Time Warner Cable won’t engage in an expensive bidding war for ownership of Hulu so it is trying to convince the online video venture’s current owners not to sell.

Sources tell Bloomberg News the cable company has offered to buy a minority stake in the online video streaming service alongside its current owners, which include Comcast-NBC, Fox Broadcasting, and Walt Disney-ABC.

If Hulu accepted the offer, the other bidders’ offers may not even be entertained.

Among those filing binding bids/proposals with Hulu as of the July 5 deadline:

• DirecTV, which reportedly wants to convert Hulu into an online companion to its satellite dish service for the benefit of its satellite subscribers;
• AT&T and investment firm Chernin Group, which submitted a  joint bid, presumably to beef up online video options for U-verse customers.

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Bloomberg News discusses how the various bidders for Hulu would adapt the service for their own purposes. It’s all about bulking up online video offerings.  (4 minutes)

Hulu’s new owners could continue to offer the service much the same way it is provided today, with a free and pay version. But most expect the new owners will throw up a programming “pay wall,” requiring users to authenticate themselves as a pay television customer before they can watch Hulu programming. If Time Warner Cable acquired a minority interest and the current owners stayed in place, Time Warner Cable TV customers could benefit from free access to certain premium Hulu content, now sold to others for $8 a month. That premium content would presumably be available to U-verse customers if AT&T emerges the top bidder, or DirecTV could offer Hulu to satellite subscribers to better compete with cable companies’ on-demand offerings.

Hulu’s influence will be shifted away from broadcast networks and more towards pay television platforms regardless of who wins the bidding. That could end up harming the major television networks that provide Hulu’s most popular content. Many of Hulu’s viewers are cord-cutters who do not subscribe to cable or satellite television. Placing Hulu’s programming off-limits to non-paying customers could force a return to pirating shows from peer-to-peer networks or third-party, unauthorized website viewing.

Online video rights are so important to cable operators and upstarts like Intel, which wants to launch its own online cable-TV like service, providers are willing to pay a premium for streaming rights.

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Richard Greenfield, analyst at BTIG, and Scott Galloway, chairman and founder of Firebrand Partners, discuss Hulu and the ability to stream on multiple platforms. They speak on Bloomberg Television’s “Bloomberg Surveillance.” (4 minutes)

The Los Angeles Times reports that pay TV distributors are in a rush to make deals, not only to offer more viewing options for customers, but to potentially get rid of expensive and cumbersome set-top boxes.

Interlopers like Intel, Apple, and Google who want to break into the business have not had an easy time dealing with programmers afraid of alienating their biggest customers. Even DirecTV, which has done business with some of the largest cable networks in the country for well over a decade still meets some resistance.

Acquiring Hulu could be an important part of DirecTV’s strategy to develop the types of services satellite TV has yet to manage well. On-demand programming is no easy task for satellite providers. But if DirecTV acquired Hulu, satellite customers could find DirecTV-branded on-demand viewing through the Internet. The Times speculates DirecTV could even build an online subscription service for subscribers who don’t want a satellite dish, receiving the same lineup of programming satellite customers now watch.

Distributors that acquire enough online streaming rights could even launch virtual cable systems in other companies’ territories, potentially pitting Comcast against Time Warner Cable, but few expect cable operators to compete against each other.

Aereo plans to expand to nearly two dozen cities in the coming year.

Viewers of NBC’s Nightly News with Brian Williams learned an upstart online streaming video competitor seeking to help Americans control their cable bills is probably an illegal pirate operation that doesn’t pay for the programming that parent company Comcast-NBC pays hundreds of millions to produce.

On Tuesday Aereo bypassed the network television gatekeepers suing to shut the service down and bought a full-page ad in the New York Times to remind the country it is winning its case in court:

“The broadcast networks have been granted free and valuable broadcast spectrum worth billions of dollars in exchange for their commitment to act in the public interest. It’s a sweet deal… Along the way, cable and satellite providers entered the picture.

In addition to free spectrum and advertising revenues, the networks got very lucrative retransmission fees from these providers. And so, for many, broadcast television is now offered in expensive fixed bundles or packages. Yet many millions of Americans continue to use antennas to get broadcast TV.”

Despite the corporate media firewall that keeps positive reports about the competition off the nightly news, the little streaming company that could is having an impact.

In the last two weeks, virtual hysteria has broken out among major network officials who are threatening to pull the plug on free over the air TV if their multi-billion dollar operations are not granted immediate protection from a startup that rents out dime-sized antennas in New York City to stream local television stations.

Chase Carey from Fox said he’ll put the Fox Network behind a pay wall if Aereo keeps it up.

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Leo Hindery who oversees a private equity firm and has a history with both cable and broadcast networks called Aereo tawdry and a “pissant little company” run by a man who helped launch the Fox Network and now threatens to ruin the broadcast television business model for everyone else. (Bloomberg News) (5 minutes)

Is media consolidation influencing the evening news?

A combination of networks and other big media interests are now preparing to take their battle to Congress, warning lawmakers the very concept of free over the air television is in peril if companies like Aereo are allowed to operate.

Why are they so threatened? Aereo effectively bypasses the “retransmission consent fees” that broadcasters now charge pay television providers for permission to carry their channels and networks. As advertising revenue declines from reduced viewing numbers and equipment that offers viewers a fast forward through ads, the broadcasters have found gold charging monthly fees to cable, satellite, and telephone company TV systems for each subscriber. Ultimately, consumers pay these fees through higher cable and satellite bills.

Aereo receives over the air signals from individual antennas and makes that programming available for online streaming. No retransmission consent fees are required, Aereo argues, because they are just serving as an antenna farm. Only one stream per antenna is allowed, they note, so the company is not mass-distributing programming.

The battle between broadcasters and Aereo is now turning up in news reports that have tried to walk a fine line between the positions of the executives at the networks suing Aereo and the streaming service itself. Not every news outlet is managing the balancing act successfully.

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NBC News aired this incomplete report about Aereo on its evening newscast on April 9th. What is missing? The fact courts have so far sided with Aereo and against the broadcasters’ claims the service is pirating content.  (3 minutes)

The Verge points out NBC News did not make it far before they fell solidly in line behind their corporate owners:

In its piece on Aereo, NBC News included a lengthy explanation of what TV has meant to Americans through the decades. Aereo’s CEO Chet Kanojia is quoted, but only about how the service functions, and there’s nothing from him about the controversy. In contrast, NBC’s story includes a quote from Carey calling Aereo “piracy.” The network news group also tossed in this line: “Aereo doesn’t pay networks for the content they spend hundreds of millions of dollars to produce.”

What NBC didn’t say was that, according to two separate federal courts, Aereo’s service is legal. The ruling by the appeals court upheld a district judge’s decision and was not insignificant. The court allowed Aereo and Kanojia (photographed at right) to continue operating until the lawsuit with the broadcasters is resolved, which could take years. “We were disappointed that NBC News didn’t include a mention about the court decisions,” Virginia Lam, an Aereo spokesperson, told The Verge. “All we ask are that the facts be reported.”

A spokesperson for NBC News disagreed. “The report was a fair and straightforward telling of how the service operates in the changing media environment. It fully explained why Aereo argues that the service is legal, and included an interview with Kanojia. In the interest of full disclosure, it also noted that NBCUniversal, the parent company of NBC News, has filed suit against the service.”

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Robert Prather, president of local station owner Gray Television, tells Bloomberg News station owners are still trying to figure out what Aereo means for their business models. (3 minutes)

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Aereo’s CEO responded today to threats from Fox to turn its network into a pay cable service, suggesting that if Fox wanted to abandon over the air service, someone else might make use of that spectrum.  (3 minutes)

Holder

The Justice Department has been quietly conducting a wide reaching investigation into whether cable operators are using Internet Overcharging schemes like usage caps and metered billing to squash online video competition, according to a report in this morning’s Wall Street Journal.

The Antitrust Division has spoken to major online video providers like Netflix and Hulu as well as cable operators, including Time Warner Cable and Comcast.

At issue are data caps — limits on how much a subscriber can use their broadband account.  Justice officials are exploring whether major broadband providers like Comcast and AT&T are using usage limits to protect their video businesses from cord-cutting — canceling a cable subscription to watch shows online.

Providers of online video like Netflix are particularly concerned about operators showing favoritism to their own video platforms. Comcast, for example, exempts partnered content from its usage allowance while continuing to count Netflix viewing against its cap. Comcast’s Xbox “free pass” is attracting particular attention in the Justice probe, in part because it could violate the merger agreement with NBC-Universal which requires the company to not discriminate against third party video content.

Some cable operators claim usage caps protect their networks from heavy users overwhelming their facilities. Comcast claimed its decision not to count Xbox video traffic against the operator’s monthly usage cap was fair because the video content did not travel across the Internet. Now the company has temporarily suspended  usage caps altogether in preparation for testing a new usage limit that also carries overlimit penalty fees.

Federal Communications Chairman Julius Genachowski last month publicly announced his support for usage limits and metered billing, describing both as innovative and enabling customer choice. The Justice Department probe would indicate otherwise, because it suggests customers are finding their options increasingly limited, possibly in violation of federal antitrust laws.

The Justice Department is also investigating the industry’s TV Everywhere project, which provides access to cable network online video exclusively to those with an existing cable television package. Most cable networks specifically prohibit online streaming of their live content, which itself might run afoul of antitrust rules.

The Journal notes Attorney General Eric Holder on Tuesday suggested he would like to be a cord-cutter himself, picking and choosing only the channels he wants to watch. At a recent Senate hearing, Sen. Al Franken (D-Minn.) said cable bills were “out of control” and consumers want alternative options to watch shows online. Holder responded, “I would be one of those consumers.”

Shaw is ripping the wires out of its analog FM cable radio service, formerly delivered free of charge to all Shaw subscribers.

Shaw Communications’ plans to abandon its analog cable FM radio service, delivered free of charge to basic Shaw subscribers, has been met with resistance by customers who appreciated the improved reception the service delivered.

Some noted Shaw is eliminating the free service and replacing it with one that requires a digital cable subscription to receive. Shaw:

Shaw previously offered customers access to FM radio stations free of charge with their coax cable connection, as part of their Shaw service. Given that many of our customers no longer use these stations, we are in the process of removing this service across our systems.

Removing FM radio stations allows us to free up additional bandwidth, which means Shaw can deliver faster Internet speeds, increased High-Definition content and more Shaw Exo On Demand programming. This change is part of Shaw’s dedication to providing our customers with leading edge technology through our superior Shaw Exo network.

How can I access my radio stations?

The problem with both of Shaw’s options, according to readers who have contacted Stop the Cap!, is that they come at an added cost.

“Shaw would love it if we streamed those radio stations, which all count against our bandwidth cap, instead of listening to them for free on the cable radio,” says Irene Delasquay from Prince George, B.C. “Galaxie is just a music jukebox service that requires you to buy a digital cable subscription and rent a box to listen, and I don’t want all that extra equipment and expense.”

Some wonder why Shaw is discontinuing the service in the first place. Shirley and Meg Bonney told the Comox Valley Echo:

When we finally we able to speak to a person at Shaw we were told that they “didn’t think that many people were using the FM frequencies”. Had they ever inquired? Had they even tried to find out? Or had they just made a biased assumption – perhaps to try to force people to buy their digital black box in order to access even more of their own, commercial music channels?

We were also told that the CBC frequencies were a “gift” from Shaw.

Many readers who have been in touch with Shaw are being told their best alternative is streaming radio signals over a personal computer, but that presents a problem for some who don’t have a personal computer, have located it in an inconvenient room to listen, or who do not want to waste electricity running a computer just to listen to the radio.

While cable radio is no longer common in many parts of the United States, the vast expanse of Canada combined with an often-insufficient network of low-powered FM repeater transmitters, has made reception of commercial and certain public radio signals difficult, especially inside homes.

Roger and Isabel Thomas feel the loss hurts their ability to stay in touch with informative programming long-abandoned by commercial stations and cable networks:

The FM service provided us with daylong (and night-time) enjoyable, culturally stimulating, commercial free listening. It kept us abreast of national and world-wide events and allowed us to enjoy our selection of favourite music, eclectic though it may have been.

Time Warner Cable and Viacom have ended their dispute over whether the cable company had the right to stream Viacom-owned cable networks over its lineup of streaming apps for portable devices and home computers.

This means the cable company will be restoring streams of Comedy Central, MTV, VH1 and other Viacom networks over the coming weeks.  In return, Time Warner Cable has agreed to carry/continue Viacom’s Country Music Television on its cable systems.

From the official statement:

Viacom and Time Warner Cable have agreed to resolve their pending litigations. All of Viacom’s programming will now be available to Time Warner Cable subscribers for in-home viewing via internet protocol-enabled devices such as iPads and Time Warner Cable will continue to carry Viacom’s Country Music Television (CMT) programming. In reaching the settlement agreement, Time Warner Cable and Viacom were also able to resolve other unrelated business matters to their mutual satisfaction. Neither side is conceding its original legal position or will have further comment.

The dispute had no effect on traditional cable carriage of these networks. Only online streaming was impacted.