Friday, October 15, 2010, 3:32 PM ET|Posted by Will RichmondA WSJ article today, "TV's Alternate Universe," about the proliferation and inventiveness of basic cable programs, provides an unintentional reminder of the value these shows have as a bulwark against cord-cutting. The article points out that basic networks will spend $23 billion this year on 1,462 originals, up from $14 billion on 863 shows just 5 years ago. The fact that these shows are both finding an audience and that they are virtually unavailable for free online makes them highly strategic assets as the pay-TV industry is increasingly buffeted by over-the-top video competition.
Two years ago, in "Cutting the Cord on Cable: For Most of Us It's Not Happening Any Time Soon," I argued that there are 2 key reasons mass-scale cord-cutting was unlikely, at least in the short term: first, the difficulty of watching online-delivered video on TVs (instead of on computers) limited its appeal as a substitute for pay-TV service for mainstream consumers, and second, the loss of numerous popular cable entertainment programs resulting from cord-cutting would give many people pause.
Flash forward to today and there has been a lot of change on the first issue, but little on the second. Connected devices which enable online video viewing on TV, are one of the hottest corners of the consumer electronics industry, and have helped drive the huge popularity of Netflix streaming. However, little has changed on the issue of gaining free online access to cable programs. In fact, of the cable programs named in the WSJ article, "Drop Dead Diva (Lifetime), "Army Wives" (Lifetime), "Hot in Cleveland" (TV Land), "Men of a Certain Age (TNT)," "Mad Men (AMC), "It's Always Sunny in Philadelphia" (FX), "Leverage (TNT) and "Royal Pains," (USA) only a very limited assortment of past season episodes is currently accessible online.
For the pay-TV industry, that's as it should be as the industry girds itself for an ever-escalating series of over-the-top video options. It may seem bewildering to many consumers why there's no free viewing access, but it's a simple matter of economics. Cable networks rely, to one extent or another, on payments from pay-TV operators. If they make their shows freely available online, those payments will disappear. While it might make sense to offer promotional sneak peaks, access to past seasons, behind-the-scenes footage and the like, giving away current episodes themselves online would be devastating to pay-TV's primary value proposition.
Still, online access to cable programs is important, and that's why TV Everywhere - authenticated online viewing for paying subscribers - is critical to the industry's future. Absent it, the industry looks like an ostrich with its head buried deep underground, out-of-touch with consumers' desire for anytime, anywhere, any device viewing. Recently I lamented the slow pace of TV Everywhere rollouts, and I'm still looking for evidence that the industry is aggressively moving forward. Audiences enjoy cable's original shows and have shown a willingness to pay to be able to watch them. If the pay-TV industry is to blunt cord-cutting's appeal, cable's original programs will be a key strategic lever.
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