Sony and Viacom Reach Tentative Deal to Stream Cable Channels

The agreement is believed to be the first of its kind between a major programmer and any of the technology giants that are trying to disrupt traditional modes of TV delivery. If other programmers follow suit, Sony’s as-yet-unnamed service would let paying subscribers receive live cable channels the same way they use on-demand libraries like Netflix or Hulu. Intel and Google are working on similar services, but try to make it more user-friendly, perhaps the way Netflix does with personalization features and a fancy interface.

Most households today have only a few choices for television service: whatever cable company serves their local area, be it Comcast, Time Warner Cable or others, and two satellite providers, DirecTV and Dish Network. In some parts of the country, television through Verizon or AT&T is also available. Analysts say cable delivered through the Internet could give households many more choices — if the new services give customers more for their money and if cable incumbents don’t smother the services.

To even have a chance, companies like Sony and Intel need the permission of programmers, and that’s why the Viacom deal is considered a breakthrough. Although Viacom and Sony declined to comment on Thursday, a person directly involved in the negotiations confirmed a Wall Street Journal report about the agreement. The person insisted on anonymity because the companies were not prepared to comment on the record.

Having the news spread was advantageous for Sony, though, because having Viacom on board — even just on a preliminary basis — will most likely help the company complete other carriage deals. The company has also contacted other top programmers, like the Walt Disney Company and Time Warner.

That Viacom — which has more than 20 channels, including big ones like Comedy Central and small ones like Centric — was the first to agree to support Sony’s fledgling service is not necessarily surprising, since the company has a reputation for contentious relationships with cable and satellite companies. Last year, Viacom channels were blacked out in DirecTV households for nine days. Sumner Redstone controls both Viacom and the CBS Corporation, which is blacked out in three million Time Warner Cable households because of a contract dispute.

Time Warner Cable, and to a lesser extent other TV providers, has thrown up roadblocks for new entrants by inserting language into some carriage contracts that discourages programmers from selling its channels to Internet TV services. The existing providers say they just want to ensure that the upstarts don’t get better terms, like broader video-on-demand rights or cheaper rates for channels.

Most likely, Sony will pay higher rates — one of the downsides of being new and untested. Any deals between programmers and the Sonys of the world will keep the TV bundle intact, despite occasional public agitation for an “a la carte” option.

“I don’t think the classic pay TV subscription bundle model of television is going away anytime soon — it’s a pretty compelling and cost-efficient smorgasbord,” particularly for older Americans, said Tim Hanlon, a former media agency executive who now runs the Vertere Group. “But all bets are off with the under-40 set — the growing group of folks who just want their video content when and where they want it, preferably without the messy commitment part,” he added.

Sony is well-positioned to reach younger Americans because its PlayStation video game console is already hooked up to TV sets in tens of millions of homes. The company has said almost nothing about its intentions, but it has been interested in selling a bundle of channels at least since 2011. Its TV service could also be made available in the future via smartphones, tablet computers and other devices.

Sony hopes to start selling the service in the fourth quarter of 2013 or the first quarter of 2014, said a media company executive briefed on the plans for it.

If Sony’s service (or another one like it) gets off the ground, incumbents like Comcast, Time Warner Cable and Verizon are also likely to sell their own versions, furthering this new type of competition. What no one knows — but everyone in the industry wonders — is whether these Internet cable services will steal market share; entice people who do not currently pay for any channel bundle to sign up; or fail to sign up customers at all.

The overall number of American households paying for television has remained remarkably steady in recent years, though there are some slight signs of fraying around the edges. Mr. Hanlon said he sensed that as younger viewers were getting better at “cobbling together their own workarounds to all-or-nothing content packages,” the “smart programmers are starting to carefully position themselves to take advantage, just in case the classic carriage model starts to break.”

Of course, all of the alternatives being dreamed up in Silicon Valley and elsewhere are B.Y.O.B. — Bring Your Own Broadband. Video is data-intensive, and data caps or stiffer monthly charges for broadband imposed by companies like Comcast could inhibit the establishment of virtual cable services. In a recent interview, the departing Time Warner Cable chief Glenn Britt acknowledged as much when he was asked about Intel’s interest in TV.

“The reality is, if everybody watched TV over the Internet, and we were out of the TV business, then we would have to recover more money from the Internet service,” Mr. Britt said.

YouTube Introduces First Pay Channels

The first paid video channels appeared on the sprawling video Web site, a unit of Google, Thursday afternoon, with subscription rates ranging from 99 cents to $7.99 a month. The early participants include Sesame Workshop, the producer of “Sesame Street,” which streams full episodes of the children’s show to paying subscribers; Ultimate Fighting Championship, the mixed martial arts league, which streams classic fights to fans; and The Young Turks, a progressive talk show.

YouTube identified about 30 of these partners on Thursday and said other video makers would soon be able to set up their own paid channels. In a conference call for reporters, Malik Ducard, the director of content partnerships for YouTube, suggested that this “self-service feature” was the most important piece of the announcement.

“As we roll out wider and as we roll out self-serve, you’ll see a lot of innovation,” he said, predicting that homegrown YouTube stars with fan followings would set up paid channels.

YouTube’s subscription plans were widely reported this week, but the names of the participants were not disclosed until Thursday. The arrangement gives the creators of videos — some of whom have expressed dissatisfaction with the payments from the advertisements attached to their videos — a new way to profit from their popularity. The plan also gives YouTube a new source of revenue, although there are widespread doubts about whether people will be willing to pay for channels, since the name YouTube is almost synonymous with free streaming video on the Web.

Absent from the list of partners on Thursday were all of the biggest media companies in the United States, like the Walt Disney Company and Comcast, which owns NBCUniversal. Instead there were start-ups like the Rap Battle Network, BabyFirstTV and Cars.TV. Some of the partners have tried to gain distribution on cable and satellite television systems, but say they view YouTube as another appealing way to gain an audience.

Several companies specializing in how-to videos are among the initial partners, including iAmplify, a producer of instructional workout videos. Another area of concentration is children’s programming: in addition to Sesame Workshop, there will be paid channels from National Geographic Kids and the Jim Henson Company. Henson will stream full episodes of shows like “Fraggle Rock.” There will also be several channels devoted to movies and documentaries, though most of the film titles are obscure. Other channels will have reruns of television shows from outside the United States.

Mr. Ducard said all the paid channels would have 14-day free trials and many would offer discounted yearly rates for subscribers. Viewers will pay with Google Wallet, the same system Google’s app store uses. As the channel owners set their own prices, YouTube and the partners hope to find out quickly what price ranges are most successful.

YouTube declined to say exactly how it would split the revenue from paid subscriptions with the producers of channels. It now keeps 45 percent of the revenue from the ads it sells and gives producers the rest. Mr. Ducard said the subscriber revenue split would be “very similar to the ad-support business.”

YouTube to Serve Niche Tastes by Adding Channels

The oddball videos of gurgling babies, teenagers crashing their skateboards and synchronized wedding dances are still there. But they have been increasingly buried under what YouTube calls original channels — polished, highly produced videos financed by YouTube. It is part of YouTube’s strategy, started a year ago, to lure television viewers and advertisers by helping to produce high-quality videos that cater to niche interests.

Now Google, which owns YouTube, is stepping up that effort. On Monday, it plans to announce that it is adding more than 50 original channels to the 100 it has introduced in the last year and expanding original channels to France, Germany and Britain.

Other online video platforms — including Amazon.com, Netflix and Hulu — are also trying to compete for viewers by creating original content. But transforming from platform to producer has been challenging for all, including Google. And it is hard to argue that YouTube, or any other video platform, is on a path to soon replace television — whether for viewers, content makers or advertisers.

“There are not any successes you can point to and say, this happened because of Google’s investment,” said James L. McQuivey, who studies digital video and television at Forrester. “What they’ve learned is that they haven’t invested enough.”

As part of the new effort, Google is investing a fresh $200 million to market the shows. It is also investing an additional, undisclosed amount -- on top of the $100 million it invested last year -- to pay for production equipment and, in some cases, pay the full production costs.

The new channels, which will carry advertising and be available free, include producers with major media experience. ESPN has a sports channel, Grantland; Sarah Silverman and Michael Cera have a comedy channel, Jash; and Everyday Health has a beauty and health channel, Daily Glow. There are also smaller, online-only producers, like Tastemade and PopSugar.

“I believe that every interest will, at some point, have a channel serving that interest,” said Robert Kyncl, global head of content at YouTube. “People are building channels and creating audiences, which is something they couldn’t do before in such numbers.”

YouTube says that its push in this area has already created successes.

The top 25 original channels average more than a million views a week, according to the company, and in the year since original channels were introduced, people have increased the hours they spend watching YouTube each month to four billion from three billion.

Several YouTube video producers, including AwesomenessTV, StyleHaul and Blip.tv, have received venture capital financing. Some have been acquired by big entertainment companies, including Nerdist Industries by Legendary Entertainment and Revision3 by Discovery Communications. And YouTube-financed channels have attracted prominent advertisers like Procter & Gamble, Toyota and American Express, though it did not give specific ad revenues.

Even so, YouTube is nowhere close to being the default home for high-quality video, analysts say.

Video producers, Mr. McQuivey said, “are interested in this, but they’re not about to risk giving up a pilot on NBC in order to do a new YouTube channel.”

Advertisers, meanwhile, “still hold the 30-second spot on a pedestal, and the idea you would put that creative content into that inferior channel still bothers a lot of them.”

Though advertisers will increase their spending on digital video ads 46.5 percent to $2.9 billion this year, that is a small fraction of the $64.5 billion they will spend on television, according to eMarketer.

And viewers who have spent decades in front of their televisions are not about to throw them out in favor of YouTube, he said.

YouTube has learned the same thing, so it is going after younger people who have grown up online.

“The thing we learned is it’s certainly best to fish where the fish are,” Mr. Kyncl said. “In terms of making investment decisions and putting dollars at risk, we’re going to focus on audiences of 35 and below, who are already on YouTube.”

As a result, much of YouTube’s original programming may seem foreign to older audiences, like casual comedy skits full of Internet references. But other programming has attracted critical acclaim and Hollywood stars. WIGS, for example, shows TV-quality dramas aimed at women that star actresses like Julia Stiles and writers and directors like Marta Kauffman, a creator of “Friends.”

In addition to financing production, YouTube sells ads for the video producers. It takes its initial investment out of the ad revenue.

“That’s their secret sauce, a huge sales force all over the world,” said Jim Louderback, chief executive of Revision3, which will have a new tech channel on YouTube. “We’re pretty excited that huge sales force is going to be spending time finding revenue opportunities for the stuff we’re doing.”

Video producers say that in addition to financial support, YouTube offers a way to bypass television’s frustratingly slow production schedule.

Nerdist Industries recently decided to make a music video with the Fraggle Muppets. Three weeks later, a music video was on YouTube, made with the band Ben Folds Five, the actors Anna Kendrick and Rob Corddry, the Jim Henson Company and Chris Hardwick, the television actor and founder of Nerdist.

“What we found amazing about the opportunity was to go from ideation to production and having content in front of our fan base in a ridiculously short amount of time, and content that’s produced at television-level quality,” said Peter Levin, chief executive of Nerdist Industries.

Another contrast with traditional television is that it is much easier for video creators to get a start and gain a following. YouTube says that minorities who have historically been underserved by network television, for instance, have popular channels on the site, like Michelle Phan’s Fawn and NuevOn, a Spanish-language Hispanic pop culture channel.

“There’s a giant pot of money that is controlled by the broadcast and cable television industries, and it’s because there’s comfort and scale and predictability,” said David Grant, president of PopSugar Studios and a former president of Fox TV Studios. “There’s a fair amount of ways to go — years — before the online video industry has enough scale to move those dollars over. But it is inevitable.”

This article has been revised to reflect the following correction:

Correction: October 8, 2012

An earlier version of this article referred incompletely to Google’s plans to invest in original YouTube channels. Google will invest $200 million this year to market the channels, and an undisclosed amount for production on top of the $100 million it invested last year for production and marketing.

Aereo Distributes Local TV Channels via the Internet

These were not your standard rabbit ears. They were thumbnail-size slivers, neatly arranged in rows. Behind Mr. Lipowski stretched rows of rectangular shelving units with dozens of sheets just like the first.

“There’s enough in here to accommodate a half million people,” he said. “And that’s just the beginning.”

The army of antennas is at the core of the ambitious service Aereo is introducing, first in New York and then across the country. Aereo picks up local broadcast channels like Fox and ABC and streams them over the Internet to mobile devices and TV sets. Its subscribers, who can record shows to watch later, pay fees starting at $8 a month.

Aereo executives say they are looking ahead to a future in which many “television” watchers have never had cable, or even a TV, and grab their favorite shows piecemeal from a number of online sources. In that sense they are joining the many other companies, including start-ups like Boxee and hardware juggernauts like Apple, that are trying to position themselves for the next wave of entertainment and media spending.

“The goal is not to recreate the cable companies but to create an alternative for people who are coming into television from the Net side first,” said Chet Kanojia, Aereo’s founder and chief executive. “There’s an emerging population of people who have never signed up for traditional cable packages, who are used to customizing their own TV experience.”

The rows of antennas are helping Aereo walk a fine legal line. Broadcasters want to shut the company down, claiming that it is violating copyright law.

Repackaging television transmissions without permission or payment would ordinarily be a blatantly illegal endeavor. But Aereo says it assigns each subscriber two antennas, allowing live viewing and recording at the same time, and lets a customer watch only the programming that those antennas pick up. It claims this is not so different from a person’s buying an antenna and a DVR at RadioShack and hooking them up to a TV at home.

Aereo’s headquarters are in clear view of the Empire State Building, the source of most of the local TV stations’ broadcasts. The signals are converted into an Internet-friendly format and streamed live or funneled to hard drives for playback — with individual copies for each subscriber who has requested a show.

“A single copy for a single user is not a copyright issue,” Mr. Kanojia said.

Broadcasters do not see it that way. Soon after Aereo introduced its service in February, a group of 17 stations, including Fox, NBC, CBS and CW, sued Aereo, accusing it of illegally capturing broadcast signals in New York and saying it was stealing copyrighted content.

But in July a judge ruled in Aereo’s favor, denying a temporary injunction to shut the company down and allowing it to keep operating — for now. The broadcasters have appealed the ruling and say they will not rest until Aereo is out of business.

“We believe that upon appeal, Aereo will be found to be a copyright infringer in violation of the law,” said Dennis Wharton, a spokesman for the National Association of Broadcasters.

The other significant problem Aereo faces is luring customers. Dan Rayburn, an analyst at the market research firm Frost & Sullivan, said that the company’s service would appeal to a niche audience at best.

“Aereo says a large market would be 300,000 subscribers, but that’s not even 1 percent of the entire market of people who pay for TV in the United States,” Mr. Rayburn said. “That’s not disruption.”

Mr. Rayburn cited the service’s sparse content — a handful of channels per city — and its technical requirements. For now, Aereo requires an Apple mobile device and, for those who want to watch on a TV, a Roku box.