At the Deutsche Bank Securities Media and Telecommunications Conference earlier this week, Time Warner Chairman and CEO Jeff Bewkes fielded a question about the company’s plans for “TV Everywhere.” According to Bewkes, Time Warner is exploring making content from HBO, TNT, the Cartoon Network and other Time Warner properties available to subscribers through venues other than cable TV. The company is reportedly in talks with major cable, satellite, telecom and content providers to allow viewers to stream programs from HBO and other channels over the Internet. Popular online destinations like Hulu, a joint venture of NBC Universal and News Corp., are rumored to be among the potential outlets for Time Warner’s premium content. Unlike current Hulu content, which is available free with advertising, Bewkes’ plan is to make the content available only to those who subscribe to the cable channels. Users will be given an account to log in and then be granted access to their cable-subscribed content through online streaming.
A number of commentators, including some whose opinions I generally respect, have dismissed this idea, criticizing locking the content behind a subscription requirement and seeing it as yet another example of old media not “getting it.” I’m not so sure. I think Time Warner is on the right track with this plan.
In his 1960 Harvard Business Review article, “Marketing Myopia,” Theodore Levitt provided the canonical example of an industry that failed to recognize its true value in a changing business environment. As Levitt’s oft-told tale goes, the growth of the railroads stalled in large part because of their misguided belief that they were in the “railroad business,” rather than realizing they were actually in the “transportation business.” The blind spot created by this misperception caused them to fail to see the underlying value in their assets and business expertise.
In a similar, more closely related example, Hollywood saw nothing but a threat to their “movie business” with the rise of television in the 1950s. Only later did they realize that television could become a profitable distribution channel for the studios’ back catalog of movie content. The studios were not in the “movie business” but, rather, the “entertainment business,” in which television could serve as a valuable partner.
Time Warner’s announcement, along with its spin-off of Time Warner Cable, signal that the company does not see itself as in the “cable TV” business but, rather, the entertainment delivery (and monetization) business. To the extent this is true, it makes sense for them to provide that content through as many venues as possible.
This focus on the content rather than the distribution channel also offers potential benefits to both the consumer and the industry.
If I subscribe to HBO, why shouldn’t I be able to watch “Big Love,” “True Blood,” or “Flight of the Conchords” from a hotel room while I’m traveling (without requiring a Slingbox or some other arcane hardware installed in my home)? Log on, sign in, and start streaming. I’ve paid for the content; I should be able to watch it wherever I am on whatever device I’m using.
Given the current dearth of robust business models for online distribution of content, this seems an opportune move for the industry as well. With sales of media-based entertainment like DVDs profitable but shrinking, and online advertising revenue too uncertain to drive the creation of significant original content, finding new ways to monetize online content is critical.
Giving customers freedom of choice and providing content creators with a broader set of options for monetization are both welcome advancements.