Comcast/Disney deal ties Web streaming to cable subs

In its deal with Disney, announced today, Comcast will become the gatekeeper for access to Disney channel content, not only on its own cable network but on the Web as well.

Under the pact, ABC, ESPN and other Disney channel content will be streamed on the Web, but access will be restricted to users who already buy Comcast's cable television bundles. The move is, according to the Wall Street Journal, part of the industry's strategy, dubbed "TV everywhere, that aims to keep a new generation of viewers paying for cable service by tying traditional TV subscriptions to the online availability of TV channels."

This is not good news for fans of Web streaming services that provide alternatives to buying bloated packages of programming from the cable television and media cartels.

With cable bills and programming costs spiraling upward, both content creators and cable providers are worried that more users will cut the cable, and they're anxious to make sure that consumers can't bypass the gatekeepers to access that same content.

They're also not interested in offering choice by letting users pick and choose the channels they want to buy. That runs counter to the business model.

Forcing users to accept large blocks of channels in cable bundles allows content providers to spread the costs of very expensive programming -- such as sports channels -- across a wider customer base than if such programming was sold only to those who really want it by way of a-la-carte premium channels.

Today everyone pays for dozens-- and in some cases hundreds -- of channels they don't watch so they can view a few channels that they want to see.

ESPN is a great example of why the model is broken. It just signed up to pay $15.2 billion over eight years to broadcast NFL games. But ESPN is already the most expensive cable channel, adding $4.69 per month to the average cable TV bill, as reported in the Wall Street Journal story cited above, and that doesn't take into account the cost of all of those other sports channels that are included with your cable television bundle.

That's all fine and good if you're a sports fan. But think about this: If you don't watch sports programming on television you're paying for it anyway, in effect subsidizing those expensive broadcast rights to sports teams and astronomical player salaries.

In the case of ESPN, because you're paying more, sports fans in effect pay a little less. The very fact that sports programming is bundled and that virtually every cable television suscriber in America subsidizes it has allowed content providers to pony up more for sports programming -- and for sports franchises to charge higher prices for broadcast rights.

What would happen if ESPN were presented as a premium channel and the full cost of that programming were priced into the offering? Cable subscribers that did not want sports programming would no longer be paying for it. With a smaller audience across which to spread the costs, the pricing for ESPN would be higher for the sports fans who actually consume that programming. Supply and demand would be properly aligned. And a day of reckoning might finally be at hand.

In a sense, the bundled business model amounts to socialized programming. It misaligns supply and demand for individual channel content, increases costs for consumers and restricts choice. Some users are already starting to rebel against rising prices for fat cable television bundles, which have tripled over the last 10 years. Hopefully, the players that succeed on the Web with content streaming will be those that come up with innovative new business models, and not those that attempt to perpetuate the old ones.