Should an agreement be struck, Viacom would be the first major entertainment company to agree to sell its content to a so-called over-the-top distribution system. Sony and
Programmers have been wary of committing to an over-the-top provider because it could alienate their biggest business partners — the satellite and cable companies that reach most American homes. This is why a Sony or Intel would likely have to pay a premium to get access to content for their services.
The arrangement between Viacom and Sony will likely mirror the programming agreements it has with more traditional pay-TV providers, a person with knowledge of the talks said. Programmers don't want to enter into contracts that give a new distributor freedoms that its longtime cable and satellite customers do not have. When a Viacom or a
Cable operators — particularly Time Warner Cable — are concerned about having yet another competitor to deal with on top of the phone and satellite companies. They have become more aggressive in trying to craft contracts with programmers that would discourage a sale to an over-the-top service.
In its distribution fight with Time Warner Cable,
At the same time cable and satellite operators have tried to stymie over-the-top services, they have also been pushing for rights to distribute channels via the Internet themselves should that appear to be a viable business model.
It remains to be seen if consumers will embrace an over-the-top service if it is essentially the same as cable TV. Sony and Intel are betting that they can craft a more consumer friendly pay-TV menu that will woo consumers. Sony's service would likely use its
Sony and Viacom spokespeople declined to comment on the talks, first reported by the
Follow Joe Flint on Twitter @JBFlint.