Fox Pulls the Plug on Free Streaming

Netflix (NASDAQ:NFLX) is making tons of money from streaming video, and Fox (NASDAQ:NWSA)
wants in. Beginning August 15, Fox will be restricting free online access to many of its popular shows. While websites like Hulu often begin streaming shows the day following their original air date, viewers who don’t subscribe to participating cable or satellite services will now have to wait eight days from a show’s initial broadcast to watch it online.

While free online-streaming sites do bring in advertising revenue for the networks, the next-day availability of shows has been taking a toll on broadcast ratings, which are used to negotiate advertising deals that ultimately determine which shows stay on the air and which get canceled. Revenue from streaming sites can’t compete with the billions networks earn each year from primetime advertising.

As part of a strategy called “authentication”, under consideration by many in the television industry, Fox will be inconveniencing those who would watch shows online in an attempt to increase the number of people watching live programming. Pay-TV services will also benefit from authentication because, if they sign on to Fox’s new plan, their customers will receive passwords to watch programs online the next day. Currently Dish Network (NASDAQ:DISH) is the only pay-TV service to sign up for the plan, thus giving its 14.2 million subscribers nearly exclusive online access to Fox programming the day after it airs live. Subscribers to Hulu Plus, Fox’s joint venture with Comcast’s (NASDAQ:CMCSA) NBCUniversal and Disney’s (NYSE:DIS) ABC, will be the only others granted early access to Fox shows online.

Fox and other networks hope not only to increase live viewing figures, but to give subscription-based services an advantage over free services. Cable and satellite subscriptions have been declining as more and more popular programming becomes available for free online. All of the major networks are owned by larger media conglomerates with cable and satellite television channels that stand to lose billions in advertising revenue if they lose viewers.

However, the move could be counterproductive. Fox (NASDAQ:NWSA) originally created Hulu to address the growing problem of piracy. But with shows no longer freely available, instead of watching live or subscribing to a paid service, people might begin watching more pirated content, which is often available within hours of a show’s original air date.