Hollywood has long specialized in artfully managed, highly profitable scarcity. A new film debuts in theaters. Months later, it arrives on DVD, Blu-ray and pay-per-view. Next, on premium channels like Showtime. When the flick finally gets sliced to smithereens on some basic-cable station, you know that pretty much every last nickel has been squeezed out of it.
Reinventing this time-tested business model for the Internet age hasn't been easy. Increasingly, consumers want to watch whatever they want whenever and wherever they choose, on an array of gadgets--TVs, PCs, smart phones and tablets. Studios and networks are working to make that happen, and despite the pesky holdouts (no American Idol, no regular-season NFL), the proportion of programming that's available online has never been higher. At the same time, content owners remain cautious about doing anything that might cause too many folks to switch off prime time, stop buying DVDs or quit paying for cable.
In 2012 the way we watch TV will continue to be shaped by these conflicting agendas--innovation tempered by paranoia. "A lot's going to change," says Phillip Swann, president of the industry news site TVPredictions.com "And it's all going to stay the same."
Just look at Netflix. The company that crushed the once mighty Blockbuster by mailing DVDs and dispensing with late fees now has more than 22 million customers streaming movies and TV shows over the Internet. Netflix has made its way onto more than 700 kinds of devices, including HDTVs, game consoles, smart phones and tablets. It's also on middlemen like TiVo and the sandwich-size Roku, which offers access to tons of channels via the Internet.
Netflix is starting to view premium-cable channels as archrivals--and to act like them too. To shore up subscriptions, it is helping produce exclusive content, including an Americanized remake of the BBC series House of Cards in 2012 and new episodes of the canceled cult favorite Arrested Development in 2013. It will also start streaming DreamWorks cartoons before their cable debuts.
Netflix's new ambitions help explain why Starz terminated its distribution pact with the streaming service, a decision that will deprive Netflix subscribers of Disney and Sony releases starting in February. It's also why HBO (a subsidiary of this magazine's parent company, Time Warner) is adamantly uninterested in selling such shows as Boardwalk Empire and Game of Thrones to Netflix or Hulu, the streaming service that's a joint venture of all the major broadcast networks except CBS.
But the cable companies that aren't playing nice with third-party streamers like Netflix aren't trying to undo Internet TV; they're launching their own watch-us-anywhere services. HBO is ramping up HBO GO, which puts its current programming lineup and past seasons onto PCs, smart phones and tablets. Starz says it's working on something similar. Comcast offers 65,000 on-demand choices from its Xfinity TV website and apps combined. And since none of these companies want to encourage consumers to dump cable TV altogether, they are making their Internet services available exclusively to people who pay for conventional cable. Cut the cord and the Net services go away too.