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Does Media Need to Be Free?

Once upon a time, back in the days of early cable television, the emerging infrastructure allowed local viewers to watch content from their local Big 3 affiliates (ABC, NBC and CBS), as well as from affiliates in other regions of the country (like WTBS' SuperStation and WGN from Chicago).

Then, a funny thing happened. Actually, two funny things.

First, new specialty channels like ESPN appeared, which broadcast games and sporting events from around the world 24 hours a day (like an expanded version of Wide World of Sports, ABC's prime time sporting showcase).

Then, after cable was comfortable with non-Big 3 speciality channels, new premium channels popped on to the scene. Those channels, such as Cinemax, HBO, and even some that have moved into package deals such as premium sporting channels, met a need that consumers had. In the specific case of the movie channels, consumers were willing to pay for early and commercial-free access to content that wasn't yet out on VHS or on the Big 3 with commercial interruptions.

The Big 3 were skeptical of the premium channels, because the advertising model was all they knew. But there was no denying, especially when HBO began to do original programming, that the pay-for-premium content model worked.

The Big 3 finally got their chance to try their hand at selling commercial-free content on an equal footing with their premium cable channel counterparts when multi-episode, full-season DVD bundles took off. And the model worked for the Big 3, with product such as The Office and 24 (from the "4th network" Fox) selling as well or better than those DVDs from HBO or other premium cable channels.

The model expanded again with the advent of video on iTunes Music Store, with NBC reaping a windfall on shows such as The Office being downloaded to iPods, iPhones and Apple TVs.

But the Big 3 must not have ever been completely comfortable with the pay-for-commercial-free content model, as NBC made its recent decision to move away from pay-for-play and toward free streaming of its content, complete with old-school advertising. CBS and ABC are also following suit.

Yes, you heard it right—free streaming TV on the internet, complete with advertising. And it's something the Big 3 are comfortable with and plan to use to their advantage. In a recent Financial Times article, which featured interviews with representatives from each of the Big 3, the networks made it abundantly clear that they are interested in retaining total control of the content.

"Ad-supported streaming is absolutely the future," said Quincy Smith, president of CBS Interactive.

Albert Cheng, VP of Digital Media at the Disney-ABC, which recently inked a deal to distribute its programs via streaming on AOL, agreed. "This is definitely something that’s here to stay," said Cheng.

Some analysts are predicting that paid downloads of TV programs will "amount to no more than a niche market." But others disagree.

"There are two user bases that this will affect," said Jose Castillo, president and founder of media consultancy ThinkJose LLC (and frequent contributor to StreamingMedia.com), "The first is the hardcore user who understands technology and can and will use BitTorrent to obtain what they want—premium content without commercials—for free. This segment is fairly small."

"The other group is of more concern, though," continues Castillo, "a broader base of users that has some technology skills but has grown accustomed to the ability to buy content that they want—and retain it."

Castillo also explains that the big decision point, despite the Big 3's comfort with control of the timing and placement of ad-supported content, is less about the inclusion of ads and more about the choice between downloading content—with access at any point—versus the temporary availability of streaming content.

"The value of unfettered content appears to be higher than 'free with ads' content," says Castillo. "Those consumers who choose to pay to download are also expecting to be able to watch it when they want to, whether they're connected or not."<>
All this leads to some interesting technology models that companies such as Adobe are exploring with their upcoming Adobe Media Player. But the bigger question that the industry needs to answer is this: If content is only available in one delivery model, and the choice has to be between paid downloadable content or streaming advertising-supported content, does media need, or even want, to be free?

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