More Pressure for Changes to Pay TV

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We’ve been following for some time now the jockeying for position that has been going on in the entertainment industry. The past weekend brought a new offer from Verizon Communications Inc. (NYSE: VZ), another blast from Barry Diller of IAC/InteractiveCorp (NASDAQ: IACI), and news from Amazon.com Inc. (NASDAQ: AMZN) on producing its own original content.

Verizon and Amazon are taking different approaches to the issue of content. Verizon wants to pay for content based on viewership, an approach that has never appealed to content providers like the broadcast networks or the cable channels or the movie studios. The content providers, like The Walt Disney Co. (NYSE: DIS), which owns ABC and ESPN, and CBS Corp. (NYSE: CBS) have resisted any attempt to split up their offerings in any way.

Amazon, following the path set out by Netflix Inc. (NASDAQ: NFLX), will produce 11 pilot programs of its own for its Amazon Prime viewers. The company plans to broadcast all the pilots and produce further installments of those that pull viewers.

Diller and IAC, through an investment in a small company called Aereo, is using a scheme that really outrages content providers. Aereo makes a small antenna that it uses to capture broadcast signals and then converts the signal to a stream than can be delivered over the Internet to any connected device. So far the system has only been tested in New York City, but Aereo is about to roll out the service in 22 cities. Aereo won a court battle last summer preventing an injunction against its plan, but the case has been appealed. This may be the biggest threat of all to the broadcast networks.

With assaults on the existing model of pay TV coming from every direction, about the only thing the content providers can do is resist on all fronts. Eventually, though, that strategy will cost the media firms viewers as consumers find their entertainment somewhere else.

Consumers are no longer willing simply to put up and shut up. They want access to TV shows, movies, music, and other content at the time and on the device of their choosing. The top-down model the networks and media companies like is eroding and they won’t be able to beat back every assault that’s coming.

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