NBC's Zucker defends Olympics online strategy to Sen. Kohl
NBC Universal Chief Executive Jeff Zucker just got back to Sen. Herb Kohl (D-Wis.), who complained a little over a month ago to the network over how it was offering the Olympics online.
In his letter to NBC dated Feb. 26, Kohl took issue with the network's strategy to offer much of its Olympics coverage online to people who already subscribe to an existing pay television service such as cable or satellite. Kohl, who is chairman of the Senate Antitrust Subcommittee, did not say he was against the idea of people having to pay to watch the Olympics online, but wondered what stopped NBC from just charging people directly instead of requiring them to already subscribe to a cable or satellite service.
The network's decision, he wrote, raises questions as to "why NBC requires consumers to have pay TV subscriptions in order to access Olympic coverage on-line, rather than offering viewers the opportunity to purchase this select Internet content and in order to collect revenues directly."In his four-page response, Zucker noted that the fees that cable, satellite and other pay TV providers pay NBC for their cable channels that carry the Olympics help the network foot the bill and have allowed NBC Universal to "consistently increase both the number of ad-supported television hours available on the NBC broadcast networks as well as the number of hours available to subscribers of MVPDs [multichannel video programming distributors]."
Zucker also brings up the ghost of TripleCast in explaining why the network did not create its own pay option online. In 1992, NBC teamed up with Cablevision to offer three channels of pay-per-view Olympics and it was, Zucker wrote, "not successful." Zucker's being kind. It was actually a pretty big flop.
Though it's true that the TripleCast did not work, that was also almost 20 years ago. The big concern of NBC is that it does not want to alienate pay TV distributors by offering a way for consumers to watch content online. There is great concern among distributors that as more programming migrates online, either for free or for pay, consumers will start to cut the chord to their pay TV services.
This issue is only going to heat up as the cable industry rolls out its TV Everywhere initiative. NBC Universal, of course, is in the process of merging with cable and broadband giant Comcast Corp. In his letter to NBC, Kohl wrote that he worried if the network's Olympics online strategy is "a harbinger of things to come" and went on to say, "it is our view that video over the Internet has the potential to become a significant competitive alternative to traditional pay TV subscriptions, and it appears that policies such as the one described in this letter may have the effect of limiting the prospects of such competition."
In other words, this is going to be fun to watch play out.
-- Joe Flint