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Tivo bets against cable cutting, expects Internet and cable to join

By Cecilia Kang

Will television viewers choose to stick with their cable and satellite services or cut the cord as more content is available on the Web? Tivo thinks most viewers won’t make the choice but will increasingly use both.

In an interview with its senior vice president of corporate development and strategy, Naveen Chopra (right), Post Tech asked about Tivo’s take on the different battle lines being drawn between broadcasters, cable and satellite firms and the crop of new Internet delivery providers such as Google, Apple and Boxee. What do these battles mean for consumers?

Chopra said the biggest setback is that content providers – Hollywood studios and networks such as Fox and NBC – have been frugal with what they put on the Web. They are afraid of eating into the business deals they have to cable and satellite providers to bring the best sports and other programs first to subscribers.

So Tivo, the company that was supposed to put broadcasters out of business with their digital recording device, is betting on a world where the cable and satellite model remains in place for the next two to three years and viewers use their set-top-box to combine first-run videos with the Internet.

In our ongoing exploration into the future of TV, here’s an edited version of our Q&A on Tuesday:

Q: How does Tivo view all the disruptions at play (retransmission disputes, blocking of Web shows to Google, net neutrality and the Comcast merger) and what it means for the future of TV?

A: Consumer behavior is driven by the desire to get access to as much content as possible in the most convenient way possible. Those goals aren’t always completely aligned on the Internet and there are trade-offs. There is significant momentum for Internet-delivered content, some free, some paid and some paid per title. And then there is the traditional world of paid television, which the vast majority of consumers continue to buy from cable and satellite operators. The reality is that neither one is a complete solution from a consumer’s perspective. Some things are incredibly enjoyable from Netflix, Hulu and YouTube. But massive pieces of content from those are missing if you want, for example, to watch the World Series or Monday Night Football.

Q: What are the roadblocks to a fuller Internet experience on the TV?

A: Perhaps most annoying of all for consumers is that for the most part, those services are stuck with user interfaces from 1985. As good as the content and broadband is, users are stuck with poor navigation and poor user interfaces. That’s why we’ve steered Tivo and our products so that these two worlds can come together.

Q: But clearly there is demand for Internet videos. Did you see that statistic that Netflix streaming occupies 20 percent of broadband traffic during peak hours? Does that show that it’s just a matter of time that people will fully adopt Internet streaming only?

A: It’s not likely that it will be a mainstream solution but for techies and early adopters.

We would agree that there are trends at work that will continue to cause alternatives for cable and satellite to develop. But the notion that you will see large numbers of consumers abandoning paid television for over-the-top video is unlikely to happen in the short term.

Q: What’s keeping the business from changing?

A: There are significant financial and strategic reasons why owners of that content will continue to make it available through cable and satellite in ways that are much more economically compelling to consumers. Apple TV allows you to get all sorts of television content, but if you use it to substitute cable it is incredibly expensive. If the average television viewing per month is 180 hours, that means more than $300 a month in fees to Apple.

Relative to that, even the most expensive cable package is a phenomenal deal and less restrictive with what you can do with the content – you can watch a show multiple times, in different rooms and devices.

Q: Who’s in control of these boardroom negotiations on fees, program access, new distribution models?
A: It’s probably overly simplistic to name any one player as having a bigger stick than another. But there is a lot of interdependencies between traditional cable and satellite and the content owners, who are studios and programmers, and the device guys, who are the Googles and Apples of the world.

Today, the paid television providers are very appealing as distribution channels for anyone who owns content. They reach large numbers of homes and have recurring fees. It’s a very lucrative model and hard to replicate. Even with the level of distribution of Netflix, which is far and away larger than any over-the-top service, it’s hard for content owners to see how they get the same economics as replacement for what they get for paid television.

Q: But they are changing because Netflix is willing to pay.

A: Most are seeking a way to distribute through Netflix as an add-on for what they do with paid television guys, and that is going to require them to create some difference with content. And cable guys want to ensure that people become cable subscriber. And those dynamics are entrenched.

Q: When will things really change?

A: Over time, there will be footprint for other forms of distribution that will ultimately get so large that the economics get interesting for content guys. And it’s hard to put a specific time frame on it, but I don’t think it will be in two to three years.

Our view today is that it the set-top-box continues to be place where these two worlds most effectively are joined.

By Cecilia Kang  | November 3, 2010; 7:00 AM ET
Categories:  Comcast, FCC, Online Video  
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Get on board it's happening and happening fast. I know myself and my friends have all cut our cable off and increased our bandwidth. It's cheaper to get more internet and watch everything online when I have time and I want to. All the major TV stations thankfully are seeing whats going on and providing it free already. And they realize that we'll watch it off they're official site with the commercials if it's fast and easy and they stick to ONE commercial per break.

Evolve or die. Media needs to work with what people want. Everything should come through an high speed internet connection on demand and much more affordable then before. This is why netflix is winning. They are cheep they make it easy to watch what you want when you want to and it's legal.

Posted by: RexDameon | November 3, 2010 12:33 PM | Report abuse

Speaking of TV, when is Dana Milbank going to correct his Wednesday lie in saying that Fox had only one democrat on for its election coverage?

Posted by: RepealObamacareNow | November 5, 2010 7:27 AM | Report abuse

Posted by: RepealObamacareNow

Speaking of TV, when is Dana Milbank going to correct his Wednesday lie in saying that Fox had only one democrat on for its election coverage?
1) What the humph does you comment have to do with this column ?
2) Sorry that YOU don't realize that the only
downside of Obama Care for ALL of us was that it didn't go far enough (read "single payer") to keep us from continued rape by Health Insurance Robber Barons!
...and Corporate owned GOP millionaires want to throw us 100% back to their Corporate Wolves! Geeze...the stupidity of the rank and file GOP (and blue dogs).

Posted by: lufrank1 | November 6, 2010 3:37 PM | Report abuse

I just cut my cable...and it felt so good to shut the door on this monopoly. I get only the programs I like for free on the internet.

Posted by: scubatankman | November 7, 2010 9:40 AM | Report abuse

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