OTT Changes Landscape But Doesn’t Threaten MVPDs, Say Providers, Broadcasters, Content Producers
Though the rise of over-the-top (OTT) video services has forced broadcasters, content producers and video providers to embrace new ways of distributing their products, companies such as Netflix and Aereo aren’t yet a threat to the incumbents, said representatives from 21st Century Fox, Viacom, NBCUniversal, Charter Communications, Starz and others on panels Tuesday at the University of Colorado’s Silicon Flatirons conference on video programming.
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Users will find new ways to discover content while still relying on traditional linear models, said streaming company executives at the conference that was webcast from CU’s Boulder campus. “We've had more time than music did to embrace digital,” said Viacom General Counsel Michael Fricklas. The “edge” video services -- meaning video providers that don’t fit the mold of traditional cable or satellite multichannel video programming distributors (MVPDs) -- have a long way to go before they can threaten the established industry leaders, said Charte Senior Vice President Allan Singer. “Is the edge something that’s gonna pop up tomorrow and be a threat to incumbent businesses?” he asked. The Super Bowl will be on a major broadcast network “for our lifetime,” he said.
OTT services such as Netflix have given consumers a taste for content choice, which could build momentum for a la carte cable, said moderator Paul Glist, a Davis Wright cable lawyer. “If you go to a dramatically different business model, the economics are gonna change,” said Maureen O'Connell, 21st Century Fox senior vice president-regulatory and public policy. A la carte cable, or even smaller bundles, will vastly reduce the number of channels available to consumers and drive up the price of those that remain, she said.
Even if a la carte cable legislation passed, customers would still buy bundles, said Singer. “That’s how people are accustomed to shopping.” He said McDonald’s Extra Value Meals remain popular even though customers have the option of ordering their hamburgers a la carte. O'Connell said even with a la carte cable, OTT’s rising popularity may push consumers back to cable bundles as usage-based data pricing becomes more common. “If people have to pay minute by minute for the content they're consuming, that adds up quick,” she said.
On-demand content from networks is “vastly superior” to the content provided by most OTT services, said NBCUniversal Content Distribution Executive Vice President Matt Bond. However, he said, services such as Hulu and Netflix have traditional MVPDs beat when it comes to their products’ user interface, a fact he blamed on the older companies relying on “legacy tech.” Bond said he doesn’t see services such as Netflix as “antagonistic” to his company’s “core revenue stream.” There’s “no indication they're undermining other parts of the business,” he said.
OTT services that use broadcaster content will eventually have to pay for it, said O'Connell, referencing streaming TV service Aereo. She said court decisions in Aereo’s favor were “an anomaly,” and if broadcasters’ right to their content isn’t held up in future court decisions, Fox’s business model could change, as executive Chase Carey suggested at the NAB show earlier this year (CD April 9 p13). “If Fox should decide to change its business model, we would hope it would give back the broadcast spectrum” that it currently owns, said Dish Network General Counsel Stanton Dodge.
O'Connell and executives from Lionsgate Films and Starz said OTT as both a competitor and a venue for content prompted their companies to carefully consider the timing and methods of how they release their products. “It’s a complex dance,” said NBCU’s Bond. Lionsgate released successful movies in 2013 with traditional theater openings, through VOD and direct-to-video, and allowed customers to buy digital copies of the film Mud before the movie was released in theaters, said Lionsgate President Worldwide TV and Digital Distribution Jim Packer. “There’s no exact science to this,” he said. “You have to be mindful of the changes."
Traditional linear programs will not go away, experts said on a panel on disrupting the legacy video model. Linear TV is media’s foundation, said Lindsay Gardner, a former president at Fox. “The average American consumes 80 hours a week and the majority is through linear TV,” he said. “There’s a dependable delivery with linear TV where you know that you are going to get the same quality every time you watch a TV channel.” Without the legacy model, viewers could also lose the opportunity to discover new shows, said Gardner, a former Fox Cable Networks executive. “We have very narrow opportunities to discover new content with these new platforms,” Gardner told us. “With less channel surfing, there’s a decreasing chance that we will sometimes find shows that we love.”
Rapt Media CEO Erika Trautman, however, said social sharing encourages discovery of new shows. “People want to share with others what shows they like and encourage others to watch,” said Trautman. Tivli President Christopher Thorpe said the Kindle is one example of how models can change over time. “People still read books just through a different device,” said Thorpe. “TV is certainly not dead.” Tivli is an Internet Protocol-based TV service aimed at college students that works with the industry for licensing agreements, said Thorpe. “We need to build better business models to reach these customers."
Advertisers do not understand the value of online views, said Trautman. “Specificity and relevance are a lot more important than the number of online views.” Sympoz CEO John Levisay said cable companies have had some missteps with 3D, but other companies are starting to find new potential. “Apple TV came out seven years ago with a lot of promise, and now we are starting to see the effects of it,” said Levisay. It’s important to help users find content in a nonlinear model, said Gardner. “Metadata for online guides is huge business because the most scarce resource that users have is time,” he said. “With the companies that provide the description and the context, the ability to persuade someone to watch is going to become even more important."
New models of watching TV could take another generation to become fully integrated into the consumer interface, said Gardner. “To be a disruptor, you need to do your own promotion and marketing.” Through Tivli, legacy TV can be brought to young people, said Thorpe. “We are finding 90 percent of students will use our service at some point.”