The Clicker: IPTV needs exclusivity

Every Thursday Stephen Speicher contributes
The Clicker, a weekly opinion column on entertainment and technology:

$1.58 billion for 4 years?  At the time it sounded downright outrageous.  Yet, in 1993 when Rupert Murdoch slid his bid across the table, that's just what the numbers read. That edgy little network with that funny little cartoon-show was gaining ground on its rivals and was preparing for a major coup. The Fox Broadcasting Company was about to strip the football from the hands of longtime NFL-incumbent CBS.

Rights to those coveted NFC games didn't come cheap. The Fox bid bested by hundreds of millions of dollars the CBS
bid, but that was to be expected. The economics behind the two bids were drastically different, as were the risks associated with each of the bids. Fox knew that its bid both needed to be higher and, more importantly, could be higher. On their part Fox was not about to repeat the proceedings of six years prior when its bid for NFL rights failed due, in large part, to the (il)legitimacy of its network. This time Fox would give them an offer they couldn't refuse.
The Fox bid would say, "We might be riskier, but that's just too much money for you to pass up."

Besides, at the end of the day, an NFL contract was simply worth more to Fox than it was to CBS. To CBS the NFL was just another form of programming. Fox, on the other hand, was growing a network and football was just the leverage that Fox needed to both legitimize said network and, more importantly, compel potential viewers to climb atop their roofs and plant that UHF antenna which was needed in many markets.

But Fox isn't the only example of a company paying more than market rate in order to build.

$500 Million for 5 years? That?s what Sirius needed to dole out to Howard Stern, the self-proclaimed ?King of all Media,? to sway him from his current terrestrial home to the world of satellite radio. It?s a hefty chunk of change, no doubt. It?s an even bigger amount when you consider that Stern?s audience will take a sharp and immediate drop the second he leaves the conventional airwaves. Why is Sirius willing to pay more money for fewer listeners? The answer is simple: like Fox?s assessment of the NFL, Sirius views Stern as must see, er, must listen radio.

Both companies recognized that one of the big keys to success in launching a media company is compelling exclusive content. If you want to listen to Stern, you will need Sirius. If you wanted the NFL, you were going to need Fox. Even today DirecTV?s $3.5 billion dollar contract to keep its Sunday Ticket package through 2010 is considered a reasonable mechanism to curb satellite defectors.

So when then will we see a company with the vision of Sirius, Fox, etc. enter the IPTV game? When will be see the first real IPTV-only network?

The pieces are already starting to fall into place. Most of the major PVR players have implemented mechanisms to handle Internet-delivered content. TiVo has begun testing downloadable Independent Film Channel (IFC) content.
Microsoft?s Media Center Edition has its ?Online Spotlight? where consumers can see repackaged mini-content. Akimbo,
Dave.TV, etc. are all trying to get into the game. However, each of the players is missing compelling and exclusive content. There is nothing to drive the users to the new platform. Each is attempting to use either a) the same content available elsewhere or, more often, b) a hodgepodge of syndicated ?micro-content.? Neither solution is compelling enough to create the needed paradigm shift.

Meanwhile traditional media companies are working hard to cram their content into a system that is slowly devaluing both the worth of the content through commercial-skipping, and the worth of their delivery infrastructure through peer-to-peer sharing networks (e.g. BitTorrent). Their solution, predictably, is to use technology to clamp down even harder.

What if, on the other hand, a company were to say, ?Let?s develop broadcast-quality shows. Let?s brand them together under a ?Network? label. Let?s buy the rights to NASCAR. Heck, let?s buy the darn FoodTV network and convert it to an IPTV network.? Granted each of those suggestions is made without analysis, but the idea is still the same: think big;
think out of the box; think IPTV Network, not IPTV delivery.

Instead of using technology to prohibit, use technology to enable new options. Give people choices with regards to commercials. Some people might not mind watching commercials. Others might choose to pay a small fee to have a commercial-free viewing. Unlike traditional networks, technology would allow for many different options in IPTV. Market segmentation is now viable.

Cut out the middle man. Don?t like dealing with Comcast, DirecTV, etc.? That?s fine, go direct. An IPTV network would be far less reliant on the billion+ dollar infrastructures of the past. You?d be freed from the backroom negotiations and package deals which are oft associated with Comcast/content-provider negotiations. You?d be free to move quickly and without many of the dependencies of the current system.

It?s only a matter of time until someone creates a legitimate IPTV Network. The efficiency of direct-to-consumer and the drive towards content value are two trends that can?t be ignored. The only question that remains is who will have the chutzpah to place the giant bet that consumers will follow content. I don?t know the answer, but if you?ve got a billion dollars and are willing to try it out, give me a call ? I want to be a part of that shift.

If have comments or suggestions for future columns, drop me a line at theclicker@theevilempire.com.