Recent developments like Facebook’s move to make content sharing a centerpiece of its user benefits, reported efforts of Google to gain control of Hulu and a new Credit Suisse survey reporting heightened cord-cutting pressure on service providers are raising the stakes for small and large operators alike as they look for ways to expand the appeal of TV Everywhere and VOD offerings into full-scale multi-screen services. While Credit Suisse found that only about four percent of pay TV subscribers in its survey of 2,075 consumers intended to drop service within the next 12 months, the findings overall indicated that up to 20 percent may do so in the years ahead.
The primary cause for dissatisfaction is subscribers believe service is too expensive, Credit Suisse says. Already, about half of the 500 respondents who said they regularly access OTT services said they use these as a substitute for pay TV.
Adding fuel to this fire is the emergence of connected TVs, which, according to a new study from The Diffusion Group, are starting to draw consumers to OTT content much more consistently than was the case early on in the marketing of what are now dubbed “smart TVs.” The researchers found that with smart TVs now operating in 20 percent of broadband homes, 80 percent of those owners are using them to watch OTT content at an average rate of 4.8 hours per week.
For service providers the question is will the expansion of TV Everywhere to a full multi-screen service provide the navigational convenience and compelling usage experience that will keep subscribers from disconnecting? If Credit Suisse is right, it comes down to creating a sense of greater value at existing prices or cutting prices, which, given the economics of program acquisition appears to be a non-starter. Fortunately, no matter what their OTT strategies might be, most programmers are supporting TV Everywhere, understanding full well the conundrum service providers face and the threat that poses to their licensing revenues.
The level of commitment to TVE ranges from those like TBS who are only allowing online access to authenticated pay TV service subscribers to those like NBC Universal that are expanding their OTT plays, in this case by making all online content accessible to tablets, as they release content into TVE. In between are those who are pulling back on the OTT windows in favor of TVE, as in the case of Fox, which says it won’t make its broadcast programming available online until eight days after it airs.
It’s been a struggle to put together a meaningful portfolio of TVE content, especially when it comes to extending the reach to devices other than PCs and MACs, owing largely to licensing issues. But two major program suppliers, Disney-ABC and TBS, offer evidence as to how fast things are changing.
“Multi-screen video will be the major step forward in the TV experience in this decade; much more than HD was,” says Tim Connolly, vice president of digital video distribution for Disney and ESPN’s Affiliate Sales and Marketing group. Multi-screen video will “become a default part of the package you sell to your consumers,” Connolly tells service providers.
Disney is in a position to offer these optimistic assessments thanks to great success after much hard bargaining at gaining rights to extend TV programming to other devices, he notes. “Even though rights holders said, ‘Open up your wallets’, Disney made the decision to try to get multi-screen rights [on reasonable terms],” he says. “Obtaining rights has been a long time coming.”
Now, Connolly estimates, “100 percent of the rights are cleared with all of the Disney channels, 70 percent of the rights are cleared for ABC-Family linear and on-demand content and [in ABC-owned broadcast affiliate markets] 70 percent of the rights cleared.”
TBS, too, has cleared the licensing hurdle, says Michael Quigley, the network’s vice president of business development and multi-platform distribution. As a result, he says, Turner has enabled authentication of its networks to systems representing 70 million households through partners such as Cox, Suddenlink, DirecTV, Dish Network, AT&T and Verizon. “Customers are hugely excited about being able to watch CNN where they want,” Quigley says.
For Turner TVE represent a full-bore cross-platform, cross-industry initiative aimed at ensuring that its multi-screen programming is available to all its distributors’ customers, Quigley says. Echoing Connolly, he notes the rollout of multi-screen has occurred much faster than other deployments, such as high definition and digital TV. TBS only started talking about multi-screen two and a half years ago and announced its first affiliate deal just one year ago, he says.
Now the challenge is to educate consumers on the availability and value of TVE. “Now that the technology is out there and the rights issues figured out, it’s about driving awareness and usage with customers,” Quigley says.
Taking a page from its sister network’s HBO GO campaign, TBS in September put new muscle into that challenge with kickoff of TVE ads featuring Conan O’Brien dressed in a ridiculous suit embellished with flashing screens to explain what the service is all about. The network is putting other stars to work as well, including the cast of its “Leverage” series, in campaigns that encourage people to download TBS and TNT apps on their phones and tablets to start watching television episodes online and on demand.
Connolly likens the consumer challenge to a political campaign where people must be persuaded to register before they can vote. Getting them to sign-up for a user name and password from their service provider isn’t easy, he notes, notwithstanding the fact that ESPN has “a big megaphone” and is using cross-promotional spots to get the word out.
“We’re not as far as along [in TVE authorization] as Turner,” Connolly adds, noting that Disney now has several networks offering TVE access to about 18 million subscribers. “It’s been a dead sprint over the last year,” he says.
ESPN anticipates a surge in TVE usage during this college football season. “ESPN is 100 percent committed to this service,” Connolly says. “Their number one priority is the ‘Watch ESPN’ [TVE access] feature, and once fans see the service, they love it.”
Connolly believes the better navigational experience with search and discovery associated in the multi-screen environment will help drive VOD. ESPN placed short-form and some long-form VOD on the Xbox 360 and found it to be quite popular relative to traditional set-top VOD, he says. Moreover, the OTT platform benefits content owners and service providers in the on-demand space by allowing them to ingest and publish content a much more timely way, he adds.
“Millennials are incredibly sensitive about getting the content in a timely basis, thanks to social networks,” he says. “Anytime, anywhere access is resonating well with multiple groups.”
Flexibility on the part of both content owners and service providers is essential to maximizing reach and use of TVE, Quigley notes. “There is no single one-size-fits-all solution, as much as [service providers] would like one,” he says. As long as they follow Turner’s best practices, operators are free to build their TVE service internally or to outsource them, using Turner’s storage base or integrating the content directly on their sites.
Getting smaller service providers on board with TVE is vital to success, Quigley adds. “Seventy percent of the cable systems have less than 1,000 subscribers,” he says. “How do you make it economically viable for them?”
For smaller operators especially, the integration of authentication and back-office processes can be daunting. Both Connolly and Quigley suggest that third parties with core authentication systems in place, such as Adobe, Avail-TVN, Clearleap, Synacor and MobiTV, offer one way operators can defray the costs of integration and speed time to market. Connolly also emphasizes that operators don’t need their own portals to get into the streaming game.
While programmers are generally keen to capture new ad revenues through exposure of content online, they’re also mindful of the ad revenue-enhancing possibilities associated with TVE, especially as it works in tandem with maintaining their lucrative distributor fee revenues. “The license fees are about the value delivered to the distributor,” Quigley says.
Nielsen’s C3 rating system, which extends gathering of TV viewing data up to 75 hours after broadcast, could become a boost to TVE advertising later this year when the firm begins tracking program viewing on PCs, MACs and tablets. “The advance of C3 to VOD has provided us the opportunity to monetize VOD,” Quigley notes.
But Connolly is not sure about the benefits of C3 for measuring viewing on IP devices insofar as those devices must download client software to be counted. ESPN is concerned Nielsen won’t be able to accurately measure that part of the market, he says.
But that’s just another inducement to take another tack, he adds, which is to move away from repeating the linear broadcast ads in time-shifted programming. This fall ESPN plans to place different ads in time-shifted programming for both TVE and VOD, he says.