Time Warner, Comcast to test Web TV

NEW YORK (Reuters) -- Time Warner Inc. and Comcast Corp. have banded together to test ways to allow people to watch more TV shows over the Web, while making sure they keep paying for their traditional cable or satellite TV services.

The partnership by two major media companies underscores the pressure the TV industry is under to protect its revenue but also satisfy consumers who want to watch their favorite drama or comedy at a time and place of their choosing.

Time Warner (TWX, Fortune 500) and Comcast (CCW) are banking on an approach that would essentially allow viewers to see any show at any time over any sort of device they wanted -- whether that is a TV set, computer or cell phone.

One catch: they must first prove they are a cable or satellite customer, meaning they already pay a monthly subscription fee for TV.

In announcing the partnership Wednesday, Time Warner Chief Executive Jeff Bewkes stressed that he viewed the plan as a "free gift" for consumers that simply "expands" their entertainment choices. Time Warner is the parent company of CNNMoney.com.

"If this approach gets adopted ... it will clearly be the biggest story in video-on-demand and Internet video," Bewkes said.

Shares of both companies were up more than 1%.

In testing whether the system will work, both technically and strategically, Time Warner and Comcast will begin a national trial of the service in July.

The roughly 5,000 customers in the trial will be able to access full episodes of shows from Time Warner's TNT and TBS networks like "The Closer" and "My Boys" on Comcast.net just hours after they air on TV.

Bewkes said he was "talking to pretty much all the satellite, telephone and other cable companies" about similar initiatives. For his part, Comcast Chief Executive Brian Roberts said he expected other networks to join the approach and offer their own hit shows.

"It's kind of like iTunes but it's better because you don't have to pay," Bewkes said.

Bewkes has made no secret of his desire to move the industry toward what he calls "TV Everywhere," a catchphrase for an approach that boils down to a requirement that viewers prove they they pay for a TV service before they can watch shows on the Web. Comcast calls it "On Demand Online."

Whatever the name, getting audiences to keep paying for a TV service is paramount for cable operators like Comcast. It is hardly less essential for cable networks like TBS, since they collect fees from cable operators that carry their programs.

The fear within the industry is that by failing to protect their shows from the free, open world of the Web, the TV industry will suffer the same devastation as the publishing and music worlds.

But the TV industry remains divided on how to approach the issue.

In one case, three of the major broadcast networks -- News Corp's (NWSA) Fox, General Electric Co's (GE, Fortune 500) NBC, and Walt Disney Co's (DIS, Fortune 500) ABC -- have joined together to form Hulu.com, which carries mostly broadcast TV shows but also some content from cable.

That's a point of irritation for some in the cable business -- since audiences are suddenly able to watch a TV show over that Web that previously they could see only if they subscribed to a pay-TV service.

When asked about the industry's challenge, both Bewkes and Roberts denied that were reacting belatedly or defensively to the threat of the Web.

"This is offensive," Bewkes said. "Make no mistake about it."

Comcast shares were up 5 cents at $13.84 on Nasdaq, while Time Warner rose 19 cents to $24.74 on the New York Stock Exchange.