- Cablecos Take on OTT with OTT
There’s too much at stake not to overcome the natural tension between the cable-TV companies and content owners over prices and rights for delivering content over the Internet to devices like tablets and smart TVs, according to participants in The Cable Show’s initial general session. Liz Claman, Fox Business News reporter, moderated the panel of Time Warner CEO Jeff Bewekes, Time Warner Cable CEO Glenn Britt, DirecTV CEO Chase Carey, Cox CEO Pat Esser, Viacom CEO Phillip Dauman and Comcast president Neil Smit.
Claman pointed out that’s there’s more content for people to watch than ever, but much of it is not from the cablecos: it’s mainly delivered over the Net through companies like Netflix. “How did you let that happen?” Claman asked. “How are you going to get them back?” Napster used the Internet (and free but pirated music), and that destroyed the music industry, she pointed out.
In a different session, the financial analyst said the cablecos must me missing something in their offerings as evidenced by the meteoric rise in Netflix subscriptions.
The panelists’ responses were, in general, to smother consumers with their offerings of Internet-delivered content.
Responses included:
- Comcast’s Smit suggested personalizing recommendations.
- No one knows exactly where this is going, Britt said, but the cablecos have to offer what subscribers want.
- We created this chaos with broadband, said Esser, and we have to give consumers choices.
- Television is the foundation, according to Dauman, and cablecos need social networking. Content providers and the distributors have grown the pie.
- Apple has shown the way with a great and intuitive experience, Chase said. Content rights are our backbone, he said, and a wild west can’t be allowed.
- This is not the music industry, Bewkes said, and programs like TV Everywhere are important. The Internet is a new morning in the pay-TV industry, and the operators will offer the “best stuff” on OTT. The industry needs a better user interface for on-demand, he said.
Claman asked about tablets.
- Smit said consumer demands have to be met everywhere and on every device. Content owners want to get paid, he said, so the operators had worked with Nielsen to get ratings for catch-up TV.
- Consumers will pay for quality, Chase said.
- Consumers are sending a loud, clear message, Esser said. They want video-on-demand and catch-up TV, he said, pointing out the success of Cox’ recent catch-up TV launch. We’re doing lots of things right, he said, but have to do some things differently.
- We can’t fall asleep, Britt said, and we must embrace all the screens consumers have.
- Dauman said Netflix uses massive amounts of the cablecos’ broadband. It’s also developing its own content, he said, but that’s not Netflix’ fundamental business. Viacom, which owns Paramount Studios and a number of pay-TV channels like MTV, has a large library of content on Netflix as a part of its windowing strategy for maximizing revenue. It’s not easy to produce content, he said. - There are no massive changes in the content industry, he said, pointing out that the same studios existed 75 years ago. You also have to satisfy where they want to watch.
Claman said Showtime recently pulled some content off of Netflix when Netflix announced it was creating some content.
- Bewkes said his company’s HBO can be accessed through on-demand networks and is now available over the Net to PCs and tablets. These services are only to their paying subscribers. So are Showtime, Starz and Epic. Netflix is Internet only but has a great user interface that makes it easy to find older content. The cablecos will put everything on-demand and on every device along with a great user interface, he said.
- Dauman said the industry has to give consumers what they want and overcome the technology and monetization obstacles.
- Claman asked if the trivial amount of cord-cutting taking place might turn into a torrent. She recalled reporting that 1.5% of mortgages were late on payment in 2007 and being told not to worry because that meant 98.5% of mortgages were solid. We know how that turned out.
- Smit said Comcast has seen no cord-cutting, saying, “It’s almost not measurable.”
- Esser said it’s the economy that’s caused the slowdown in adding subscribers. The costs of pay-TV have increased, he said, but consumers’ incomes have not, pointing out that the cost of acquiring content has increased.
- Dauman said the industry has suffered through the worst recession in memory but had shown that the last thing people cut was the pay-TV cord. (Most of the studies we’ve seen, however, show that broadband is the last thing to get cut.) Any decline was minor, he said, and only lasted a few quarters.
- Britt said there are fewer new households and more empty homes than ever. The decline in subscribers is moderating a bit, he said. What’s alarming is the increase in the size of the “underclass” that can’t afford pricey pay-TV. He urged the development of smaller, less costly packages to offer them.
- Claman said the industry is also losing eyeballs, as we have been saying, as shown by ESPN having 2 million downloads of its app. People are watching lots of content on tablets, she said, and asked, “What happens next?”
- Smit said 50% of consumers are using their tablet as a tool such as remote, not for viewing premium content. Only 25% use a tablet to view content, he said.
- Bewekes, who evangelized the TV-Everywhere model, said the industry has to put TV on Internet-connected devices without increasing subscribers’ monthly fees. It’s our industry that made all this possible, he said. Internet delivery will have to be restructured to offer quality content. We don’t offer 3D on screens in the home in an appealing way.
- Dauman said people are changing what they do while they watch TV. One of Viacom’s shows has 1.5 million Twitter followers, he said, and another has 2.5 million Facebook likes. More original programming and interactivity has to be provided, he said, because the viewing experience is changing.
- Claman asked what the industry must avoid in order not to have to later ask, “We didn’t see it coming?”
- Smit said it’s software engineering.
- Esser said he is giving the company’s employees permission to disrupt the business model. Cox hires students as interns and asks what they do and don’t like and watch to see what the next generation wants.
- Dauman said it’s creativity and understanding the technology.
- It’s content, Chase said. The industry needs more content.
In summary, the industry appears set to embrace OTT in every way imaginable. A good test is to see how long before it offers Netflix on its STBs; that is unless companies think they can overcome Netflix by creating a duplicate OTT service with more content and a better user interface. It’s what they’re saying they’ll do but without saying they’ll take on Netflix head-to-head.
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It made me realize something about our own cable/Netflix consumption in our household. I haven't cut the chord on cable (yet), but I have noticed that since Netflix streaming, my kids have stopped complaining about how they're the only kids in the universe who don't have the premium channels on cable tv companies. So while not a clean break from cable, it does constitute a few snips at the chord.
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