TV’s Real Weak Spot (Hint: It’s Not “Game of Thrones”)

Moan about it all you want, but you’re not getting “Game of Thrones” for a long time without paying for cable. The same goes for the summer Olympics: If you want to watch every single event from London, you’ll need a pay-TV subscription.

That’s the story, more or less, for all the glitzy, expensive programming you see on TV these days. The TV industry’s paywalls might topple one day, but it won’t happen soon, and that means you’re going to have to pony up to see this stuff (legally).

But, as Venrock’s David Pakman, YouTube’s Hunter Walk and lots of others point out, your TV-programming guide isn’t dominated by high-end stuff. Most of what’s on, most of the time, is a lot less exalted. Like reruns and reality TV.

And that’s where TV’s first real weak spot will materialize.

Thanks to Netflix and Hulu, we already have a pretty good idea of what reruns on the Web look like. What about reality? Well, it looks a bit like this:

That’s an episode from Demand Media’s “eHow Home” channel, one of three the Web publisher is producing for YouTube’s new “professional” content venture.

To my eyes, it looks a whole lot like “real” reality TV — multiple camera angles, professional edits and an easy-to-understand narrative. If you were scrolling through channels on your couch, it would seem familiar, at the very least.

It’s a whole lot cheaper than “real” TV, though. An hour of similar programming on Scripps’ HGTV may cost something like $250,000 to $350,000. An informed guess places Demand’s costs at something like $100,000 an hour for its stuff. Quite likely much less.

Right now, Scripps can afford to shell out so much for its programming because it gets paid twice for its shows: Once by advertisers, who pay much more than YouTube has traditionally been able to command for its video; and another time by pay-TV subscribers, who pony up a monthly fee that gets cut up between Scripps and all the other programmers on the TV grid.

They’re not paying a whole lot for HGTV — the channel probably gets 20 cents or less per subscriber, per month. But all of those subscribers add up, and Scripps is able to bundle HGTV with all of its other channels — Cooking Channel, DIY Network, Food Network, etc. — and ends up with a nice chunk of guaranteed revenue, no matter who watches.

So if Demand and Google — which is underwriting all of this, with its $5 million interest-free loans — are successful, they’ll be able to attack TV on two fronts:

• Marketers may decide they’d rather pay to reach eyeballs on the Web, instead of TV.
• And cable-TV providers like Comcast or Time Warner Cable may decide that HGTV, etc., isn’t must-see programming, and it may push to lower the channels’ subscriptions fees (or threaten to drop them altogether, like Dish TV is doing).

This doesn’t work at all if no one actually watches the stuff on YouTube. And right now the view counts for “life style celebrity” P. Allen Smith’s home-building series on eHow’s channels are quite modest.

And remember that even if the P. Allen Smiths of the world do start chipping away at the pay-TV business, most of you may not notice — because you’re not watching channels like HGTV in the first place.

But if it does pan out, the net effect is that money flows into Web video and away from TV, which puts pressure on budgets for everything — even the high-end TV you really care about. Sketch that curve out far enough, and things really will change. You may even be able watch your dwarfs and dragons without paying for TV.