ROW: Rest of the World

People keep asking why none of the new online TV services support international customers. People (rightly) point out that international fans shouldn’t get a second class experience and that the web is “world wide.” All true.

So what don’t the studios get?

They get it but unfortunately the problem here is (surprise) money. In the pre-internet world of entertainment, local partnerships were the key to business. Whether this meant local affiliate stations or foreign networks, the studios simply sold their content to these partners. This approach had many benefits. Namely, distribution meant delivering a tape and that was it. Simple.

Since television has historically been an ad supported platform, ads have to be sold for the content to be profitable. In the US this ad time is split 50-50 between the local affiliate and the studio distributing the show. (Note: Not sure if this is the standard deal amongst all syndicated shows or not but I know it is commonly the case. Also not sure if it is always the case that the affiliate does not pay for the show but just gives the studio the ad time. Feel free to chime in if you know.) This is why you can be at home in Boise and watch the 7pm airing of Friends and see some ads for national companies (Tide!) but then see an ad for a local business (Crazy Eddie’s!). The studio sold the spot to Procter & Gamble and the local affiliate sold their spot to Eddie. In the US, this is a fairly workable system. The studios have ad sales departments that sell the national ad inventory.

But the situation becomes much more complex internationally. Selling ads to a Norwegian company for the local airing of Friends is much more difficult. Besides the language issues, there are bound to be different standards for pricing, laws, etc. Multiply this by all the countries that want to air Friends. The easy way out is to just sell the broadcast rights in that country to the highest bidding network. Then the network sells the ads.

So what does this have to do with internet distribution? Well, there is no infrastructure at the studios to sell ads against episodes streamed into different countries. Since on the internet the studio is the distributor, they need to sell the ads. Can this problem be overcome? Sure thing. Somebody will figure it out or a start-up will launch a service.

But one more thing… What about the millions of dollars being made by selling the shows to foreign networks? In a studio, every division is responsible for growth. It is not an easy choice to cut TV sales departments off at the knees in favor of an untested online international distribution platform. Plus there may be mulit-year contracts in place. And what happens if you piss off the foreign network by launching your international streaming service? Will they drop your other shows? What if your service tanks and you have to go back to that network?

These are hard questions. I think international online distribution will come but its a big leap for a large, slow-moving corporation with a successful revenue source to make.

- MediaBits

Next – Panic at local affiliates