The Internet and the future of TV

You may soon view TV shows directly over the Web instead of subscribing to cable or satellite services.

Imagine a day when you would be in total control of creating your own TV channel lineup.

Instead of subscribing to a service from a cable, satellite or phone company that might offer you hundreds of channels you'll never watch, you would be able to select what you want and watch it on your own schedule.

That day might not be so far away. Slowly but surely, content that's broadcast over cable networks and through satellite providers is being distributed through the public Internet.

In terms of the technology, all the elements are falling into place to deliver high-quality video from the Net directly to viewers in their living rooms. Software has been developed to ensure the quality of video distributed over the Net. And companies such as Microsoft and Cisco Systems' Linksys home division are developing products that enable Internet video to be viewed on TV sets instead of only on PC screens.

Apple Computer, which has changed the music industry with its iPod music players and iTunes music store, is trying to do the same thing in the video market. Earlier this month it introduced an iPod that plays videos, and launched a department in its iTunes store that sells episodes of popular TV shows, such as "Desperate Housewives" and "Lost," along with a handful of animated short films and music videos. All video offerings sell for $1.99 apiece. While the iTunes video library is limited today, it's clear that Apple's approach is shaking up the entertainment industry and a new distribution model is emerging for video.

So far, content providers are treading lightly as they open new Net-based distribution channels. For example, Comedy Central's new MotherLoad Web site, which launches Tuesday, will offer only select clips of content rather than the full range of programming available on Comedy Central's cable channel.

It's easy to see how the old model for TV might evolve and adapt to distribution on the Net as the necessary technology makes its way into the home.

"Producers of content want as many forms of distribution as they can get to reach their audience," said Vito Palermo, founder of a start-up called Portola Networks, which is in the early days of developing technology for content providers to manage the distribution of their content over the Web. "They would love to cut out the middlemen, but the economics must be compelling. Technology is an enabler, but there are a lot of other dynamics around consumer behavior and the business model that need to be in place first."

Much of the infrastructure to provide broadcast quality video directly over the public Internet is now available. Companies, such as Kontiki and EdgeStream, have already developed software to secure content and ensure the quality of streaming video.

"We have developed technology that mitigates latency on the Internet and tunnels video traffic through congestion, so that a user on the other end never experiences errors or packet loss," said Rajeev Sehgal, chief business development officer for EdgeStream.

Start-ups like Portola, which is still at least a year away from launching a product, are developing management tools for content providers who want to bypass the traditional cable and satellite distribution models and deliver directly to consumers via the Internet.

"The challenge now is around usability. How do you make it easy for people to access high-quality video content over the Internet while satisfying the rights of content owners and keeping networks safe from viruses? That's what we're trying to do."
--Scott Sahadi, VP of corporate development, Kontiki

EdgeStream has already struck deals with several content providers, including Digital Identity in Italy, which enables more than 75 percent of all the streaming traffic on Telecom Italia's network; TV Plus in the United Kingdom, which offers popular Russian movies, cartoons, documentaries and classical music; and SkyPerfect Communications, Japan's largest satellite TV broadcasting services company. Earlier this month a Web site called Bollywood.tv, which uses EdgeStream's technology, launched a service that offers more than 730 Indian movies over the Internet.

Kontiki, which has developed software that applies digital rights management rules to ensure video isn't ripped off, is also seeing more content providers, especially those outside of the United States interested in distributing content over the Web. The BBC started testing Kontiki's technology in 2004 and is now in the second phase of a technical trial. Sky, a satellite TV provider owned by News Corp., will launch an Internet TV service using Kontiki's service before the end of the year.

"All the pieces are here now from an infrastructure perspective," said Scott Sahadi, vice president of corporate development for Kontiki. "The challenge now is around usability. How do you make it easy for people to access high-quality video content over the Internet while satisfying the rights of content owners and keeping networks safe from viruses? That's what we're trying to do."

Internet search companies like Google are also getting into the Internet TV business. In June, Google launched a new Web-based video search service, which allows people to use keywords to search the company's indexed database of video from content providers that have uploaded video since April.

While some content providers, like Comedy Central, are experimenting with Web distribution, most of them are only doing it tentatively. Executives at Comedy Central say its new broadband-optimized site, called MotherLoad, is designed to complement the existing cable channel and not replace it.

Content providers like MTV, which runs Comedy Central, seem reluctant to move forward too quickly. They are nervous about losing control of their brands if an aggregator like Google provided access to individual shows or clips of content.

"I think some people who talk about Internet TV have been naive in terms of the digital rights issues and the importance of creating a brand," said Jason Hirschhorn, senior vice president of digital media for MTV. "We don't want to sell our content piecemeal."

"We aren't going to react like the music industry, who has been trying to put the genie back in the bottle."
--Jason Hirschhorn, senior VP of digital media, MTV

These content providers also have to consider the behavior of their audience, which is used to paying cable or satellite companies monthly fees for access to channels that they can "surf." The technology may be available to stream quality video over the Internet, but whether or not people will abandon the old cable model to go with something totally different has yet to be seen.

"The demise of traditional television is a folklore," Hirschhorn said. "Viewers want more interactive TV, but traditional TV won't die. Still the best way to reach an audience is through the TV."

But it's clear that content providers like Comedy Central are starting to position themselves for a transition in the market. Comedy Central knows that nearly 85 percent of its viewers have broadband access and tend to be early adopters of technology, so it's not far-fetched to assume that some of these viewers could also experiment with Internet-based television.

"We will go where ever the viewers are," Hirschhorn added. "Right now they are in both places?-on the Net and on cable and satellite networks. We don't believe in shutting people off. We aren't going to react like the music industry, who has been trying to put the genie back in the bottle."

Cable providers and phone companies, such as Verizon Communications and SBC Communications, now entering the paid-TV market also recognize that customers want more interactive content. And many of them are already providing on-demand programming, which allows viewers to download movies anytime they want.

Comcast, the largest cable company in the United States, already provides an extensive library of on-demand movies. On Wednesday it announced it would provide an additional 250 movies every month to its digital cable customers at no extra charge. In total, Comcast customers will be able to select from about 800 movies each month.

Comcast says that its video-on-demand programming is extremely popular. The company has already surpassed one billion total on-demand program views for the year, eclipsing last year's total of 567 million views.

"The traditional TV market is not dead," said Kontiki's Sahadi. "Multiple models will evolve. Broadband penetration and improvements in digital rights management are helping push content providers to look toward the Web. But there will always be people who want to subscribe to a traditional television service."

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