If you know anybody who's young, poor, and tech savvy, you probably know about the trend that could destroy Hollywood: People using a video game console, PC, or other device to connect their television directly to the Internet and then watching TV shows from network web sites, Hulu, YouTube, or numerous other options.
And at CES this year, there were numerous TVs that connect directly to the Net. No intermediary device necessary.
But what's the problem with watching TV via Hulu or SouthParkStudios.com or whatever? After all, they're legal, right? Well yes, but Hollywood doesn't want them to become too popular too fast. Online episodes contain just a fraction of the commercial time as on-air, because auds won't wait for them (or maybe we just measure better how people don't watch?) And there's no equivalent of cable subscription fees going to the networks. Their only revenue is advertising.
Time Warner CEO sees the coming freight train and has a solution: If you want to watch video online, you should have to pay for it. In an interview with AdAge, he says his network will put all its cable programming online. But it will only be accessible if you subscribe to a "multi-channel provider," meaning cable, satellite, or one of the new telco TV services. Or non-subscribers can pay a fee to watch on the Web.
The reasoning is simple: Time Warner knows it needs to put content online to reach increasingly digital native auds. But it also knows its business model would blow up if it lost cable subscription revenue.
For the 85% of people who subscribe to a TV service (according to the article), this won't make a difference. But the trend is clearly going in the opposite direction. Fewer people are subscribing because more people are watching online
Bewkes' attempt to stem this tide is to put up a wall and make people pay. But as with all walls Hollywood tries to put on the Internet, one has to be skeptical. Unless it works perfectly, people are going to get annoyed (I subscribe to Dish, but what if I'm out of town and forget whatever login information I'm supposed to have?). Once people are used to getting something free, it's very very hard to get them to start paying again (look at all the newspapers that try and fail to add subscriptions to their websites). And then there's the little issue of piracy. The more restrictions there are around content on the Web, the more people will turn to illegal outlets, partially because it's free, and partially because it's so much simpler (such as the music industry's failed attempts to make DRM work).
All that says to me that Bewkes' proposal makes sense from a simple business perspective, but it'll be tough to implement. And to have any chance at success, it'll need to work almost flawlessly. Because all those free options are good and getting better