BUY ONCE, PLAY ANYWHERE

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Content providers sitting down to make distribution deals with wireless operators are noticing something a bit different about the suits on the other side of the negotiating table: Increasingly, their conversation is no longer limited to just wireless experiences.

The top executives in charge of striking content deals at such carriers as AT&T (formerly Cingular) and Verizon are now responsible for driving the content strategies across their organization's other channels—including Internet and digital TV.

While their motivation may be to leverage their wireless assets to better compete for home services with cable rivals Comcast and Time Warner, the ultimate consequences of this effort are profound. At stake is the very future of how consumers access and pay for entertainment content across multiple platforms.

Today, content and service providers benefit from a model that is designed to sell consumers the same content in different formats. Buy or subscribe to something online or via cable, and you'll have to pay for it again to access it on your mobile phone.

For instance, Rhapsody subscribers who already pay a monthly fee to access the music service online have to pay an additional $7 per month to get the same Rhapsody radio stations on their mobile phones via Sprint.

But the growing number of companies offering content placeshifting services—which allow users to access content stored on one device from another —is causing content providers and network operators to rethink the nature of how content is delivered and monetized across multiple channels.

"Eventually, the buy-once/play-anywhere model will be the value proposition you must meet as a content distributor," says Mark Desautels, VP of wireless Internet development for CTIA-The Wireless Assn. "Wireless will just become the natural extension of the need to provide a consumer with access to content ubiquitously and on any device—TV, PC or mobile phone."

The industry is already seeing early stabs at this. In March, AT&T began offering a free year of the Napster subscription music service to any customers signing up for its Internet and wireless services. Users can manage their Napster account from their mobile phones at no additional cost but can't yet stream or download music, although company officials say that capability is coming.

What made this possible was the merger of BellSouth and AT&T, which included wireless operator Cingular. Once AT&T completed the merger, it began condensing all the content licensing operations of its TV, Internet and wireless divisions under one roof.

Verizon Communications is doing much the same thing. In January, it promoted Verizon Wireless head Denny Strigl to president/COO of the entire company, giving him control over the wireless and wireline divisions. He subsequently authorized key members of his wireless team to strike content deals that spanned all Verizon platforms.

The motivation is fairly obvious. AT&T and Verizon are trying to compete with cable operators for TV access with fiber optic IPTV services—AT&T's u-Verse service and Verizon's FiOS attract about 26,000 and 350,000 subscribers, respectively.

Meanwhile, Comcast alone commands some 13 million digital cable TV subscribers, and therefore gets the best deals on video and other packages when negotiating with content providers.

However, AT&T and Verizon have significant wireless subscriber bases—47 million and 42 million, respectively. With mobile becoming the all-important third screen, they can now leverage their wireless prowess to get better deals for their other platforms.

Meanwhile, cable companies aren't exactly resting on their laurels. Comcast, Cox and Time Warner all offer wireless services through a reselling relationship with Sprint, and they now own enough wireless spectrum to individually launch their own nationwide wireless networks in the future. They also offer landline voice services as well.

Today, the primary benefit is to offer bundled services all on one bill. Tomorrow, it will be about offering access to entertainment content across these various platforms for one price.

"As networks and devices get smarter, consumers will demand access all the time," Music Choice CEO David Del Beccaro says. "If you don't give it to them, they'll just go get it elsewhere."

Apparently some content owners haven't gotten the memo yet. Late last month, Major League Baseball renewed its attack on SlingMedia, accusing the service of illegally "misusing" its content by allowing users to view their cable feeds on their computers while traveling.

MLB would prefer that baseball fans pay it directly to stream games from its online portal. But this argument likely won't take place in five years. When MLB or any other content provider is negotiating its TV distribution deals, the person across the table will also be demanding that same content for their Internet and wireless subscribers.

"Placeshifting technology is why these access and content providers are only going to be able to charge for content one time," Desautels says. "That is where consumers are pushing the business model toward. In the short term, that means leaving money on the table."