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Mark Pedowitz, President of the CW, caused a bit of a stir this week by declaring ambivalence to when and where consumers watch his shows: “I just want the consumer and the audience to feel that they can find the show wherever they can find it.” He estimates the network will have a whole new strategy in the next 6 to 9 months, as many of its output deals are now expiring – and it doesn’t seem at all unreasonable to suspect they’ll be the next big-time direct-to-consumer play. With a nice slate of exclusive, millennial-friendly content to bring to the market (and a back-catalog that is now very large thanks to the longevity of shows like Supernatural), don’t be surprised if they make a big splash.
Sure, you might say, another publisher copying Netflix, HBO et al – that’s not news, that’s just more of the same. Then how’s about Discovery’s Eurosport announcing that it will be selling NBA League Pass across Europe for online consumption? That’s the same Discovery that recently announced Discovery Go across a range of locations, while continuing to harvest the benefits of traditional Pay TV? With nearly $2.5B in EBITDA the last 12 months, this is a network with a lot bet on the MSO line, yet their continued efforts to pave the way forward online suggest a sophisticated strategy to be at the front of the pack when the OTT transition is complete.
The NBA / Discovery deal is particularly fascinating in the light of the observation by Digital TV Research that it is exclusive programming that is driving sign-ups for traditional TV subscribers (albeit in less-saturated regions of the Middle East and North Africa) – because no programming is more exclusive than sports. And the cost is becoming prohibitive: according to SNL Kagan, the Norwegian market, for instance, is struggling with ever-increasing costs for sports programming, at the same time that subscriber and ARPU growth are under pressure. Capturing that non-traditional viewer with a comprehensive OTT strategy could very well be the shortest path to reversing the scary profitability curve on sports.
Outside of sports, exclusive deals continue to be the order of the day, and one has to wonder how long channels playing primarily syndicated repeats can continue to compete. The OTT world continues to impinge on their playground, from pick-ups of expiring shows (see Longmire and The Mindy Project), claims for shows rejected by the networks (The Unbreakable Kimmy Schmidt), and deals with show producers like the one Hulu just did with Sony. Perhaps everyone doesn’t want to binge watch Dawson’s Creek or The Shield, but those who do now face a fascinating choice between traditional TV and OTT.
Don’t think the TV world hasn’t noticed what’s going on. In one of the most aggressive moves, TNT announced its intention to reduce the ad load on its channels by 50%. For those of us accustomed to getting 17 minutes of ads for every 43 minutes of show, this will likely by very noticeable. It also puts the pressure on OTT services planning to drive their business forward through advertising: if ad loads online start to exceed those of the television, two things are likely to happen: ad blockers will continue to proliferate faster than publishers can defeat them; and viewers will ask themselves whether the experience isn’t better online after all. Where today’s OTT providers are able to push a unique differentiation by offering vast choice and a great playback, there is a hierarchy of experience – and suffocating ad loads are on that hierarchy.
Finally, it would be wrong not to give the final word to CES, the mind-bogglingly huge trade show that just concluded in Las Vergas. In a keynote that was livestreamed via Periscope, YouTube’s chief business officer Robert Kyncl declared that “Digital will win the decade”. His belief that digital’s growth will be ‘exponential’ is compelling, although he predictably pushed the ‘democratic’ nature of a platform where anyone can post anything – which slightly undercut his concentration on the replacement of traditional TV by OTT services.
So we head into a year that has opened with MSOs offering to re-sell OTT services, OTT services outbidding traditional TV companies for exclusive content, and networks declaring their openness to delivering entertainment any way the consumer wants it. Perhaps it’s wrong to say that digital will win the decade, and better rather to say that this is the decade where viewing experience transcends the delivery method.
