16 November 2011

Sony's "Assault on Cable TV" - Don't Hold Your Breath

The Wall Street Journal reported today that Sony was in discussions with major cable programmers about a service that it would distribute via the Internet to PlayStation 3 game consoles and other Internet-connected Sony devices. Last week the WSJ had a similar story about Dish Network.
Original PS3 on left, new slim PS3 and controller on right
Sony certainly brings a number of things to the over-the-top party, including one of the most used Netflix streaming devices in the PS3, a movie and television studio and a leading seller of televisions, computers and other electronics -- nearly every possible client device.

While many would like to see such a service, it does not look like anyone, including Sony, has found a way to address the three fundamental things that are standing in the way of such an offering:
  1. Some channels do not have the right to transmit their programing (which is often acquired from a third party such as a movie studio) over the "open Internet". "Open" in this case is related to security -- studios are concerned about piracy -- rather than "open platform" the ability to have third party applications and providers running on the network. Something on the open Internet can be reached by anyone with Internet access; something on a close network requires a user to be physically connected to it. I defer the discussion of whether a VPN is closed or open to others.
  2. Sometimes cable/DBS companies actually forbid cable networks from distributing their programming over the Internet, even if such delivery is only to paying subscribers.
  3. One of the other problems is that advertising produced for television/MVPD compensates performers differently than advertising produced for the Internet. The advertisers, not unreasonably, don't want to pay more if a handful of people watch "TV" on the "Internet". One example of this is that MLB Extra Innings on cable contains the local TV commercials; MLB Extra Innings on the Roku box or on your computer does not. No advertising effectively makes the platform much less attractive to all the ad-supported basic cable networks (e.g., ESPN, CNN, USA, Lifetime).
Frequent readers will recognize this list from my post of 5 Nov.

How would we get past these issues? If the FCC declared that an over-the-top video distributor would be regulated as an MVPD, all of these issues would be effectively resolved. Short of that, it will take awhile.

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