Accessing ESPN 3 (Issue 1767)

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A few customers have asked about the availability of ESPN3. ESPN3 is the sports network’s online video streaming service. To watch ESPN3 your service provider (in this case Amplex) has to pay ESPN for access. Why don’t we do that?

The simple answer is that we feel it is poor business model when applied to the Internet, and an incredibly slippery slope that will end badly for everyone. ESPN’s plan is to recreate the Cable TV business model on the Internet. The Cable TV model is this:

The networks (HBO, ESPN, ABC, etc.) negotiate deals with the cable company to carry the networks channels. The deal requires the cable company to pay X dollars per customer per month for the cable company to carry the networks programming. The contract specifies that all of the network’s channels must be carried, not just the popular ones. Why there are 50 junk channels? Because the contract says if you want to have Oprah you also have to pay for and carry our 12 other channels. Combine the junk channels from a dozen networks and you have Cable TV. 150 channels that you pay for, 3 that you actually watch.

Why does cable TV costs so much? It’s not because the cable companies are greedy. Ok, they probably are, but the bigger reason is that they are forced to pay ever increasing fees to the networks for content. The ‘provider pays’ model is the way cable TV works. There are a lot of reasons that it should not be applied to the Internet:

It raises our costs (and the cost of your Internet service) to pay for something the majority of customers do not watch. There are a huge number of sources of content on the Internet. The service provider negotiating with every content provider on the Internet is unworkable. Fees will escalate over time.

If ESPN’s model succeeds there is nothing to stop Netflix, Hulu, YouTube, or even Google from demanding the same type of business model. The day that happens the cost of Internet service is going to skyrocket. I can easily see content costs adding hundreds of dollars a month to the cost of Internet service.

Cable TV is a naturally limited model in that the network can only carry a few dozen networks and a few hundred channels. The Internet is unlimited in the amount of content it can carry. Do we really want to recreate a service where your content choices depend on the networks your service provider subscribes to? ESPN refuses to sell a subscription directly to an end user.

If you would like ESPN to change this feel free to tell them about it: http://broadband.espn.go.com/espn360/watchespn/feedback