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A defense of charging more for Web TV (Q&A)

Fox is going to make it harder for Web viewers who don't pay for content to access its shows, and other TV networks are likely to follow, says Dan Rayburn, a longtime streaming-media expert.

Apparently we were just kidding ourselves and the Internet really isn't going to send us to some digital TV Shangri-La, where all the content is free of charge, available at our fingertips, and stripped of commercial breaks.

Dan Rayburn says the reality is we're going to have to pay for top films and TV shows distributed online. Dan Rayburn

All the signs coming out of Web TV over the past year or more tell us that the TV networks are done with their experiment with ad-supported online distribution and super low-cost content. The returns that these companies were collecting from Hulu just weren't attractive enough for them to brush off cable companies and other distribution partners.

Fox announced yesterday that it will no longer offer TV shows the day after they appear on broadcast TV to the free version of Hulu. Users of that service must wait eight days to access that content. To acquire next-day viewing, you must subscribe to Hulu's paid-subscription service or those cable and satellite companies that contract with Fox. So far Dish Network is the only company to have signed on.

The move didn't surprise Dan Rayburn, who has been involved with streaming media in some form or another for 15 years and now, as principal analyst at research firm Frost & Sullivan, covers the online video sector. He says he understands that people wish hit movies and TV shows and films were freely available online. But the self-described pragmatist says that just isn't going to happen.

Rayburn spoke with CNET tonight about the quickly shifting landscape in video distribution:

Question: Have we've seen the end of free Web TV ?
Rayburn: Was it ever really here? Somehow the idea got out that consumers will have access to any type of content they want on any device. That's not going to be the reality. The reality is that we're always going to have some kind of pay wall and we're going to have authentication methods that keep us from being able to get a lot of different types of content unless you're a certain subscriber.

Now, you can say that's the case with Netflix. You have to pay to get access to their content. With Hulu Plus, you got to pay to get access, with Major League Baseball, the NFL, NBA. This stuff costs money. So, I'm not at all surprised by the Fox move and I expect we'll see a lot more of that down the road. Some will argue that that's not the right approach. You can debate that but the bottom line is they are obviously concerned about their core business and they want to do everything possible to protect that.

As a consumer, does it stink? Yes, but these guys are running a business. They aren't willing to give away their content for free. That will never happen.
--Dan Rayburn

How does this compare to what's going on with Hollywood and films?
Rayburn: It's the same way that the movie studios are worried about DVD sales so they force Netflix to agree to a 28-day window where they can't rent new DVDs. It's no different from what the studios have done. I expect we'll see more of that.

What about piracy. Isn't what's happening with legal services going to send people to BitTorrent?
Rayburn: That's always possible but here's the thing: The average person is not going and getting that [pirated] content. My wife just turned 30. So she's still in that demographic where she's young. She's not the 18- or 19-year-old, but she wouldn't have any idea how to get that content off of BitTorrent.

It's not like it's easy to get it. You got to download an application. You have to figure out how to search for it. You got to figure out what the quality is. Was it encoded in H.264? Is it something that has to playback in DivX. Do you have the right player for it? It's not as easy people make it out to be. In our industry the media makes it seem that people just pirate it...but [it takes a lot] of work to do it. I don't think this will increase piracy.

What Fox is doing isn't a huge burden on users. You're talking about a wait of eight days. Is one week that big of a deal? Now, is 28 days a big deal? Absolutely, and the scary thing on the Netflix side is that the studios have said that once they go to renegotiate with Netflix, they're going to get longer windows because they're noticing that they're selling more DVDs [as a result of agreements Netflix entered into last year with some of the large studios to delay renting new releases for 28 days]. No surprise there. The problem is that the consumers aren't saying they want more DVDs. They are saying they want more digital content.

So, this is the future. Like it or not as a consumer, content owners are the ones who are putting restrictions on who can see what, the quality that they can get it in, and the device they can play it on. So for instance HBO Go, that app is awesome on the iPad but if you try to output that to your TV it doesn't work because they built in protections so you can't output it to a larger screen. Do most people know that? Probably not. But why is HBO doing that? Because watching it [via the Web streaming service] defeats the purpose of having an HBO account. They don't want you watching the Web stream on a larger screen.

It sounds like you don't see a lot wrong with what they're doing.
Rayburn: There's all these restrictions in the market today. I don't hear people talking about them and I didn't see any big complaints by people until this [Fox] story broke yesterday. But we've always had stuff like this. I think the media will blow this up and say, "This is crazy, this is going to be a killer." But do consumers care? I don't know that. You don't know that. It's too early to tell. Do consumers care that they have to wait eight days to get some of this content? Probably not. This is content from Fox. This is "Glee" and that type of stuff. That's all available on major broadcast channels. So even if you don't have a cable subscription, you can access stuff from Fox over the air.

Come on, do you think there's that many people clamoring to see "Glee" who can't see it on broadcast TV or record it? I don't' see that being a big deal.

As a consumer, does it stink? Yes, but these guys are running a business. They aren't willing to give away their content for free. That will never happen. You can argue that their business is broken. I don't think it is. We don't have numbers that shows that people are fleeing cable subscriptions. I think the way they think about it is the wrong. Again, consumers are saying we want A, and studios are saying we'll give you B. That doesn't work, but their model isn't broken. Cable TV isn't dead. It's not dying and it's certainly not going away anytime soon.

Just the other night I went and I was doing my review of all the [Web] services. Most of the content I was looking at would look terrible on my new 55-inch TV. It would look horrible. Yeah, I can get it on my computer. I think it's interesting that Netflix says that the majority of their streaming is still done through the PC. Why is that? Well the streaming on a lot of the movies from Netflix to a 55-inch TV screen doesn't look very good.

Now, the moment I turn on cable and turn on an HD channel, I know the quality I'm going to get. I don't wonder what it's going to look like. I don't. So that's the thing about cable, it's easy. It works. The quality is always there. It has lots of channels, and I can DVR whatever I want. To me paying $100 a month for a triple play of phone, Internet and cable is the most cost-effective solution on the market. People say that I can cut cable and save $80 a month. OK, you sign up for Hulu, sign up for Netflix and Major League Baseball, which still has black-outs so you can't get your games live locally. Then let's say you buy two shows a week from iTunes. Now, you're already close to the cost of your cable subscription.

All those arguments that I read about regarding the cutting of cable don't work unless you're somebody who doesn't watch a lot of TV.