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Of all the media industries dragged kicking and screaming into the brave new digital world—news, music, publishing—Hollywood has held up comparatively well. Although physical sales of DVDs and Blu-ray are falling, no single Web company dominates the online video realm, and consumers mostly still get their programming via pricey cable bundles. Poky Internet speeds—the U.S. average of about 5 megabits per second ranks 26th globally—means that pirates can’t swap bulky video files with the same insouciant ease as they do MP3s.
Google (GOOG) might change that. In 2010 the company announced plans to bring super-high-speed Internet access to select communities in America and in 2011 picked Kansas City to start. The search giant has said it hopes to spur innovation among cable companies and Internet service providers by demonstrating what’s possible with Internet speeds 100 times faster than the U.S. average. The project could also foreshadow dramatic changes for Hollywood, both because of the specter of piracy and Google’s possible experiments with new ways to distribute content legally.
Photograph by The Kansas City Star
Google has already strung more than 100 miles of fiber-optic cable along utility poles in Kansas City, Kan., and Kansas City, Mo., and expects to connect its first homes in the next few months, says Google Fiber spokeswoman Jenna Wandres. Its test network of about 850 homes in a faculty neighborhood near Stanford University in Palo Alto, Calif., already provides blistering download speeds of 922 megabits per second and upload speeds of 883 Mbps. At those speeds, Web surfers—or pirates—can download a DVD in under a minute or a high-definition Blu-ray in five.
Wandres stresses that Google Fiber isn’t meant to empower pirates: “We hope higher speeds will actually make it easier to deliver and download more authorized content,” she says. Nonetheless, Howard Gantman, spokesman for the Motion Picture Association of America, notes that piracy is always a concern of the entertainment industry. Google Fiber “could be a great opportunity for consumers whose access to creative content is often hampered by slow speeds,” he says. But in South Korea, “the home entertainment marketplace was decimated by digital piracy” enabled by the widespread availability of high-speed Internet.
Google doesn’t have the intent or money to build a nationwide fiber network, which is a prerequisite for apocalyptic piracy. Such a project could cost $350 billion, according to the Federal Communications Commission. Still, there are signs that Google’s experiments could affect Hollywood. In December the Wall Street Journal reported that Google was in discussions with Walt Disney (DIS), Time Warner (TWX), and Discovery Communications (DISCA) about offering their content via Google Fiber. Google subsequently obtained licenses from Kansas and Missouri state regulators to offer video services over its fiber-optic network. In February the FCC gave the search company permission to operate a satellite farm, pulling down transmissions that typically carry TV signals, near its data center in Council Bluffs, Iowa. The state’s economic development authority has approved tax breaks to Google for a planned $300 million expansion of that data center.
Such evidence fuels belief that Google will become a content distributor, although the company won’t comment on its plans. Craig Moffett, an analyst at Sanford C. Bernstein (AB), speculates that Google could use its raw data processing power to store TV programming, essentially creating a giant, searchable DVR in the cloud and distributing programming—live or on-demand—to Android smartphones, iPads, and TVs. It could also use the network to develop more targeted ways to sell and deliver TV advertising.
In short, by creating its own pipe, Google can play with new ways to allocate bandwidth between Internet and TV services and see what Kansas City denizens adopt. Mitch Singer, the chief digital strategy officer for Sony Pictures Entertainment (SNE), believes media companies can’t ignore such experimentation. “Google Fiber will definitely be a disruptive force,” he says. “The studios know that if we stick our heads in the sand, we will fail, pure and simple.”
The bottom line: Regulatory licenses and other evidence point to Google considering video distribution as part of its Kansas City fiber project.