RealNetworks streams content from cable nets: operators keep eye on 400,000-subscriber service

Cable World, Dec 10, 2001 by Staci D. Kramer

RealNetworks is taking video on the Internet to the next level with a new subscription video-on-demand service featuring content from CNN, Fox Sports Net, The Weather Channel and E! Entertainment.

With 400,000 subscribers, the streaming media company is even billing itself as the 12th largest multiple system operator (MSO), even though it doesn't really offer the full programming schedule of those channels.

While much of the content is being produced specifically for RealNetworks by the cable programmers, which receive subscriber fees in return, Fox Sports is making all of its material available on demand after it appears on cable.

In the past, cable operators have been concerned about the streaming of cable programming over the Internet, but MSO executives had only relatively modest concerns about the RealNetworks' RealOne service--so long as certain lines were not crossed.

"We're not opposed to streaming. That's ludicrous to think a [Paul Allen-owned] Wired World company would be," says David Andersen, SVP-communications at Charter Communications, which earlier this year battled ESPN over plans to stream parts of ESPNews. What Charter doesn't want is entire channels "made available to anybody who has access."

AT&T Broadband VP-programming Allan Singer says he is keeping tabs on the new venture just as he does with any change that could affect the value of his own product.

"There's a line out there, and it's a pretty tight line," Singer said. "If they are just taking existing programming that we're paying for or our customers are paying for, [whether it's] free or under another business model, we're not that interested in carrying that programming anymore."

Singer says there are other factors to consider in evaluating cable programming that's also being streamed. "One is the timing. Two is the quantity. Three is what the product is or how it's presented, and we're trying to work with our partners--the line differs for various networks--to see what makes sense for them. We don't want to inhibit them from things that are mutually positive."

Before signing on with RealNetworks, CNN parent Turner Broadcasting contacted some cable operators.

"We did discuss this with a couple of our clients in advance, especially the ones that were worried streaming video content was going to appear in two separate locations. And, yes, we felt pretty comfortable when we did it that this was going to be perceived by them as a pretty positive step--and it has been," says Andy Heller, Turner president of domestic distribution. "I'm not interested in cannibalizing my business, nor am I interested in cannibalizing the cable operators' business.

For Turner, and other programmers, the three-year deal with RealNetworks offers the chance to test a new distribution model. "It puts the product behind a subscription wall, and we get to figure out whether the consumer's going to like that or not like that," says Heller.

RealNetworks president Larry Jacobson says the new service is complementary to--not competitive with--cable. "Cable does not have the ability to deliver this kind of service," he said, referring to, among other things, Real Networks' right to stream music from more than 10,000 artists.

As for drawing viewers away from cable, says Jacobson, "that question's been asked for many years. Time and again what we've seen is more choice relates to more revenue and also more time spent. A lot of this is about access and being able to get what you want when you want it."

Content is available at a variety of speeds but works best in broadband, something RealNetworks executives and programmers tout as a plus for cable operators selling high-speed Internet access.

Jacobson is willing to make revenue deals with MSOs that offer his service to their high-speed-access subscribers. But with programmers offering operators customized content for their broadband services, large operators are unlikely to see any benefit to working through RealNetworks. Smaller operators without the infrastructure to address the complications of customized broadband content may be more interested, however.

AT&T's Singer and Charter's Andersen both see the value of cross-pollination in attracting cable and high-speed subscribers. But, says Anderson, "what the programmers have to remember is their viewers are our customers, and ... we protect our customers the same way we protect our kids and our families."

RealOne starts life with the 400,000 subscribers who were paying $9.95 for its older service, GoldPass, which debuted in August 2000. That would place it after RCN Corp. (471,567) and before No. 12 Classic Communications (352,600) on Cable World's ranking of the Top 25 MSOs.

"We think this is the biggest subscription video-on-demand service in the world right now," Jacobson says.

Among other activities, subscribers can listen to every Major League Baseball and National Basketball Association game, create their own highlight reels, listen to streaming music, watch brief newscasts or "QuickCasts" produced by CNN and call up sports reports from Fox Sports Net. Other content providers include Viacom's CBS and Walt Disney Co.'s ABC News. Some content is available for free.