We’re fans of Will Richmond’s VideoNuze newsletter here at digitalmissive.   However, we have to take issue with a recent VideoNuze article on the future of long-form online video – like many such forward-looking articles we’ve come across lately, it’s tacitly assumed that since we view internet video on a computer and web browser today, the situation will remain unchanged  indefinitely.  It’s surprising how many articles attempt to predict the future of internet video while failing to consider the role a new generation of consumer electronics devices (i.e. televisions and set-top boxes) with network interfaces and baked-in internet video functionality might play.

First and foremost among the conclusions often drawn from this flawed premise is that “advertising alone will not be sufficient for profitable long-form program distribution online”.

Arguably, that’s been the case to date – but I would suggest the cause has to do with how internet video is currently viewed on a computer and web browser - essentially, it’s a non-social, lean-forward user experience.  Move that activity from the desk to the couch, though, and we would see internet video viewer tolerance for a heavier, more “TV-like” ad load finally emerge – and not only that, these ads would be able to be targeted towards specific user profiles (as internet ads already are).   For all industries involved, the intersection of high TV ad loads at high targeted internet CPM rates represents the sweet spot – the best of both worlds.

The VideoNuze article is  primarily concerned with “TV Everywhere“ .  Essentially, the idea behind this joint Time Warner Cable/Comcast’s cooperative initiative is to make cable content available on demand via any web browser – but to hold access to that content hostage to whether or not you maintain a valid cable television subscription.

The VideoNuze piece’s bullishness on  “TV Everywhere”‘s is based on three assumptions: that cable content is significantly compelling to steer consumers behavior, that internet video will remain limited to the computer and web browser, and that a substantial number of competing cable networks will fall in line and agree to limit consumption of their content to a single walled garden not in their control (remember, the “TV Everywhere” lever depends on the programming not being available anywhere else).

While I agree with the first assumption to a certain extent, I take issue with the second and third.   As we’ve written about before, we’re big believers that the consumer electronics industry will ultimately take the internet video market away from the computer industry – and once your flat screen TV sports a wireless network interface and access to internet video, one of the central premises of “TV Everywhere” – that the internet is for the desk and the coax cable is for the couch – is no longer defensible.

Cable Networks As to the third assumption, it has to be noted that not all cable networks move in lock step.  The VideoNuze article takes HBO’s recent signing on to “TV Everywhere” as an indication of a trend towards wider cable network buy-in, but is HBO really a good measure?  It’s worth noting that until March of the year, the company was a direct subsidiary of “TV Everywhere” originator Time Warner Cable.  Look a bit further at other cable networks, though, and a less certain scenario emerges: Viacom’s Comedy Central now makes “The Daily Show” episodes available over the internet the next morning.  How likely is it (on other words, how expensive would it be) to have Viacom pull their flagship content from the internet and instead cede complete control to TWC and Comcast?

And let’s look at cable stalwarts AMC (“Mad Men”) and ESPN – subsidiaries of NBCU and Disney, respectively.  Both happen to hold major equity in Hulu, the well-received internet video service that’s  now reportedly approaching profitability despite still depending upon the (less-than-optimal)  computer/web browser viewing solution. How likely is it these two companies will allow “TV Everywhere” to become the sole internet delivery platform for their content rather than rolling out a version of their own service for the internet-enabled television?

Lastly, let’s look at it from the HBO fan’s perspective: together, HBO and Cinemax typically cost the viewer an additional $10-15 per month.  If that HBO customer finds themselves able to watch their favorite shows on demand via “TV Everywhere”, will they still be willing to pay a total of $25-$45 for HBO and a (largely unused) basic cable subscription?

Broadcast Networks It’s certainly true that cable TV programming receives more critical praise at awards time than does broadcast TV.  It’s also true that 2008 cable network viewership was up 3% while the broadcast networks’ was down 6%.  However, there’s still more than enough value in the four major broadcast networks’ businesses to make them part of the discussion.  Of the four, only CBS has signed on for “TV Everywhere” – the other three are (again) major stakeholders in Hulu.  How likely is it that these companies (Fox/Paramount, NBC/Universal, and ABC/Disney) would all abandon their own internet video service service in favor of “TV Everywhere”?

“TV Everywhere”  Challenges

“TV Everywhere” depends on two things holding true, neither of which I think will:

• Internet video will stay on the browser and off the television.
• A critical mass  of content creators (cable networks) will sign away exclusive internet rights.

In addition:

• With current hardware, most viewers can now pick up digital HD broadcasts of their local network affiliates over the air.
• On a purely technical level, “TV Everywhere” faces significant (and ongoing) challenges in terms of user authentication.  Right out of the gate, “TV Everywhere” is sure to become one of the juicier targets hackers have had in a long while – and the more the compelling the content, the more attractive a target.
• There are a growing number of competing internet video services (including Netflix) becoming available via a new generation of network-enabled CE hardware.

For any of the above reasons, a pretty good case for cord-cutting could be made – but perhaps the primary reason I question the “TV Initiative” initiative is that it’s a fundamentally artificial imposition on the market – something akin to requiring the first Model T buyers to own a horse.  Progress usually wins in the end.

One prediction: it would be profoundly disruptive, but I see the Hulu service coming to CE hardware somehow – while “Hulu vs. Youtube” may be a popular subject for discussion these days, in a post-browser internet video world, the more interesting conversation  would be about the MSOs (and “TV Everywhere”) vs. everybody else (including Hulu).