By Stephanie N. Mehta
November 12, 2009

Only if industry players successfully balance content, customer experience and revenue models

By Tom MacIsaac, CEO, ExtendMedia

Add this to the list of things the Internet has changed: Your cable or satellite company now wants to let you, as a subscriber, watch the content you’ve paid for on any device you want, any time you want.

The cable crowd has little choice: consumers are accustomed to time shifting their television viewing using DVRs, and now sites like Hulu make it easy to access network television and old shows on the web.

But getting cable and satellite companies to buy into “TV Everywhere” was the easy part. The hard part comes in executing the concept.

The first step is to determine how to authenticate users at multiple sites and ensure they are subscribers before providing access. Although it is often suggested that this is a huge barrier, in reality the technology part can easily be solved using a standards-based approach once a basic approach is agreed upon.
Once basic authentication is resolved the real work can begin. The challenges then are less about technology and more about launching a viable service that people want to use and capturing and distributing the revenue accordingly. First, several unlikely bedfellows –competing service providers and their shared content partners—must agree on a business model that makes sense. This task dwarfs any other technical issues.

Who makes money, and how?

How will these services be monetized? Cable companies have said repeatedly that subscribers won’t pay more for entitled services like TV everywhere. Is this scenario really likely? What does it mean now that Hulu is publicly stating they’ll switch some content to a subscription based model? What if Comcast (CMCSA) becomes a part-owner of GE’s (GE) NBC and Hulu as has been rumored?

What is clear is that the successful video services of the future must rely on several different revenue models to build a viable business. For evidence of this, look at three of the most successful video offerings – Hulu (ad-supported), Netflix (rental) and iTunes (purchase). Three of the most popular video services leverage three different business models. If you dig further, you will find that each is contemplating expanding their models to include others.

For example, Apple is rumored to be considering a subscription offering. Going forward, I fully expect this trend to continue. These transactional models will also need to be carefully blended with up-sell/cross-sell capabilities that encourage consumers to try new subscription services while continuing to “snack” on a la carte offerings. Consumers now expect the ability to select specific shows and this behavior must be tied into the more predictable revenue stream of a subscription model.

Content remains king (sorta)

With a multi-revenue model approach nailed down, service providers can then focus on building a compelling content library.

The best services have the widest content catalog—period. Look to Netflix (NFLX), Hulu and iTunes for inspiration, but understand that building a platform that can manage the aggregation of dozens, if not hundreds of content sources is a complex exercise. Complex, but necessary, because these guys have set the bar high and consumers expect no less. The studios obviously have to buy into this, however and some – especially the cable networks – are still reticent to risk the golden goose of carriage fees for nascent online offerings.

Finally, our industry must embrace true cross-device portability. Again, Apple (AAPL) has set a high bar here, but I think it can be improved. When I have a subscription for premium content with my cable provider, I want to be able to access it freely on my portable media player, move it to my home theater or watch it on my PC.

This is the first step towards what I call “stateful content consumption.” I can program my DVR remotely, start a show at home and finish it on my phone, and bookmark my favorite clips like surfing the web. In order for this to occur the consumer electronics manufacturers and wireless providers need to jump in with both feet as well. This in turn triggers new requirements for DRM protection, different payment methods, and mobile bandwidth improvements.

“TV Everywhere” is a compelling catchphrase that means different things to different people, but at its core means, what I want, when I want, where I want.

Doing it right, means everyone needs to win – the content providers, the service providers and most importantly, the consumer.

MacIssac is CEO of ExtendMedia, a Boston-based company whose technology enables content providers and distributors to create, deliver, manage & monetize online content offerings over many devices.

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