(Repeats story originally issued May 10)
* Cable executives to talk Web video threat at event
* Web-based cable-style packages expected from new players
By Yinka Adegoke
NEW YORK, May 10 When executives gather for the
annual Cable Show industry event in Los Angeles this week, two
issues will be near the top of the agenda: rising programming
fees and the growing threat of new Web video services.
Many industry watchers have long argued these are two sides
of the same coin. They say if cable distributors keep passing
along the higher programming fees to subscribers, then those
subscribers will eventually seek out entertainment elsewhere.
One likely place would be online video.
Such high stakes have led to ugly fee negotiations in
recent months. Stand-offs include Time Warner Cable Inc TWC.N
versus News Corp's (NWSA.O) Fox Networks as well as Cablevision
Systems Corp CVC.N versus Scripps Network Inc SNI.N. Two
months ago, ABC local station signals went dark on Cablevision
due to a dispute with ABC parent Walt Disney Co (DIS.N).
"The affiliate deals between cable networks and operators
have been increasingly contentious over the last six months,"
said Thomas Eagan, analyst with Collins Stewart. "There's got
to be some realization that the ecosystem works if they work
well together. It falls apart if their negotiations are
Standoffs between programmers and distributors are almost a
staple of the American media business in a tough economy. But a
particularly weak advertising market and the recent
introduction of retransmission fees have further complicated
Retransmission fees are the amount broadcasters charge to
distributors who deliver the free-to-air signals to their
subscribers. Broadcasters have in the past allowed cable
companies to carry those signals for free but as advertising
rates fall they been pushing for this alternative revenue.
CBS Corp (CBS.N) CEO Les Moonves, a keynote speaker at the
Cable Show, has been among the biggest champions of
retransmission fees and shows no sign of backing down.
But these battles over fees have been bad for the industry,
and cable companies have dedicated marketing dollars to explain
programming fee hikes as the reason for rising cable bills.
One reason for this is the long-running fear that customers
will tire of paying more, give up cable TV and cut the cord.
It is not yet clear that consumers will make that move.
Collins Stewart's Eagan points out that pay-TV additions for
cable, phone and satellite customers have outpaced customer
losses for the last two years. He expects the same this year in
spite of the growth of Web video.
The cable industry is aware of the threat. Comcast Corp
(CMCSA.O) and Time Warner Inc (TWX.N) launched TV Everywhere at
last year's Cable Show, which allows paying subscribers to
watch their favorite cable shows on-demand via the Web. The
service has been rolled out gradually. but has yet to fully
capture the imagination of everyday cable subscribers.
Until recently, cable investors argued the average American
family isn't prepared to sit around a laptop to watch HBO. But
a proliferation of new devices and services has made it easier
to watch PC content on flat screen TV sets.
"You're going to see an accelerated cord-cutting beginning
this Christmas season with Web-enabled TVs and games consoles,"
said Todd Mitchell, analyst at Kaufman Bros.
Programmers have also been holding talks with Apple Inc
(AAPL.O) to stream cable-type programming packages to its
devices like the iPad. Such packages could allow an Apple
subscriber to buy a cheaper, smaller package of their favorite
TV channels or shows unlike current cable offerings.
Meanwhile, companies like Netflix Inc (NFLX.O) and Sony
Corp's (6758.T) (SNE.N) PlayStation have started streaming
movies in competition with cable's video on-demand services.
PlayStation is also offering live Major League Baseball games.
But there could be an even more dramatic change if the
cable companies themselves decide to transform their
Internet-Protocol-based cable systems to deliver programming
over the Web.
"If it's all IP-based what's to stop Comcast delivering a
mini-package of Discovery, ESPN and CNN to a customer?" said
Mitchell. "They could aggregate programming at a more effective
price than cable outsiders."
(Reporting by Yinka Adegoke; Editing by Richard Chang)