Cable Technology Feature Article
Original Content Changes Cable's Battle with OTT
By Tara Seals, TMCnet Contributor
Original content is shaping up to be a battlefield royale for TV purveyors, including over-the-top (OTT) providers, and that could have big implications for the digital distribution moves undertaken by cable, satellite and IPTV operators.
The upfronts and the TV season ended last week, and we have a pretty good picture of what the content landscape for the fall 2013-2014 season looks like. It’s clear that network TV is stepping up its game, borrowing a page from blockbuster cable shows like The Americans and Californication to provide compelling premium TV in a broadcast setting.
CBS, for instance, finished the last season first in both viewers and the adults 18-49 demographic, and will be back in the fall with high-profile new shows like Hostages from producer Jerry Bruckheimer, starring Dylan McDermott and Toni Collette. It’s reminiscent of The Americans thanks to its mix of family drama and crime intrigue.
There’s also the show that marks the return of Robin Williams to TV for the first time since Mork & Mindy. He’ll star with Sarah Michelle Gellar in The Crazy Ones, about a father-daughter team working in an ad agency, with clear shades of Mad Men.
Other networks are bringing an A game as well: Marvel's Agents of S.H.I.E.L.D. (ABC) will have Avengers director Joss Whedon at the helm, and FOX has the Californication-like Rake, with Greg Kinnear. Not to be outdone, NBC is bringing the The Michael J. Fox Show to Thursday nights, about a man and his family coping with Parkinson’s. Despite the heavy underpinnings, the show is a sitcom.
All of this potential quality in the broadcast, free-to-air tier lessens cable’s dominance in the premium game. Sure, there’s no Game of Thrones or True Blood clone to be found in next season’s broadcast crop, but there’s enough meat on the bone to provide a case for viewership to return to the Big Four.
At the same time, the OTT crew has been turning to original content as a differentiator for some time now, with a fair degree of success. Netflix, for instance, wowed investors in the first quarter by adding another two million subscribers, quite possibly on the back of the debut of the highly anticipated D.C. political drama House of Cards, starring Kevin Spacey. That brought it to a total of 29.2 million members - a larger subscriber base than either market leader Comcast or HBO. The second quarter could prove out the power of original content to the company as well, thanks to the May 26 launch of the fourth season of cult darling Arrested Development.
YouTube (News - Alert) meanwhile keeps adding new channels, including paid subscription channels for niche audiences. YouTube has more 18-to-34-year-olds watching than any cable network. It also enjoys one billion unique monthly visitors, connecting 15 percent of the planet.
Amazon meanwhile is leveraging its new studio arm and is evaluating a set of pilots based on crowdsourced feedback. And Hulu, which is in the process of collecting bids in an effort to find a buyer, spent $500 million in content acquisition in the last year, including original content development. Perhaps un-coincidentally, in 2012 the company grew revenue 65 percent to almost $700 million.
“We see other subscription streaming providers following suit with Hulu Plus on the vast majority of connectable devices and Amazon also focusing on original programming to provide consumers a compelling reason to have another subscription,” John Buffone, director of devices at NPD’s Connected Intelligence service, told Digital Trends.
But what of traditional pay-TV operators? If Q1 subscriber figures are any indication, the sector has work to do.
"Since Q1 2012, pay-TV subscribers have increased by only 228,000,” said Stifel Nicolaus (News - Alert) analyst Christopher King in a research report. “Over the same time, Hulu Plus has added over two million subscribers, with almost one million of those subscribers added during Q1 2013. While housing remains weak and relatively high unemployment continues to pressure low-end subscribers, we have noticed a markedly different tone coming from management of various pay-TV operators in recent quarters."
Cable in particular continued to lose the most subs. The top four, Comcast, Time Warner Cable, Charter Communications and Cablevision Systems (News - Alert), together lost 208,000 video subscribers in the first three months of the year, doubling the 104,000 they lost one year ago.
Traditional pay-TV has been turning to TV Everywhere in an effort to sweeten the pot for subscribers by giving them the ability to access their subscription content across a range of devices. But now, some of them are going further, looking to move past their role as content aggregator, into the position of content creator.
According to CARTT, Rogers senior vice president of video content David Purdy told regulators at a recent hearing on the TV industry that the Canadian operator is looking to partner with premium cable nets to generate its own original content to take Netflix head-on, while providing value past the broadcast tier.
“We certainly plan on rolling out our own subscription products that will compete with Netflix,” he said. “There are lots of suppliers out there producing original series content. Our belief and intention would be to go after the Starz, Encore, Showtime and anybody that's not locked down on an exclusive basis and secure that type of content.”
He added, “The interesting discussion going on in the marketplace right now is are over-the-top [subscription video-on-demand providers] buying content or producing content on an exclusive basis? If they do so then there will be a natural reaction. It would be logical that we would start to produce content for an over-the-top SVOD. We'd partner with perhaps a Comcast who has a Streampix product in the marketplace.”
Verizon (News - Alert) FiOS is dipping a toe into these waters as well with Redbox Instant, a joint venture with Coinstar. The telco brought the service out of beta on May 15, opening up to the general public 7,500 “streaming and transactional movie titles” for $8 per month—equivalent to Netflix and Hulu. No FiOS subscription is required to access the service—unlike Streampix, which is wedded to Comcast’s subscription tiers. For the model to win, it’s highly likely that Verizon will need to add original content to the mix—content not found in its IPTV subscription plans.It’s a bold step, but not without precedence: satellite giant BSkyB (News - Alert) in the U.K. allows consumers to subscribe to its SVOD OTT service, NowTV, without having a Sky satellite subscription. And, in Denmark, which saw both Netflix and HBO Nordic launch as pure-play OTT services, local operator YouSee launched its answer in the form of the YouBio service.
Edited by Rachel Ramsey