Cable operators, networks brace for an online world

NEW YORK (Reuters) - When U.S. cable operators and networks gather at their biggest annual industry event this week, both sides will seek to preserve and enhance a long-term partnership now under threat as more and more consumers choose to watch their favorite shows online.

Show attendees look over the NBC Universal booth during the 2009 International Consumer Electronics Show (CES) in Las Vegas, Nevada January 9, 2009. REUTERS/Steve Marcus

In past years, cable companies employed the National Cable Telecommunications Association Show to showcase technologies and tout the diversification of their business, showing off faster broadband speeds, advanced digital phone services and new wireless services.

But this year will mark a return to basics in Washington, D.C., for the operators who own the distribution pipes and the networks whose video content brings those pipes alive.

Both sets of companies will be brainstorming on how to cope with or benefit from disintermediation: consumers can now watch decent-quality video online whenever they want, and often for free.

“Last year, cable companies were in a more protectionist mode but now they’re facing up to the inevitable trend, because online video is really here to stay,” said Tuna Amobi, equity analyst at Standard & Poor’s.

Executives will also have the economy on their minds.

“The current recession has cut into consumer spending for household TV and telecommunications, while also causing most marketers to reduce their advertising budgets,” said Collins Stewart analyst Thomas Eagan.

Longer term, the industry hopes to forge new tie-ups to capitalize on the online trend.

Cable companies such as Time Warner Inc, which owns networks CNN and HBO, and Viacom Inc, owner of MTV Networks, are working on plans to offer shows on-demand over the Web -- so long as they’re to already paying subscribers.

For instance, Time Warner is experimenting with a Web programing initiative called “TV Everywhere” with HBO and its former sister company Time Warner Cable in Milwaukee -- more details of which will be trotted out this week.

“Not only will the TV Everywhere initiative offer consumers more for their money, but it’ll also enable television networks and multichannel video services to extend the current business model by delivering more high-quality television content online,” Time Warner Chief Executive Jeff Bewkes said in an internal memo sent companywide on Monday.

Analysts point out the irony about the perceived threat of online video, in that its popularity, through sites like Google Inc’s YouTube and News Corp and NBC Universal’s, had in fact been boosted by the cable industry’s increasing broadband speeds, improving the viewing experience on the Web.

The largest U.S. cable operator, Comcast Corp, is making plans to roll out a service called On Demand Online. For the cable operator, the service will be an extension of its existing video on demand service.

Comcast has said it expects to roll out even faster speeds on its new cable platform, first demonstrated at last year’s show.

“The service really makes a difference in the quality of the video if you’re trying to watch an HD show,” said Mitch Bowling, Comcast’s senior vice president of online services. “It decreases the buffer time and if you’re downloading the video, it’s a much faster experience.”

Editing by Edwin Chan, Phil Berlowitz