that at least one of the traditional video distributors has added clauses in recent agreements with programmers restricting them from licensing to virtual competition.

Whether such tactics are legal is for the Federal Trade Commission to investigate, but the strategy is clearly bad for consumers by limiting competition and choice, Greenfield said.

Analysts like Greenfield have been perplexed that the Web so far has failed to give rise to a virtual multichannel video programming distributor -- a service that delivers linear TV, not simply shows, over the Internet. Why has none emerged if bandwidth has improved sufficiently and TVs are increasingly Internet-enabled?

Intractable distributors could be part of the answer.

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