Washington Post business columnist Steven Pearlstein was online Wednesday, Nov. 9 at 11 a.m. ET to discuss video on demand.
In his column , he writes that, for years, the entertainment industry tried to fool us -- and itself -- into thinking that it only prospered by giving consumers what they wanted. Thanks to video on demand, he adds, we are now discovering what a big lie that was.
About Pearlstein: Steven Pearlstein writes about business and the economy for The Washington Post. His journalism career includes editing roles at The Post and Inc. magazine. He was founding publisher and editor of The Boston Observer, a monthly journal of liberal opinion. He got his start in journalism reporting for two New Hampshire newspapers -- the Concord Monitor and the Foster's Daily Democrat. Pearlstein has also worked as a television news reporter and a congressional staffer.
His column archive is online here .
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McLean, Va.: With high-speed internet providers largely coinciding with cable companies and the existence of many non-competitive cable markets, is there a chance that such companies could somehow limit the delivery of web-based entertainment?
Steven Pearlstein: Yes, the cable companies would dearly love to restrict access over their wires to suppliers who give them kickbacks (they use nicer words than that, but they amount to the same thing). Whether they can do that is another question. A recent court decision seems to suggest they can dictate the choice of Internet service provider, but whether that extends to what video service you chose -- on that I'm not so sure. Congress will have to sort all this out before too long, as well as the FCC. But as long as consumers have an alternative source for their broadband servce, I suspect the market will make it difficult for the cable company to dictate your choice of service. They may be able to steer you in one direction with a pricing package, and I'm sure they will try. But they'll only be able to take that so far, or risk losing all of your business.
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Northampton, Mass.: With VOD, and Internet VOD in particular, the industry does not give consumers what they want; it tries to control customers. In the long run, this threatens to hurt the movie industry because it will ultimately have to compete with free. Things like restrictive DRM controls make the user experience significantly worse than free.
In full disclosure, I have to tell you that I am the CEO of a movie download service. We reject DRM and we reject most of the controls other people want to place on legitimate customers and how they use content that they paid for.
Best Regards,
Jim Flynn
CEO, EZTakes
Steven Pearlstein: Sorry, Jim, but you'll have to explain your insider terminology (jargon, I think they call it). What's DRM and DRM controls?
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Danvers, Mass.: Will this new competitive environment have any effect on the copyright maximization strategy of the studios?
Steven Pearlstein: The copyright issues are big and growing. I can't really sort that out right now other than to say that the courts are favorable to the industry and the industry has bought and paid for the Congress so they will get tighter and longer copyrights. This is anti-consumer and anit-innovation, not pro-innovation as the industry reflexively argues. Its another of their big lies.
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Seattle, Wash.: I've been in the TV biz for just over 20 years, and am excited at the major business model/paradign shift we're going through. Am wondering if you think the new VOD/video iPod/"snack video" business will have enough room for small Producers outside of Hollywood who offer alternative programming, or will it be totally dominated by the major networks and LA? thanks, scott
Steven Pearlstein: Both. I think it will open the market for small producers of all sorts, but I suspect the big guys will either buy up the small ones or grab some sort of hold over the distribution system so that the small guys have to deal with them in some way. Vertical integration is the obvious first strategy. But it won't be as easy as it has been in the past, because the essense of a networked Internet-based word is disintermediation -- the waning power of dominant intermediaries to determine who gets to play. If you produce something I want, it will be easier for me to find out about it and easier for me to get it (and harder for the big guys to prevent our getting together) than ever before. But there will be a fight -- count on that.
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Fairfield, Conn.: Will the on-demand versions of network shows be commercial free?
Steven Pearlstein: My suspicion is that you'll be able to buy it either way, with the commercial free way being more expensive. Somebody will figure out a way to repackage with non-commercials -- or the major netowrks will do it themselves, if it turns out to be that good of a business.
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Fairfax, Va.: Hi. My stupid question is: How come I can't just go to my TV, press a button, and order ANY movie or TV show episode I want (whether it's something new like "Desperate Housewives" or old like the 60s version of "In Cold Blood")? Will this ever be possible?
Steven Pearlstein: Yup, that's just what I was writing about. You will be. The only question is how quickly, at what price, and how much choice you'll have in which company will provide you with that service. One question is whther you'll be able to buy that from ultiple suppliers over a single distribution channel (say, your cable service, or your phone service ) or whether, at all times, you'[ll have a choice of providers over that "pipe." IN short, will the ocmpettion be to which pipe you'll chose, or to which provider over each pipe?
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Portland, Maine: Will the cable providers be offering more programs on demand? Will future cable franchises be able to cover this type of service?
Steven Pearlstein: Yes and yes.
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Arlington, Va.: After two years of VOD, the only thing I still enjoy watching on television are the programs on-air or what I have recorded with my DVR. How much of my monthly cable bill is inflated due to the VOD cost?
Steven Pearlstein: If you don't use video on demand (VOD), I assume there is not much of a cost associated with that, except perhaps a share of the capital cost of building that capacity into the system, if the cable company decides to allocate that cost to all users, rather than just VOD userse (sorry for the accounting stuff). That is something regulators ought to look at: how cable companies allocate their capital costs among the various classes of service. But I presume they can't do too much cross-subsidy without running thr risk that a competitor (a phone company, satellite) seizes the opportunity to offer basic service at a cost that isn't overloaded with excess capital allocation.
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Denver, Co.: so it won't be long before Blockbuster, along with others, goes on-line in real time to capitalize and deliver movies on demand to an ipod, cell phone, PDA, PC, etc.?
Steven Pearlstein: Right, except for the blockbuster part. That company may be bankrupt before too long. But there will be plenty of others.
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Fairfax, Va.: I got Tivo 2 years ago this December, a Christmas present. After just 3 days of use, my girlfriend and I had a discussion and it went something like this: "What are the networks going to do now? This is going to completely change television." I ask. She responded (and she was very skeptical of the machine before we set it up), "I don't know, but this is going to kill advertising." I am still amazed that they advertise Tivo on their broadcasts.
So what are they going to do? Are they going to increase the cost of the first and last commercials since you usually start skipping and ending at those commercials? Is there going to be more embedded advertising?
It's to the point now where I refuse to watch non-Tivo'd shows with the exception of live events. I am sure I am not the only one.
Steven Pearlstein: Well, you and your girlfriend were right. Network ad sales are already falling, along with cable ad sales (and newspaper ad sales!), in terms of their market share. And I don't know how it is going to turn out in terms of the balance between advertising-supported programming and paid content. But we know the general direction is toward paid content. Take the example brought to my attention the other night by my 18 year old son, who wanted to know why Disney was switching its MOnday night football next year from the ABC network to ESPN. And that's an example where Disney has figured out that it is better to have a smaller audience of people paying more (with some advertising support) than a wide audience with more expensive advertising but free content. Now that is not a perfect example, because it is essentially based on leveraging the NFL monopoly. But it is illustrative.
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Chicago, Ill.: Video On Demand is a great thing for consumers. Not only has On Demand allowed consumers to take control of their TV, it has also produced new television channels. Comcast introduced Anime to its cable line-up after it was a popular view on On Demand.
Steven Pearlstein: Exactly. And it turns out that the kind of movies that are getting a lot of attention from the Netflix crowd aren't the standard ones that Hollywood expected. Times are a changing!
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Arlington, Va.: Hi Steve:
I enjoy the On Demand service, but as a parent it concerns me. On Demand gives my children the opportunity to order (and for free) programs such as Sopranos and Rome (I like them both, but they are a little graphic for children) at any time during the day, as opposed to them normally only a playing during primetime-latenight without the VOD service. Given that I want to keep the service, what options do I have to protect my family from this?
Steven Pearlstein: Not sure at the moment. But some technology fix seems like a likely solution to your problem, which is probably quite a common one. We can already block X-rated stuff from coming in. Similar filters for other kinds of stuff should be possible as well.
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Freeport, Maine: Without advertising revenues, how will the industry sustain its level of developing new content? Would user fees really be adequate for that?
Steven Pearlstein: Yes, people will have to (want to) start paying for certain content, to some degree. Because the advertisers who use to pay for it, at very high rates, now have more cost effective, targeted alternatives. But don't kid yourself -- as a consumer, you were paying for that advertising-supported content, too. It's just the fee was hidden in theprice of huggies and toothpaste and GM cars.
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Alexandria, Va.: I agree about On Demand. I live in Northern VA and Comcast On Demand is great. The selection is huge, I have a hard time selecting a movie.
Steven Pearlstein: Great.
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Glenview, Ill.: With On Demand becoming all the rage, it's clear that the cable companies have the edge. They introduced this service years ago and consumers like myself have been enoying it for a long time. I hear that satellite companies are trying to tout their VOD service. My friend has it and it's laughable compared to what I have. His programs are on his set-top box and they disappear after a few days. How is that On Demand? True On Demand is library of programs that I can pick from anytime I want, not when my provider wants me to watch it.
Your thoughts?
H From Glenview.
Steven Pearlstein: Wait a few months and all will change. The cable guys are losing their monopoly over video content, but they'll be trying to make up for it by getting a share of the Internet service and telephone business.
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Washington, D.C.: I believe DRM is digital rights management -- the concept that the studio retains control over how the product is used regardless of the form. The guy who posted that clearly opposes it, but that's probably a topic for another day.
Steven Pearlstein: Studios will probably be able to assert a fairly high degree of control over how their copyrighted content is used, thanks to a supportive Congress and court system. The question really is the pricing.
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Washington, D.C.: Steve,
Part 1
FYI ... DRM is digital rights management ... and the studios and content creators, supported by the MPAA (Motion Picture Association of America) are very concerned with content copy protection as the want to avoid what has happened to the music industry given the digital age!
Part 2
VOD is protected in the settop box like other broadcast channels in that parental controls are enabled for VOD content and the foldering systems employed in the interactive program guide.
Steven Pearlstein: Thanks for that.
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Washington, D.C.: There's actually already a solution to keeping children away from questionable ON-Demand entertainment. It's called, telling your kids not to watch those programs, or you'll punish them.
It worked in my family.
Steven Pearlstein: Lucky you.
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Steven Pearlstein: Thanks, folks. Next up: journalism on demand. See you next week.
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