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McSlarrow Statement on TV Everywhere

January 4, 2010

Free Press’s description of TV Everywhere is a reminder of the admonition that people are entitled to their own opinions, but not their own set of facts.  The call for an “investigation” of TV Everywhere has no factual or legal basis, no matter how many times Free Press and its allies repeat the words “collusion,” “cartel” and “illegal.”  In the name of protecting competition, they would actually reduce the amount of online content available to consumers.

For those unfamiliar with TV Everywhere, it is just one of several concepts, based on different technologies and business models, being developed for the online video marketplace.  TV Everywhere, specifically, would provide a new service at no extra charge to consumers who subscribe to a multichannel video programming service – whether provided by cable, satellite or telephone companies:  the ability to watch TV programs on PCs or laptops, and potentially other Internet-connected devices.  It could significantly increase the amount of high-value video content available online – something the FCC has said would help drive broadband adoption.

But Free Press’ theory seems to be that TV Everywhere poses a threat “to kill” online video competition because it would only be available to cable and other pay TV subscribers.  But they get it exactly backwards:  It is an effort to ensure more content than ever is distributed over the Internet at no extra charge to consumers.

Moreover, the TV Everywhere concept involves a multitude of competing program networks, most of which distribute their content on competing cable, satellite, telephone and online platforms.   As publicly announced, TV Everywhere envisions separate, bilateral agreements between one content company and one or more individual distributors.  It is purely vertical in nature – like any arrangement between a content company and a distributor.  As online video evolves, various distributors and content companies may – and likely will – come to widely varying bilateral arrangements.

It is no wonder that developing and implementing this concept isn’t easy, given the vast numbers of possible participants; however, calling any of this “collusion” is, to be kind, strange.  The fact that distribution of content requires a number of differing and competing parties to enter into a multitude of bilateral agreements is normal.  Contrary to Free Press’ suggestions, the antitrust laws do not prohibit, but encourage collaboration, even among competitors, that lead to innovation and new products and services for consumers.

Distributors do not have the ability to unilaterally decide how content is distributed.  Content owners, through individual business arrangements with a growing array of distributors, ultimately make those decisions – in much the same way every other sector of the economy works.  No single content owner or distributor is controlling this process or could do so.

What is remarkable about the online video industry, even at this early stage of development, is just how dynamic it is.  Content providers can elect to distribute their content through advertising models such as Hulu or subscription models such as iTunes.  MLB.TV will give you live programming, an online DVR, picture-in-picture, and much more for an annual fee.   Indeed, there are a growing number of “paid content” models emerging on the Internet—and a large and growing number of competitors using different models – from Netflix to Blockbuster to Vuze to Veoh to iReel to Sezmi to Apple TV to ESPN360 to VUDU to Miro, and on and on.

So, Free Press is really complaining about the decisions content owners make as to how their content should be distributed.  As it happens, many programmers rely on the subscriber-based license fees they receive from cable operators and other distributors to remain economically viable.  In order to sustain that model and continue investing and creating, many content owners may want to ensure that they are compensated for the viewing or use of their programs online.  There is nothing nefarious or mysterious about this:  Programmers invest tens of billions of dollars a year to produce high quality content; they have the right to experiment with different business models and determine how to recoup that investment in terms of distributing their content on different platforms.

As much as Free Press would like to suggest that something is radically different in this case, the TV Everywhere model would be nothing more than content owners extending their copyright licenses to allow multichannel video providers to make their programming available online.

 The fact that market participants are experimenting with models in addition to fee or advertiser-supported models is not a sign of anti-competitive conduct.  It is a sign of a dynamic and rapidly-changing market in which no one knows the ultimate outcome.  Free Press may prefer one video distribution model over another.  But that is for the marketplace – and content owners exercising their rights to distribute their content in the manner they choose – to sort out.  A model that would give consumers the option to get more value – by access to online content – as part of the TV subscription they already pay for is something that consumers should have the right to embrace or reject.

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