The reality is a lot more complicated, for a lot of reasons, but the upshot is that right now you can only watch a bit of what’s on cable on devices that aren’t your TV. And if the cable guys are going to convince people not to cut the cord, or to sign up for the cord in the first place, that’s going to have to get better.

One nice counterexample to TV Everywhere’s struggles is ESPN’s great WatchESPN app, which really does let you watch whatever you want, on just about any device, anywhere, live or on demand. That’s particularly useful for ESPN, since there are lots of cases where you can’t be in front of a TV but really do want to watch a game.

But even mighty ESPN can’t quite deliver on the TV Everywhere proposition. At left is what happened to me on Monday, when I wanted to check in on “Monday Night Football” on my phone, from my couch, at the same time we were catching up on “Homeland”* on the biggish screen.

The problem, says ESPN PR, is that Verizon has an exclusive on NFL mobile rights, so ESPN can’t deliver the game to me on my iPhone, even when I’m at home, on a Wi-Fi connection (which is the way that lots of mobile video gets consumed).**

That makes sense in a biz-dev sense, but that’s hard to explain to a sports fan who simply takes ESPN’s pitch at face value and expects to watch what they want, when they want.

And it makes even less sense to anyone who tried to do the same thing I did on Monday night, but used an iPad instead of an iPhone. Because that would have worked just fine — for whatever reason, the iPad isn’t considered a mobile device.

Again, trying to argue that some rights apply to a 9.5-inch screen but not a 3.5-inch screen is the sort of thing that makes sense to lawyers and deal-makers, and no sense at all to normal people.

You know, the people you want to keep paying for cable.

*This says a bit about what has happened to “Homeland” this season. During Season One, there was no way I was doing anything but staying glued to the set. Now I still watch it — and pay CBS for the privilege – but it’s become a one-eye program, and I don’t feel bad about checking email, Twitter, etc., while Carrie and Brody are up to their high jinks.

**This is also likely why NBC and Fox can’t deliver football via their new Dyle mobile service, even though that one relies on broadcast TV rights they should already have completely sewn up.

So, once again: Does that mean people really are ditching Comcast, Verizon and Dish, etc., in favor of Netflix, iTunes and Hulu?

And, once again: Maybe. But you can’t prove that based on last quarter’s numbers.

As we’ve pointed out before, there’s a seasonal cycle to the pay-TV business: The cable, telco and satellite guys usually add a bunch of subscribers in Q1, lose a bunch in Q2, lose a few more in Q3 and then gain some back in Q4.

Tally up the first nine months of 2012 and the pay-TV guys are basically flat — just like they have been for the past couple years, notes Bernstein Research’s Craig Moffett (click chart to enlarge):

For the past few years, the pay-TV guys could point to the cruddy economy as the reason for their nongrowth. But now that argument doesn’t work as well. Moffett: “Household formation, while still anemic, is showing signs of recovery. Pay TV industry subscriber metrics are not. Pay TV penetration of America’s households is therefore falling, even while the number of Pay TV subscribers is still inching higher.”

So, if you’re in the “everyone I know uses the Web instead of cable” camp, that sure sounds like the data supports your argument. Moffett is still unconvinced, though: He figures the net losses come from subscribers who simply can’t afford to pay for TV or the Internet, and are getting their fix from old-fashioned rabbit-ear antennas.

Plausible?

But not this weekend. At 8 pm ET, you can watch Jon Stewart debate Bill O’Reilly, live from George Washington University. And as soon as that’s over, you can click over to YouTube, where Jay-Z is streaming the last show of his eight-night run at Brooklyn’s new Barclays Center.

Total cost: $5, which goes to Stewart and O’Reilly, who say they’ll give half their profits to charity. The Jay-Z show is gratis.

My only real beef is that it will be harder to get this stuff from your PC to your plasma than it ought to be. If you’re interested in doing so, you may still need some combination of cables and/or boxes, like Apple TV.

This kind of live Web programming used to be a big deal, but now it’s increasingly common. Part of that has to do with technical leaps the Web video business has made (more on that later), and part of it is that the cost/audience equation now makes sense: You can do these live events without losing money, and you may even make some.

My hunch is that we’re still a very long way from seeing any of the real tentpole live events — like awards shows and big sports events — move from TV over to Web-only streams. But Jon Stewart and Jay-Z aren’t exactly niche, either.

That would be DirecTV’s “Sunday Ticket” package, which gives football fans the ability to watch every single NFL game, without geographical restrictions.

Normally, Sunday Ticket is exclusive to DirecTV, and I know lots of people who get the satellite service solely so they can binge on football every Sunday.

But this year, for the second year in a row, DirecTV and Sony are letting nonsubscribers pay for Sunday Ticket, via Sony’s PS3 game console.

Sony is promoting this primarily as a way for people who already have Sunday Ticket to watch the games on their console, at no extra charge. But it’s also selling the package to nonsubscribers, for $300 — $40 less than last year.

In theory, you’re not supposed to be able to order Sunday Ticket this way unless you’re physically unable to get DirecTV, presumably because of geographical restrictions. But I’m pretty sure that, just like last year, DirecTV won’t really vet this — you just say “no” when the prompt screen asks if you’re able to receive the satellite service, pay up, and you’re on your way.

Of course, if there are lots of people taking advantage of this loophole, you’d see DirecTV shutting it down, because it’s in the the business of selling monthly pay-TV subscriptions, not a la carte football packages.

But it’s fun to imagine a world where you could do this for everything, all the time. Not holding my breath…

Update: If you don’t want to pay for football but do want to watch it legally on the Web, you’ll be able to do that as well this year — for a single game a week. NBC will once again be streaming its Sunday night games online. And, unlike the Olympics, you don’t need to be a pay-TV subscriber to watch the feed.

The growth rate remains below the level of even anemic new household formation, suggesting that penetration is falling even as the Pay TV subscriber base is still growing. And that, in turn, suggests that yes, there are homes that are cutting the cord. Whether they are doing so because of online video options (as the technology press would have it) or poverty/affordability (as we would argue) is unclear.

– Bernstein analyst Craig Moffett in a research note today, analyzing the next-to-no-growth of the pay-TV business

Yesterday’s earnings call was no exception. Here’s the full exchange between the CBS CEO and analyst Anthony DiClemente, via Seeking Alpha.

Anthony J. DiClemente — Barclays Capital, Research Division

Okay. And then one for Les. You — I’m sure — you may have seen that Apple TV added Hulu onto its platform this week. I’m just wondering, when you think about Apple, are you in any way philosophically opposed to offering CBS on the Apple TV platform? And I know I — just from prior experience, I’m sure your answer will have something to do with getting paid for your content. But more specifically, is there anything you need to see or specifically anything you need to get in order to be convinced that that’s a smart strategy for CBS?

Leslie Moonves

Look, Anthony, you’ve — we’ve had this discussion many times before. You’re right, it depends what the terms are, it depends what we get paid for. It depends on what effect Apple TV would have on either our advertising, our syndication or our retrans, which are our three main buckets of revenue for our content. So if it fits in well, like Netflix did and Amazon did, we’re happy to discuss it. If it doesn’t and we’re — they’re using our content to build a business, we’re not quite as favorable to that. So the devil is in the details. I know it sounds like a pat answer, but it’s really true.

Even in the transcript, it’s funny to watch Moonves and DiClemente go through the motions on this one. But I’m highlighting it here because it illustrates that digital video no longer seems like a conundrum to CBS and all the other big TV programmers. It seems pretty routine.

There are two main options:

Sell the old stuff: Once CBS and the other networks have aired their shows on their own networks, they’re generally happy to resell them, at nearly 100 percent profit. Recent programming goes to a la carte “electronic sell-through” stores, like iTunes; older stuff will show up on subscription services. For instance, now that CBS has stopped showing “CSI: Miami” after a 10-year run, that show is likely to end up on Netflix, Moonves said yesterday.

Sell the new stuff: If you want to run the current shows that CBS and others offer — the way the pay-TV providers do — then you have to act like a pay-TV provider, too. That means buying all of their program bundles, at market rates. Which is what Google is doing with its new Google Fiber TV service. And it’s the same proposition that Intel and other would-be “over the top” services are considering now.

It’s possible that Apple tries some brand-new option that the programmers haven’t seen before, like it did three years ago, when it was pitching a $30-a-month package for stuff that had just aired. And the new “channel-as-app” model that’s emerging on Apple’s devices and others offers some room for experimentation.

But the new semi-conventional wisdom — embraced by folks like Time Warner’s Jeff Bewkes — is that if Apple wants to get deeper into TV, it will work with the TV guys on the terms they already know.

But if it is, the numbers don’t show it.

It’s easy to be confused about this stuff, but it’s also easy to clear it up: If you want to evaluate the state of the pay-TV business, you have to include the results from the telco guys, who have been taking share from the cable and satellite guys. And you have to look at numbers for the whole year, not a single quarter.

Once you do that, you end up with numbers that are basically flat, give or take a few thousand subscribers.

Here’s the data from the Reuters story, which uses publicly disclosed numbers from the country’s biggest pay-TV providers, who have been reporting second-quarter earnings over the last few days.

Q2 Video subscriber losses:
DirecTV: 52,000
Time Warner Cable: 169,000
Comcast: 176,000
Dish: 10,000
——————-
Total: 407,000 lost subscribers

Those numbers will likely get worse once we see results from Charter and Cablevision, who report next week. And there are still a bunch of small cable companies that aren’t public, so sussing out those numbers involves some guesswork. For argument’s sake, let’s say those companies followed the trendline of the last few years, and ended up collectively losing another 300,000 subs.

Estimated total: 700,000 lost subscribers

Still, that’s a loss, right? Yes. But as the Reuters piece itself notes, the second quarter of the year is always the worst for the pay-TV guys. College kids move away, people move into new homes, etc.

Last year, for instance, the pay-TV guys lost 442,000 subscribers in Q2. But they still ended up adding more than 200,000 subscribers by the end of 2011. That’s barely any growth at all — something like 0.2 percent — but it’s better than a loss.

This year’s trends look similar. Pay TV added 422,000 subscribers in Q1 – which means they’re basically flat for the year. If recent patterns hold, they’ll have another flat or down quarter in Q3, and then add more again in Q4.

You can argue that the pay-TV industry’s no-growth or barely-there growth is due to a weak economy and lousy household formation numbers. Or you can argue that it’s because people really are swapping out pay TV for Netflix, Apple TV, etc. Or a mix of both, or whatever.

But for now, at least, you can’t argue that the pay-TV industry is shrinking.

The race is scheduled to go off around 3:14 pm ET, so if you want to watch, fire up your browsers now. Don’t know if this will also work on NBC’s Apple and Android apps. Can’t guarantee this will work at all, actually, but worth a shot. (Stream seems to work, but we’ll see.)

Update: NBC sports PR confirms that the pay wall will be down for this one, and says it does so for “some” events daily. Given that this is one of the biggest competitions of the day, that still seems like a meaningful decision.

Background: Earlier today, NBC officials held a press call to argue that their Olympics coverage has been a big success. Part of that strategy involves streaming all events live on the Web, but only to customers with pay-TV subscriptions.

Now they’re back, and they’re saying a little bit more: The service has a name — Redbox Instant by Verizon — and a CEO — Verizon executive Shawn Strickland. Redbox owner Coinstar says the service is in “alpha” testing, and says a full launch is “anticipated later this year.”

And that’s it as far as official details go. What about the stuff we care about — pricing, titles, strategy? We’re supposed to keep waiting on that stuff. But in the meantime, I can offer some educated guesses:

• Expect the new service to focus on movies instead of TV shows. That makes sense, because the existing Redbox service is basically a movie service. And it also makes sense because Netflix and Amazon are already spending lots of time and effort licensing TV shows for their subscription video services.
• Don’t expect to be blown away by the subscription service’s digital movie selection: Hollywood studios weren’t excited about giving Netflix access to relatively recent films for its service, and I don’t think they’ll treat Redbox Instant any differently. Deals with the likes of Viacom’s Epix will give the service a handful of more recent movies — just like Netflix offers — but the bulk of the selection will almost certainly be catalog titles, which the JV will market as “movies that matter.”
• But if you do want newish movies, you’ll have options: The service will offer customers a certain number of trips to Redbox kiosks, so you can get newish titles that way. And I believe it will also offer a la carte video-on-demand rentals, either at launch or later down the road. That is, anything you can rent from iTunes, Amazon, etc., should also be available through the JV.
• Don’t expect to get a different deal if you’re already a Verizon Fios customer. Unlike video services recently launched by Dish/Blockbuster and Comcast, this one is explicitly being offered beyond the 13-state “footprint” Verizon has built out for its Fios pay-TV service. That is, you don’t have to be a Verizon phone or video customer to get the service. But it will be marketed as a complimentary option to Fios and, for the time being, Fios customers will end up paying the same price as non-Fios customers. My hunch: Something in the $10-a-month range.

The more I hear about it, the more I think this is going to be a Redbox subscription offer with a smallish, ancillary streaming service bolted on. Pretty much the way Netflix used to work when Reed Hastings started with streaming a few years ago.

That could morph into something bigger, later. But for now, I don’t think this one will keep Hastings up at night.

Speaking of which: Netflix reports quarterly earnings today. Think that has anything to do with the timing of this morning’s announcement? In any case, I’ll have live coverage after 4 pm ET. See you then.

But how do Netflix users actually use Netflix?

For at least some of them, the answer is: They use it as an $8-a-month babysitting service.

That’s the takeaway from a focus group Bernstein Research conducted with a bunch of San Francisco moms last month. Bernstein is particularly interested in how moms use Netflix with their kids, because the team there believes that kids’ shows on Netflix are a problem, or potential problem, for kids’ cable programmers like Viacom and Disney. And the discussion they had with these moms supports their thesis:

Our panelists who subscribe to Netflix largely originally did so for themselves, but are now using the service primarily for their kids. The content selection is perceived to be significantly better for kids than for adults, and the lack of commercials and ability to control the viewing choices are seen as positives.

And the quotes and paraphrases from the focus group are excellent, and ring at least partially true. At least to this non-San Francisco-based kid-watcher:

• We found that most mothers originally subscribed to Netflix streaming for themselves, but eventually the service is used primarily by their children.
• Some mothers like that Netflix streaming allows them to watch older content, but many consider Netflix as a service better suited for children because of lack of interesting content for adults.
• Mothers like that Netflix does not have commercials and contains programming their kids enjoy (citing Dora, SpongeBob, etc.).
• Many mothers cited instances in which their children watched the entire episode library of a given show (e.g., SpongeBob) on Netflix.
• Almost universally, the mothers found that kids do not tire of watching the same programs over and over again. …
• When asked if Netflix was an adequate substitute for cable, Group 2 erupted in a chorus of nos.
• Regarding the types of shows one child watched on Netflix, one mother stated, “Mostly she watches the shows she’s seen a million times [already] on Netflix.”
• “My kids do binge viewing through Netflix. I never turn on Netflix.”
• Regarding the availability of older content: “The Columbo’s we don’t own, we watch on Netflix. Columbo, Columbo, Columbo, Columbo.”
• “I think I use it more for the kids than I do for myself.”

But it’s equally important to note that most of the Bernstein panelists don’t say Netflix is their primary source of kids’ entertainment: Most of them also rely on some combination of DVRs, pay-TV on-demand offerings and other services.

And, a bit oddly, when Bernstein conducted a similar panel of moms in New York this month, it found that most of them had no idea how the service worked. Which again means they didn’t talk to my family or most people I know.

Unlike our panel in SF, this group of mothers had surprisingly little knowledge of the Netflix value proposition. They did not use Netflix for their kids as much as the SF panel suggested since most knew almost nothing about the product.

• When describing what the product offers for kids, some uninformed mothers did not see the need for the use of such a service, as they mostly needed programs that are downloadable. They felt that OnDemand and DVR fulfilled the majority of their programming needs.
• When asked what form of entertainment service the mothers would give up first, invariably it was Netflix.
• When asking about pricing for Netflix, one mother asked, “Is it $30 a month?”

Turns out you’re going to have to keep waiting for that. For a long time.

The feud between the pay-TV programmer and the pay-TV provider ended this morning, the way every single one of these disputes has: The pay-TV provider agreed to pay more for the programming, and will pass those fees on to its customers.

In this case, Viacom got a bump of more than 20 percent for its stuff. As Bloomberg reported earlier this morning, that means that CEO Philippe Dauman will get more than $600 million for his shows this year.

And because those fees will escalate over the course of a seven-year contract, that means the overall deal will be worth more than $5 billion, the programmer is telling Wall Street today. Which is why the company was perfectly content to take an estimated $14 million hit a week while its shows were off the air.

DirecTV can also claim victory, because it’s paying less than Viacom asked for originally. And Wall Street seems just fine with it for both companies, because the prices of their shares are basically flat today.

But weren’t other issues in play here, too, like digital rights and carriage for Epix, Viacom’s HBO-like service? Yes. But also, not really. At the core, this dispute was only about the money DirecTV will pay for Viacom’s shows. The end.

No one ever seriously talked about breaking up the bundles that make up the foundation of the pay-TV business — the ones that mean that people who want to watch Jon Stewart on Comedy Central have to pay for access to Country Music Television, too. Because those bundles work quite well for both sides. And if new would-be players like Apple want in, they’ll have to accept the bundles, too.

That model will continue to work until pay-TV customers actually stop paying for TV in significant numbers. Or, more likely, a couple generations of would-be pay-TV subscribers get out of college, and never get a pay-TV subscription.

But that’s a scenario that’s going to take quite a while to play out. And since deals like today’s pact last for seven years or more (the Disney/Comcast deal signed earlier this year goes on for a decade), it’s going to be very hard to change the status quo.

That’s all old news now: All the big media companies that took hits yesterday — Comcast, Viacom, Disney, etc. — are trading back where they were on Wednesday, before Barry Diller and his Web video start-up won a legal victory.

So which group got it right? The sky-is-kinda-falling folks who sold media stocks yesterday morning? Or the “What, me worry?” camp that bought them up yesterday afternoon and today?

Insert professional shrug here. The big-TV versus Aereo case is just starting — this week’s ruling was simply a decision not to shut the company down while the trial moves on — and is likely to drag on for years.

Investors don’t like uncertainity, but they’re kind of okay with uncertainity that won’t affect the near-term future. So that’s probably the best explanation for keeping things status quo, share-price-wise.

But just for giggles, let’s pretend that Aereo ends up definitively winning its legal argument: That it can sell access to broadcast-TV programming without paying broadcasters.

What then? Here’s how it might break down for different parts of the Big TV Industrial Complex:

Broadcasters: These guys have the most to lose. In recent years, big over-the-air broadcasters have been able to secure big “retransmission” fees from the cable companies for their stuff — CBS, for instance, has said it should pocket $250 million in retrans fees this year, and that it could end up pocketing as much as $700 million a year a few years from now.

And if Aereo doesn’t need to pay broadcasters to show that stuff, then maybe pay-TV providers like Time Warner Cable and Verizon don’t have to, either. Broadcasters still make most of their money from selling ads, and that business doesn’t have to disappear if viewers head to Aereo or other “over the top” alternatives.

But just like the fees that Netflix and other digital outlets have started paying Big Media companies, retrans fees are extra valuable to the broadcasters because they’re almost 100 percent pure profit.

Cable programmers: Their core business doesn’t get affected, because there’s no way for Aereo to get its hands on stuff like ESPN or Bravo without paying for it.

There is a possibility that Aereo’s customers are happy to just get programming from the four big broadcast networks, and add in a few shows here and there from iTunes, Amazon, Netflix, etc. And if that happens, that’s not good for cable programmers, since it could accelerate cord-cutting.

But it’s just as likely that Aereo ends up striking deals with the cable networks, so it can sell its customers a more complete package, becoming a virtual pay-TV provider itself. And the cable guys would be just fine with that — as long as Aereo agrees to buy bundles.

Pay-TV providers: The negative scenario is one where Aereo attracts lots of subscribers for a broadcast-only package of programming, and many of those customers stop paying the likes of Comcast and Verizon for TV.

But even if that happens, they’ll still end up paying the likes of Comcast and Verizon for broadband. And that’s not a terrible scenario for those guys at all, since broadband margins are much better than video-service margins. And again, if Aereo doesn’t have to pay for broadcast TV, then the pay-TV guys could make the same argument themselves — which is what Time Warner Cable boss Glenn Britt has already been publicly musing about.

Now, let’s make it even more complex: All of the big media companies are in multiple lines of business, which makes it even harder to assess their impact.

Three of the Big Four broadcasters, for instance, are owned by companies with big cable programming businesses, which reduces the hit they might take (it may also give them the option to move some programming from broadcast channels to cable channels, as Disney did when it moved “Monday Night Football” from ABC to ESPN).

And Comcast is a broadcaster, a cable programmer and a cable provider. What does Aereo mean for it?

So it’s easy to see why Barry Diller is betting on Aereo: If it works, it could change the way money flows in the TV business, and he could be in a position to pocket some of the flow himself.

But that doesn’t mean Aereo will fundamentally disrupt the TV business. Or at least that’s what Wall Street seems to think today.

A Reuters report says Intel is promising programmers some cool new tech, including facial-recognition technology, that will make it easier for networks and advertisers to see exactly who’s watching their stuff.

This might creep the bejesus out of normal folks, who don’t like the idea of their TV watching them. But Intel thinks it will make it easier to get the content it wants for less, because targeted ads could be so much more valuable than the spray-and-pray model the industry uses today.

The real problem: None of the content guys have shown any interest in giving Intel their stuff at a discount. More important: None of them have any interest in breaking their programming bundles, which force consumers to pay for lots of shows/networks they don’t want, in exchange for access to the stuff they do want.

Those bundles are core to today’s TV ecosystem. And the TV guys insist that consumers really don’t want “a la carte” programming, because if they do, the channels/shows they like today will end up costing much, much more.

Disney, for instance, charges TV distributors about $5 for every subscriber that gets ESPN. And, by some estimates, only about 25 percent of cable customers actually watch ESPN on a regular basis. So if you unbundled ESPN, the per-subscriber cost might shoot up to $20 or more, to account for the 75 percent drop in its customer base.

You can argue that a la carte programming is inevitable, along with a big drop in programming fees, as the content guys adjust their costs to account for the new reality. But you’ll have to be very patient to see that happen.

Recall that content guys like Disney are inking seven-year or 10-year deals with distributors like Comcast, which will keep the bundles intact for a long time, tying access to ESPN directly to access to other Disney-owned channels like ABC Family and the Disney channel.

People familiar with Intel’s plans tell me that the company has thought about trying to deal with the bundle problem by simply picking a smaller set of bundles. Last year, for instance, Intel was working with Richard Branson’s Virgin Media, and talking about packages that just didn’t include ESPN or any Disney channels. Presumably there’s a group of TV customers who don’t value sports or kids programming, and who would be willing to pay for TV that didn’t include that stuff, and/or TV that included other stuff they do like.

But the Virgin/Intel partnership is off, and Intel is still trying to figure out how to crack the code on its own. The safe bet — the Ari Emanuel bet — is that they won’t do it anytime soon.

(Image courtesy of Shutterstock/jnumber9)

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