Few viewers limit themselves to televisions to get access to television shows anymore. But as more and more consumers tune in to other devices and online channels, the battle over profits, revenue, and licensing rights is become increasingly heated.
The battle features multiple forces. Technology companies such as Netflix, Amazon, and Google want access to more content that they can offer via digital streaming. For example Netflix entered into a $60 million deal with Viacom (which owns MTV, Comedy Central, and CBS Corp.)—worth approximately 6 percent of Viacom’s income.
But the media companies must make sure that they make the right decisions for their most valuable resource, namely, their video content. Their ads on sites such as Netflix have proven very successful, and yet revenue from traditional television sources is still higher than Internet income. Media companies thus restrict rights for Internet video TV. For example, ABC has granted the rights to older shows to Netflix, but not those for new shows. CBS has licensed only 7 percent of its video content for Internet video, none of it including new shows.
In the meantime, cable operators want to restrict the amount of televised content that is available for free online. Their goal is to hold on to their strategic advantage and the business model that has worked so well for them for the past several decades.
And watching from the sidelines are the consumers. In 2010, 11.5 million people between the ages of 18 and 34 years watched television on a traditional set, a 2 percent decrease from the year before. The number of subscribers to cable and satellite services also has dropped. No one is certain whether these shifts are due to the struggling economy, or if Internet video is emerging as the victor that will take all the spoils.
1. In this battle for dominance, which sides seem to have an advantage, and which seem likely to retreat?
2. Are there any other stakeholders in this battle that the abstract does not address?
Sam Schechner, “Painful Profits from Web Video,” The Wall Street Journal,August 15, 2011.