It’s not about the technology used for delivering TV programming; it’s about the viewer’s ability to access the desired programming at the desired time using the most convenient device or platform for that particular moment. TV Everywhere addresses those needs by allowing customers to take their pay TV subscriptions with them, preserving the traditional business model.
Will TV Everywhere preempt the loss of viewers and revenue for TV networks and stations that can occur as a result of “over the top” (OTT) video services? With the vast majority of broadcast television households subscribing to a cable, satellite or telecom company paying retransmission consent fees, that’s becoming a bigger question for broadcasters.
Stories outlining the threat of OTT are appearing in virtually every edition of our industry trade publications. Most recently, these stories have included coverage of an SNL Kagan survey forecasting some 10% of U.S. homes will have discontinued their pay TV subscriptions by 2015. Other recent news items have reported that there are now more than 4,000 models of connected TVs finding their way into U.S. households. In fact, Leichtman Research estimated that nearly one-third of households already have connected their TVs to the Internet.
While it may seem like a misnomer to use the term “cut the cord” to describe the projected loss of TV viewers to the Internet, which primarily still uses a wire to reach consumers, the industry’s adoption of the term “TV Everywhere” is a good reminder that we are living in a multiplatform environment. Now, more than ever, it’s not about the technology used for delivering TV programming; it’s about the viewer’s ability to access the desired programming at the desired time using the most convenient device or platform for that particular moment. TV Everywhere addresses those needs by allowing customers to take their pay TV subscriptions with them, preserving the traditional business model.
With so much riding on the industry’s ability to minimize — or even “opportunize” — the OTT phenomenon, the Media Financial Management Association featured a “one-on-one session” at our 2011 annual conference involving Andy Heller, vice chairman of Turner Broadcasting System, and Paul Maxwell, owner and CEO of Media Business Corp.
Their discussion had such an impact on our attendees that it was chosen as the cover story in the July-August issue of MFM’s The Financial Manager magazine. Editor Janet Stilson, a longtime media business writer and analyst, used the topics discussed by Heller and Maxwell to drill more deeply into the underlying problems and immense opportunities associated with the TV Everywhere solution. Here are a few insights that emerged from her conversation with Heller, who has been at the forefront of Time Warner’s TV Everywhere efforts:
TV Everywhere is already available almost anywhere. By early fall, Heller expects cable, telecom and satellite companies representing as many as 85 million subscribers will be offering TV Everywhere access to subscription TV channels such as HBO and ESPN.
Not all TV Everywhere solutions are the same. Each service provider is deploying it slightly differently, Heller finds. While several major MSOs have built Internet portals such as Comcast’s Xfinity, others are authenticating TV Everywhere off the programmers’ websites, avoiding the time and expense of launching and running a big portal. On the downside, theses differences in implementation preclude having a uniform process that would make it easier for educating subscribers on how to access and locate the programming they want to watch.
Audience measurement is still evolving. One of the hurdles for securing broader participation by TV networks is the concern they will lose advertising dollars if viewership on these alternative devices can’t be measured.
Solutions such as Nielsen’s C3 ratings for measuring time-shifted viewership of content watched though DVRs or video on demand needs to be extended to these other viewing platforms. “If we can get appropriate measurement for that, there is a big win-win for everybody,” Heller says.
Networks need to stream their programming. Programming such as weather, general news, sports news and live sports events is ideally suited for TV Everywhere. These genres represent the types of programming that viewers want to access wherever they are over the device that’s the most convenient for the setting. Heller expects increased use of streaming media will help to advance “the promise of legitimate, dynamically inserted advertising on a much broader basis than it would have otherwise happened.”
He also views streaming media as one of the drivers for accelerating the speed for deploying set-top-box applications outside the cable box. “For example, Verizon is moving to a set-top-box-less format where they’re going to have set-top-box applications available on Playstation and Xbox and the iPad ands Android tablets. This allows the distributor to make the navigation inside their offering really simple for the consumer,” Heller said.
TV Everywhere is added value for existing subscriptions rather than an additional source of revenue. Heller doesn’t advocate charging customers more for TV Everywhere access, at least initially. While both distributors and programmers are incurring additional costs, he believes offering it for free is the smartest way to secure “early, fast easy adoption. I don’t think you want to put barriers in the way of giving consumers access to TV Everywhere; let them see how much they enjoy it, and then you can figure out whether or not it’s smart to have incremental costs associated with it, especially given the access they have to content from other places,” he advises.
As our newspaper brethren are painfully aware, offering online content for free can cannibalize the subscription business and make it much harder to implement a paywall after customers have been enjoying the benefit of great editorial content without having to pay for it. However, with the TV Everywhere model, online and mobile access to content is inextricably tied to maintaining a digital video subscription.
This approach is also consistent with the way premium movies channels like HBO, Showtime and Starz approached video on demand (VOD). Only customers that subscribed to the premium channel could access its programming via the VOD library. The opportunity to watch premium entertainment while taking advantage of VOD’s time-shifting capability helped to increase subscriptions for these premium entertainment channels, representing a great way to revitalize their traditional business model rather than cannibalize it.
TV Everywhere is important to TV stations. With most stations receiving cash as part of their retransmission consent agreements, broadcasters have a vested interested in supporting the subscription television business. While there is potential for local viewers who cut the cord to install TV antennas for watching local broadcasts, the number of OTA households hasn’t been increasing substantially. In fact, a recent study by Knowledge Networks found that 15% of all US TV households now rely exclusively on OTA signals for watching television. That’s an increase of just one percent over the three previous years.
TV Everywhere partnerships with cable MSOs and other multichannel licensees for local television is also a great way to take advantage of their online portals and increase the likelihood viewers find the shows you are spending money on streaming.
What about OTT sites that are interested in your programming? “All these players are looking at getting into the business in a non-facilities-based fashion. You have to weigh the opportunity. It may be nice, incremental money, but you need to know if they will they help or hurt your business in the long term,” Heller suggests.
Jason Bazinet, a media industry analyst for Citigroup who also spoke at Media Finance Focus 2011, agrees with Heller’s warning about understanding the financial implications of OTT. Bazinet said his analysis shows there’s very little incentive for channels to offer themselves directly to consumers over the Internet, because the price the consumers are willing to pay is below what most channels can get from operators.
Aptly entitled “The Everywhere Gamble,” Stilson’s article may be found on MFM’s website. Because MFM’s members encompass the full spectrum of traditional and emerging media platforms, there is a lot we can share with one another about the lessons learned from our mistakes and missed opportunities. When it comes to effectively satisfying consumer demand for media everywhere without forsaking the business model that allows us to offer that programming in the first place, TV Everywhere appears to be the beneficiary of both kinds of lessons. Stay tuned.
Mary M. Collins is president & CEO of the Media Financial Management Association and its BCCA subsidiary. Her column appears in TVNewsCheck every other week. You can read her earlier columns here.