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High Prices Remain Obstacle for New Web TV Services

Hulu’s plans for launching the latest online version of pay TV moved closer to reality with Time Warner’s agreement on Wednesday to license its channels to the service. But Time Warner also showed why the new online services, which include one expected from YouTube, will find it tough to win over consumers. Despite declining numbers of pay TV subscribers, media companies insist on keeping prices high.

John Martin, who runs the Time Warner division that operates its cable channels TNT, TBS, Cartoon Network and CNN, told Wall Street analysts on Wednesday that the company wasn’t giving new online versions of pay TV services any break on prices it charges for its network. “We have a highly concentrated portfolio of very valuable networks that we intend to get full value for over time,” Mr. Martin said.

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Without pricing as an advantage, Hulu executives believe the service could best the cable operators by offering features like a nicer interface and the ability to watch programs across devices, according to a person close to the company. But the new service isn't expected to let consumers fast-forward through commercials, a popular feature of cable digital video recorder service. And Web-based TV streaming has been fraught with technical challenges, such as the picture freezing, which could also turn off viewers.

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What all this means is that web-based TV services won’t likely stem the drop in the number of people subscribing to pay TV, which Mr. Martin acknowledged was running at about 2%.