Online video is looking more and more like cable

Josh Wein

When CBS (NYSE: CBS) and Time Warner Cable (NYSE: TWC) failed to reach a new carriage agreement this month, the dispute did not just affect Time Warner Cable's video subscribers. The cable operator's broadband subscribers also lost access to CBS shows on CBS.com.

It's not a new tactic. In 2010, when Fox and Cablevision (NYSE: CVC) clashed over retransmission fees, the broadcaster made a similar move. In that case, Fox quickly reversed course after some pressure from Washington, D.C., came in the form of a letter from a veteran legislator. This time, no such letter has yet materialized and CBS.com remains blocked to TWC subscribers.

Episodes like this are quite common in the cable industry, which is what the online video industry increasingly resembles. The fact that CBS.com video streams are unavailable to Time Warner Cable subscribers at the moment is just one way online video has come to resemble cable. In other technical and strategic ways, online video is beginning to mirror the cable industry as well.

Like cable networks such as HBO or USA, online video companies are increasingly investing in original and exclusive programming. Each week seems to bring a new headline about Netflix (Nasdaq: NFLX), Hulu or Amazon (Nasdaq: AMZN) ordering or testing new original shows. In many cases, these online outlets are competing directly with the traditional cable networks for the exclusive rights to these shows.

The network architecture behind online video is also beginning to more closely resemble cable. Netflix's Open Connect system is putting local copies of popular videos within an ISP's footprint. Other online video providers are relying on traditional content delivery networks to do the same. In some cases, these copies sit on servers in close physical proximity to the cable operator's own video-on-demand servers.

From a technical perspective this makes sense. The closer a video file is to the viewer who is watching it, the less time it will take to deliver it. That gives the viewer a better experience and helps reduce unnecessary clutter on other parts of the network.

The similarities between online video and cable may be the most apparent in the case of Aereo. After winning some important courtroom victories, Aereo has been deploying its service, which delivers local TV station signals over the Internet to its subscribers for a small monthly fee, market by market. In each area it enters, it must build its patented array of microantennas and DVRs. In other words, Aereo is building local content ingestion and distribution facilities in every market where it operates.

And Aereo's product--access to broadcast TV stations--is essentially identical to the product cable operators sold when they first began operating.

Some critical differences do remain. A customer can't access online video without first connecting to the Internet. And if that customer is at home, he or she is probably doing so through a cable operator. But there's some irony--or maybe inevitability--to the idea that what the online video industry is building looks a lot like something that already exists. --Josh | +Josh Wein | @JoshWein

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