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No pay, no play pt2 RE-vision 2009: Executives from FremantleMedia, All3Media, ITV and Channel 4 discuss the issues around moving to a pay model for online video, as fears mount that free ad-supported isn't delivering. Jonathan Webdale reports. News Corp's new chief digital officer, Jonathan Miller, last week extended chairman and CEO Rupert Murdoch's recent comments about charging for online content to Hulu. Miller's suggestion that he could foresee a time when it made sense to charge for Hulu also mirror the previously aired views of NBC Universal CEO Jeff Zucker. Whether Miller and Zucker, whose respective employers are Hulu shareholders, consulted the company's CEO, Jason Kilar, before making their statements is unknown. But some within the Hulu camp, such as senior VP of content acquisitions and sales Andy Forssell, have said that introducing pay elements to the site might be on the horizon, particularly when eyeing expansion beyond the US. The UK is firmly within Hulu's sights but the market poses unique challenges due to the presence of the BBC, which is able to sustain a free-to-view internet video model thanks to the licence fee. Some believe that the huge success of the BBC iPlayer is only serving to cement the view in consumers' minds that anything online should be free. But the free ad-supported model isn't delivering the returns to TV companies that will sustain them moving forwards, and there's growing support for exploring paid-for options. The debate is becoming acute as the economic downturn bites and the government prepares to publish its Digital Britain report next week - a media policy blueprint for the future. The BBC's Project Canvas plan to develop an open IPTV standard is also on the cards, and if successful would likely accelerate the uptake on on-demand. "The BBC will need to reconsider the positioning of iPlayer as a free service if on-demand is to have the potential to generate significant new revenue streams for the industry as a whole," says the Digital Britain submission from TV production giant FremantleMedia. The company is aiming to persuade the BBC to adopt a pay-per-view model for on-demand programming. Clearly this was the BBC's intention through Project Kangaroo, its commercial arm's proposed joint venture with ITV and Channel 4, which was given the kibosh by the competition authorities in February. Quite how BBC Worldwide revises its digital strategy as a result remains to be seen, but what FremantleMedia CEO Tony Cohen seems to be advocating is a review of the windowing arrangement on which the iPlayer operates - currently seven days streamed, or 30 days after download. "Because they have the iPlayer, the BBC sees catch-up and online as free and the point I'm making is if that's all we ever see, then it's not going to help grow the industry or continue to invest in production," he says. "You can't make something out of nothing. There has to be another revenue model here and it's clearly at this point not coming from advertising." Fremantle is one of the world's biggest production companies and certainly one of the largest in the UK, where it is not alone in its appeals for a wider rethink of how broadcasters are offering viewers the content they produce for them. The company is particularly keen on micropayments. All3Media, another of the territory's major players, has voiced similar opinions, CEO Steve Morrison recently calling for the BBC Canvas initiative to put thoughts of pay at the core of its conception. All3 digital media director Andy Taylor elaborates. "A viewer on a VoD platform is worth less than a viewer in the linear schedule because there are more ads served around a TV programme when you watch it in linear, so on VoD you make less money," he says. "As things like Canvas start happening, which result in more VoD viewing, you're going to see a reduction in the value made from content. We actually think Fremantle made quite an interesting point in terms of micropayments." But Taylor says that the debate needs to centre on the development of new services such as Canvas, rather than trying to apply new rules to online content that has already been made available free-to-view.  The piracy issue, which plagues the internet and has entrenched the idea in consumers' minds that they don't have to pay for content, is less of a problem in a set-top box environment. There's also an opportunity to introduce a more seamless pay mechanism - an area where micropayment has historically struggled - say at the point when the consumer purchases their Canvas device.As one of the plan's main backers, ITV's views on the matter of free versus pay are particularly of interest. The company's brand partnership director Gary Knight (above), who took charge of online advertising in April, admits that the broadcaster is exploring the potential of pay after 50 years as an ad-driven business. "We are looking at whether there are pay options out there for content in lots of different areas and under what circumstances customers will participate in that. We're looking at micropayments and things like that," says Knight. He stresses, however, that ITV's intention is to remain a free-to-air broadcaster across all its content. "That's absolute our first priority. Only if we cannot run an economic model that makes sense for us as a company would we consider changing. But you have to look at what's happening in the market now." Knight believes it would be hard for ITV to switch to micropayments for catch-up, also highlighting how the BBC's presence would complicate such a move. "When you've given the great British public the iPlayer for free it's bloody difficult to come along and say the ITV Player's going to cost you," he says, adding that there's more scope beyond the company's free 30-day window.  It is in this domain that ITV too would have potentially benefited from Project Kangaroo. Knight will not comment on speculation that ITV is one of the parties Hulu is in discussions with about launching in the UK as a joint venture, but some pundits make it odds-on favourite.Naturally, Channel 4 has been linked to Hulu as well, and naturally, is also not saying anything on the subject. When the company launched its 4oD catch-up TV service in December 2006, it did so offering programmes on a pay-per-view basis, priced between 99p (US$1.14) and £1.99 per episode. The intention was to introduce a free-to-view ad-funded option the following April, but this was brought forward to beat the relaunch of ITV.com. C4's head of VoD and channel development Sarah Rose (above) claims the decision was, in fact, taken because the company was "overwhelmed by advertiser demand." She denies the 4oD pricing was too high, but usage has undoubtedly grown since the shift to free-to-view and, more recently, streaming via Channel4.com. The company has this week gone further, making its archive programming available online for free. "It's a very simple question of economics for us; it's what makes the most money. You make a lot less money per ad-funded view than you do per pay-funded view, so you have to have a lot more ad-funded views to make it worthwhile. But if you can get enough people to pay then it's worth it and we'll just trial lots of different models," says Rose. "What Fremantle is talking about with micropayments is interesting because who knows long-term whether money will move from linear to online, whether we need to be as rigid with this as we are in broadcasting. We want to keep our options open, but for now we'll follow demand and the demand is advertiser-led."  Right now, online video remains a drop in the ocean relative to the rest of the TV market. Brian Wieser (left), global director of forecasting at Magna Insights, estimates that currently online consumption of professionally produced content accounts for 1/200th of the total amount of time audiences spend with traditional TV. Even by 2013, the figure will only rise to 1/100th, he says."The total time spent with traditional TV per person will be something like 1,500 hours per year, while the total time per person on average spent with online video per year will be about 15 hours," says Wieser. "But there is the risk, not least in the minds of investors, that that 15 hours is going to be more like 150 hours." Such concerns, heightened by the economic crisis and initiatives like Project Canvas that threaten to accelerate major changes in viewing behaviour, mean that the debate about free versus pay is only set to intensify. Even Tiki Bar TV is beginning to explore charging for its output, as sure as sign as any that there may indeed be some truth in Murdoch's claim that the days of free internet content will soon be over. If they are not, then those of quality, professional content may be. Click here for the first part of No Pay, No Play, or here to read the print version in the current edition of C21's FutureMedia magazine. Jonathan Webdale 11 Jun 2009 © C21 Media 2009 
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