Content + Business Model = Bandwidth Breaker

Internet-delivered video is wonderful, but who’s going to pay for it?

There’s an interesting WSJ article about Move Networks that attempts to get down to brass tacks about the business model for content distribution. In a nutshell, the article asks whether content producers will sign on with Move’s business model. The article features several quotes from my former colleague, Boyd Peterson, who identifies the primary issue of content rights and business model.

But the article forgets to mention the underlying question. Let’s call it the “Project Canvas Question.” I’ll pose that question here:

What Are The Economics of Internet Access Outside of the Triple Play?

Or more appropriately, how expensive will Internet access be if everyone in the U.S. gets rid of their cable TV, IPTV, and/or DBS services and starts watching online? The conditions would be as follows:

1. There would be no Pay TV services financing the cost of production and distribution for hundreds of channels of programming;
2. The triple play (of voice, video and Internet access) ceased to be, thereby ending the infrastructure subsidy for Internet access services; and
3. The majority of multichannel video would shift to Internet delivery bypassing existing multichannel infrastructure.

Several parties in Britain have attempted to address the issue of delivering large-scale BBC iPlayer services, and the economics keep falling apart. The so-called “project canvas” is an honest attempt to reconcile the distribution costs of Internet video with the consumer marketplace, and ISPs are taxed to deliver high-quality bandwidth at a reasonable price.

For now, the question is really whether consumers will be willing to pay more (as in higher prices) for less (fewer channels, programming, etc.) Internet-delivered video.

It’s easy to look at the current multichannel infrastructure and to posit that we can simply shift the programming from one network to another. But it just isn’t that simple. In the case of cable TV, Internet access piggy backs on the cable infrastructure. And the model for triple play is predicated on the video traversing the most efficient (multichannel, not Internet) network.

When push comes to shove things will look very different than we envision. Move Networks is doing some very interesting things, but we need to stop asking ourselves whether they’ll succeed and start asking what things will look like when Move succeeds.

Tagged as: internet, Move Networks, multichannel, OTT