Media Firms Take Action Against Google TV

NEW YORK ( Trefis) -- News Corp. ( NWS) and CBS ( CBS) announced recently they will be blocking Google ( GOOG) TV from offering their shows for free over the Internet. The move mirrors the strategy previously employed by other media companies like Viacom ( VIA).

So what's provoking these media conglomerates to take action against Google TV?

Rise of Online Platforms Threatens Key Revenue Streams

The broadcasters are concerned that allowing Google TV users free access to their content could threaten critical revenue streams -- advertising revenue, programming rerun revenue, and regular carriage fees from pay-TV providers.

As CBS CEO Leslie Moonves said: "The mother lode is network advertising and syndication. Do I want to jeopardize that -- yet -- for a couple of bucks?"

Pay-TV service providers like Comcast ( CMCSA), Time Warner Cable ( TWC) and DirecTV ( DTV) are also growing concerned with the rise of online platforms that offer content at cheaper rates. The last thing they will want is Google impeding on their TV viewership foothold.

Watching content on your computer is one thing, but the ability to conveniently stream the same range of content on your TV (for free) could add a new level of competition that pay-TV providers are likely hoping to avoid. Consequently, we believe that there is going to be pressure from the pay-TV providers, in addition to broadcasters, to hinder Google TV's expansion.

Lost Ad Revenue Will Necessitate Higher Content Acquisition Costs

It's estimated that the prime-time shows viewed over the Internet have about four minutes of advertisements per hour compared to 16 minutes for regular broadcast. Since ad revenue is directly related to the number of advertisement slots, it is likely that Google won't be able to compensate broadcasters for the loss of ad dollars resulting from a shift away from traditional TV towards Internet viewing.

The traditional TV advertisement market is still very lucrative, with about $180 billion of expected global sales in 2010. This is still three times the size of Web advertising. Clearly, Google would like to grab a piece of this market, but unless the company can fill the ad sales gap it may not get its hand on much of the content.

News Corp Ad Spots -- via Fox Network

CBS Weekly Ad Spots -- via CBS Network

Can Online Platforms Bear Content Acquisition Costs?

Pay-TV service providers, due to their significant base and high fee per customer, have the purchasing power and ability to pay for their content. Online platforms seem to lack the same ability. Take for example Netflix ( NFLX), which extracts a fee of a mere $11 per month per subscriber (estimated). How much content can other online platforms, with weaker ad revenue potential than pay-TV providers, really afford?

Google TV currently seems to be a complimentary service for customers who already subscribe to some of the less advertisement-dependent channels via their pay-TV service provider. This includes premium channels like HBO and cable networks like TNT and TBS. But for broadcasters, Google TV still needs to come up with a better proposition that won't hamper their revenue growth.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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