By Cecilia Kang
Washington Post Staff Writer
Tuesday, November 9, 2010; 9:43 PM
When AT&T last week had to renew its contract with Scripps, the owner of popular lifestyle shows such as Rachael Ray and "House Hunters," it made a demand that the media company thought went too far: Exclusive rights to broadcast the content on iPads and other mobile devices.
When the two companies couldn't agree on the matter by the weekend, Scripps pulled its shows from the nearly 3 million customers who get their television service from AT&T, a strong-arm tactic that blacked out channels such as the Food Network and HGTV. The two firms managed to come to an agreement Sunday to restore service, but AT&T didn't get what it wanted.
AT&T had "demanded unreasonably broad video rights for emerging media where business models have not even been established," John Lansing, president of Scripps Networks said in a statement.
Such programming battles highlight the frantic race among a handful of powerful companies to capture the eyeballs of people who are beginning to rethink the way they watch their favorite shows as more of them appear online and as the television begins to act more like a big-screen computer.
At stake is control over how Americans will watch movies and television at home - and whether they will have viable alternatives to paying high cable bills to do so. Those trying to shape those habits are titans of industry.
On one side are Silicon Valley-type firms such as Google, Apple and Netflix, which are trying to provide content in nontraditional ways. These include streaming video over the Internet or through devices that allow consumers to pick and pay for what they want rather than be forced to buy a package of hundreds of channels, many of which they may never watch.
They face opposition from powerful and long-standing alliances between Hollywood, the networks and communications giants such as Verizon, Comcast and Time Warner Cable, which deliver the content to television sets.
"When people try to take online television content and put it on the livingroom TV, broadcasters and cable companies try to resist that and try to get the cut and control they once had," said Marvin Ammori, a communications law professor at the University of Nebraska. "Consumers and innovators want the freedom to . . . choose whatever content they want to watch, whenever they want."
So far, the Silicon Valley firms have had varying success. They have had to agree that they would only show popular television episodes and movies days or even months after they first run.
Netflix has probably made the most headway. Earlier this year, it agreed to pay $1 billion to MGM, Lionsgate and Paramount to stream movies to subscribers the same day they hit theaters. Already, about 20 percent of all residential broadband traffic during peak hours at night is from consumers watching Netflix videos, according to Sandive, an analytics firm.
Apple recently released the Apple TV, a "pet project" in the words of co-founder Steve Jobs. The idea was to allow consumers to access television shows a la carte, but after months of negotiations the firm was only able to get ABC and Fox to sign up.
Perhaps the hardest pushback was aimed at Google's fledgling Google TV, which is designed to bring Internet browsing to the television set. All four networks last month blocked Google TV Web browsers from accessing their sites.
Despite the opposition from Hollywood and the cable companies, people continue to experiment with the new offerings. For the second quarter in a row, cable giants such as Comcast, Time Warner Cable, Cablevision and Charter lost subscribers. Analysts say some of those losses were because people went online for their TV.
Traditional cable and media companies are trying to hang onto their subscribers through their own initiative called TV Everywhere. The service requires online viewers to complete an authentication process in order to see shows on the Internet and mobile phones.
Consumer groups complain the effort is anticompetitive and have filed complaints with the Federal Communications Commission. The agency declined to comment on the matter.
At least for now, the cable and satellite firms have Hollywood on their side. Content providers get far more money from their traditional partners than online broadcasters.
"There are significant financial and strategic reasons why owners of content will continue to make it available through cable and satellite in ways that are much more economically compelling to consumers," said Naveen Chopra, senior vice president of corporate development and strategy at Tivo. The Silicon Valley set believes consumers, for now, will hang on to their cable and satellite subscriptions and supplement their viewing with Internet TV.
Analysts say many of these issues will come to a head through the federal government's review of Comcast's proposed merger with NBC Universal. Senator Herb Kohl (D-Wis.) has asked the FCC to make sure the deal doesn't withhold Internet versions of NBC and Comcast programs from competitors.
Colin Crowell, a former senior adviser to the FCC chairman, noted that the agency and Congress have a history of helping nascent video distributors compete with large incumbent companies.
"The idea was to create an environment where the consumer was king," said Crowell, head of consulting firm, Crowell Strategies.
So far, the experience for consumers who have made the leap to Internet TV has been decidedly mixed.
Last month, Lyla Max and Tom Paffel cut off their $175 cable bill in favor of paying $15 a month for high-speed Internet. They get shows for free off Hulu.com or occasionally buy episodes of "iCarly" and "SpongeBob SquarePants" from iTunes for their 7-year-old daughter.
But it hasn't been easy. The Marin, Calif., residents watch episodes of "The Office" and "Parks and Recreation" online, but days and even seasons later. Lyla gets her "junk food TV" fix with "The Real Housewives of Orange County" too, but only a few episodes are available online. Forget big sports events, which aren't live on the Web.
"I keep hearing there is all this great content on the Web, but I need help," Max said. "I just can't find it."